Deck 7: International Strategy: Creating Valuein Global Markets

Question 1

Expanding the global presence of a firm does not automatically increase its scale of operations.

Answer 1

False
Explanation: Expanding company global presence also automatically increases its scale of operations, providing it with a larger revenue and asset base. Such an increase in revenues and asset base potentially enables a firm to attain economies of scale. This provides multiple benefits including the spreading of fixed costs such as Research and Development over a larger volume of production. Examples include the sale of Boeing commercial aircraft and Microsoft operating systems in many foreign countries.

Question 2

The factor endowments of a country are inherited and cannot be created.

Answer 2

False
Explanation: Classical economics suggests that factors of production such as land, labor, and capital are the building blocks that create usable consumer goods and services. However, companies in advanced nations seeking competitive advantage over firms in other nations create many of the factors of production, such as skilled human resources.

Question 3

High levels of environmental awareness in Denmark have led to a decline in Danish industrial competitiveness in the international marketplace.

Answer 3

False
Explanation: Countries with demanding consumers drive firms in that country to meet high standards, upgrade existing products and services, and create innovative products and services. Denmark is known for its environmental awareness. Demand from consumers for environmentally safe products has spurred Danish manufacturers to become leaders in water pollution control equipment which it exports successfully.

Question 4

International expansion can extend the life cycle of a product that is in its maturity stage in the company home country.

Question 5

Countries with a strong supplier base benefit by adding efficiency to downstream activities.

Question 6

An advantage of international expansion is that it can enable a firm to optimize the location of every activity in its value chain.

Question 7

Because many countries are investing in countries other than their own,each country is becoming more autonomous and independent.

Question 8

Arbitrage opportunities in global financial markets are more attractive to local companies than global corporations,because they enable them to buy in huge volume and therefore increase their bargaining power with suppliers.

Question 9

Demanding domestic consumers tend to push firms to move ahead of companies in other countries where consumers are less demanding and more complacent.

Question 10

Typically,intense rivalry in domestic markets does not force firms to look outside their national boundaries for new markets.

Question 11

Increasing international exchange in goods and services can run into the difficulty of having one offer that meets the needs of customers at differing income levels.

Question 12

Arbitrage opportunities are more than simple trading opportunities and account for a large part of the success Walmart experiences.

Question 13

The trend towards worldwide markets makes it easier to predict where competitors will spring up.

Question 14

The Michael Porter Diamond of National Advantage is a framework that explains why countries foster successful multinational corporations based on factor endowments and demand conditions only.

Question 15

Many international firms are increasing their efforts to market their products and services to countries such as India and China as the ranks of their middle class continue to increase.

Question 16

There are risks associated with the Bottom of the Pyramid strategy.One of them is that the new low-cost products that are developed may cannibalize the sales of the core products of the company using the strategy.

Question 17

Emerging markets are growing slower than developed markets,thus shifting the structure of the global economy.

Question 18

By 2015,it is predicted that trade within nations will exceed trade across nations.

Question 19

With regard to factor conditions,the pool of resources that a firm (or nation)has is much more important than the speed and efficiency with which these resources are deployed.

Question 20

The laws and the enforcement of laws associated with the protection of intellectual property rights,represent a significant currency and management risk to multinational firms.

Question 21

Within a worldwide market,the most effective strategies are neither purely multidomestic nor purely global.

Question 22

A limitation of a multidomestic strategy is that it may lead to overadaptation as conditions change.

Question 23

When U.S.currency appreciates against other currencies,U.S.goods can be less expensive to consumers in foreign countries.

Question 24

Reverse innovation occurs when a company develops a product that meets the needs of a developed country and then adapts it to the needs of the developing country.

Question 25

The World Bank publishes the Euromoney magazine Country Risk Rating semiannual report.In the text,the January 2013 sampling of these ratings indicates that Norway is the best country in which to invest in terms of its expected level of risk based on the evaluation of its political,economic and structural risks and debt indicators and access to capital.

Question 26

A key tenet of a transnational strategy is improved adaptation to all competitive situations as well as flexibility by capitalizing on communication and knowledge flows throughout the organization.

Question 27

Multinational firms following a transnational strategy strive to optimize the trade-offs associated with efficiency,local adaptation,and learning.

Question 28

Offshoring takes place when a firm decides to shift an activity that they were previously performing in a domestic location to a foreign location.

Question 29

The need to attain economies of scale encourages multinational firms to operate under a multidomestic strategy.

Question 30

Differences in foreign markets such as culture,language,and customs can represent significant management risks when firms enter foreign markets.

Question 31

Corporations with multiple foreign operations that act very independently of one another are following a multidomestic strategy.

Question 32

Two opposing pressures that managers face when they compete in foreign markets are cost reduction and adaptation to local markets.

Question 33

Industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy than those in which more value is added downstream (closer to the customer).

Question 34

Firms can eliminate political instability and adverse government actions risks by: competing in a range of geographic markets,developing stakeholder coalitions,cultivating relationships with key influences,and including key public/private stakeholders in their boards.

Question 35

A multidomestic strategy is the most appropriate strategy for international operations,because it drives economies of scale as far as possible and provides a middle-of-the-road product that appeals to the largest number of consumers in every market.

Question 36

Among Theodore Levitt's assumptions that would favor a global strategy is that consumers around the world are becoming less price-sensitive.

Question 37

Theodore Levitt,a marketing strategist,argued that people around the world are willing to sacrifice preferences in product features,functions,and design for lower prices and high quality.

Question 38

When the U.S.currency appreciates against other currencies,it becomes more expensive for American companies that have branch operations overseas,when they declare foreign profits in the United States.

Question 39

In a global strategy a firm operates all of its businesses under a single common strategy,regardless of location.

Question 40

A multidomestic strategy would likely include the use of high volume,centralized production facilities to maximize economies of scale.

Question 41

Trading blocs and free trade zones promote the rise of international expansion.

Question 42

Typically,joint ventures involve less control and risk than franchising.

Question 43

Multinational firms are constantly faced with the dilemma of choosing between _______ and __________.

A) local adaptation; global integration
B) local adaptation; local integration
C) global adaptation; local integration
D) global adaptation; global integration

Question 44

PepsiCo successfully captured the Indian market by using a joint venture strategy.

Question 45

When considering the exporting decision,companies should consider that the ability to tailor their products to meet local market needs typically is very limited.

Question 46

When considering the export decision,firms should not partner with local distributors because many foreign markets are nationally regulated.

Question 47

__________ occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house.

A) Offshoring
B) A global strategy
C) Outsourcing
D) A transnational strategy

Question 48

Which of the following is not a risk normally associated with Bottom of the Pyramid strategies?

A) A low-end version of a brand may detract from the overall brand attractiveness.
B) The new low-cost products they develop may cannibalize the sales of their core products.
C) Entrenched competitors can impact the ability of the new firm to enter the market successfully.
D) New products may be perceived as exploiting the privileged customer with substandard products.

Question 49

The sale of Boeing commercial aircraft and Microsoft operating systems in many countries enables these companies to benefit from ____________.

A) higher prices in their domestic markets
B) reducing their exposure to currency risks
C) economies of scale
D) optimizing the location for many activities in their value chain

Question 50

According to Michael Porter,firms that have experienced intense domestic competition are _________________________________.

A) unlikely to have the time or resources to compete abroad
B) more likely to demand protection from their governments
C) most likely to design strategies aimed primarily at the domestic market
D) more likely to design strategies and structures that allow them to successfully compete abroad

Question 51

In the Porter Diamond of National Advantage framework which of the following factors does not affect nation competitiveness?

A) The position of the nation in factors of production necessary to compete in a given industry.
B) The presence or absence in the nation of supplier industries that are internationally competitive.
C) The conditions in the nation governing the nature of foreign rivalry.
D) The nature of home-market demand of the products or services of the industry.

Question 52

If the U.S.dollar appreciates relative to foreign currency,what is likely to be the result for the U.S.company that has company branches abroad?

A) Profits will increase, when measured in U.S. dollars.
B) Profits will decrease, when measured in U.S. dollars.
C) Foreign exports to the United States will decrease.
D) Foreign demand for U.S. goods and services will decrease.

Question 53

A franchise generally expires after a few years,whereas a license is designed to last into perpetuity.

Question 54

Typically,the least risky method of entry into a foreign market is through the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control.

Question 55

According to studies by Rugman and Verbeke,most of the 500 largest companies in the world are global.

Question 56

If a company is considering optimizing the physical location for every activity in the value chain,which of the following is not a possible strategic advantage for that decision?

A) Performance enhancement
B) Cost reduction
C) Political risk reduction
D) Life-cycle enhancement

Question 57

Rivalry is intense in nations with conditions of __________ consumer demand,__________ supplier bases,and __________ new entrant potential from related industries.

A) weak; weak; high
B) strong; strong; low
C) weak; weak; low
D) strong; strong; high

Question 58

Which of the factors below has not made the software services industry in India extremely competitive on a global scale?

A) large pool of skilled workers
B) large network of public and private educational institutions
C) tax and antitrust legislation that protects the dominant players in the industry
D) large, growing market and sophisticated customers

Question 59

Which of the following is not a motivation for a company to pursue international expansion?

A) It wishes to increase the size of the potential markets for its products and services.
B) It wishes to take advantage of arbitrage opportunities in order to increase profit.
C) It wishes to optimize value-chain activities to enhance performance, reduce costs, and reduce risk.
D) It wishes to increase foreign market penetration by developing products for the home market.

Question 60

Exporting is an expensive way to enter foreign markets.

Question 61

Recent trends that might lead managers of multinational corporations (MNCs)to adopt a more decentralized strategy for their operations would include all of the following EXCEPT ______.

A) customer needs, interests, and tastes becoming increasingly homogenized
B) consumers around the world increasingly willing to tradeoff idiosyncratic preferences in product features for lower price
C) flexible manufacturing trends allowing a decline in the minimum volume required to reach acceptable levels of production efficiency
D) fluctuating exchange rates

Question 62

Elements of a multidomestic strategy may facilitate the competitive advantage of cost leadership by __________.

A) flexibility in adjusting to local laws and customs
B) decreased duplication of inventories which are often involved in having multiple plants producing similar products
C) decreased shipping and transportation costs inherent in local production
D) economies of scale gained through centralized production of standardized products

Question 63

High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy?

A) global strategy
B) multidomestic strategy
C) transnational strategy
D) overall cost leadership strategy

Question 64

Which of the following types of international firms are most likely to benefit from a global strategy as opposed to a multidomestic strategy?

A) firms that compete in industries in which consumer preferences vary substantially in each country
B) firms in industries that are expanding very rapidly
C) firms in industries that have value added by sales and marketing departments
D) firms in industries that have much value added in research and design or manufacturing

Question 65

In considering the decision to offshore,which of the following generally is not one of the hidden costs?

A) Total wage costs and indirect costs
B) Increased inventory and coordination costs
C) Reduced market responsiveness and intellectual property rights
D) Wage deflation

Question 66

Firms following a global strategy strive to offer __________ products and services as well as locate manufacturing,Research and Development,and marketing activities in a limited number of locations.

A) widely differentiated
B) more expensive local
C) internationally differentiated
D) standardized

Question 67

Units coordinate their activities with headquarters and with one another.Units adapt to special circumstances only they face.The entire organization draws upon relevant corporate resources.These are all attributes of which type of strategy?

A) global strategy
B) transnational strategy
C) international strategy
D) multidomestic strategy

Question 68

When firms expand into global markets,they are faced with the choice of reducing costs and/or adapting to the local market.When high pressures exist to adapt locally,companies should choose a __________ or __________ in order to compete in the global marketplace.

A) global strategy; transnational strategy
B) global strategy: multidomestic strategy
C) international strategy; global strategy
D) transnational strategy; multidomestic strategy

Question 69

Industries in which proportionally more value is added in __________ activities are more likely to benefit from a global strategy.

A) downstream
B) upstream
C) marketing
D) sales

Question 70

High pressure for local adaptation combined with high pressure for lower costs would suggest what type of international strategy?

A) global strategy
B) multidomestic strategy
C) transnational strategy
D) differentiation strategy

Question 71

Which would be the appropriate strategy for companies to use to compete in the global marketplace if the marketplace pressure is for lower costs with little pressure for local adaptation?

A) international strategy
B) global strategy
C) multidomestic strategy
D) transnational strategy

Question 72

Which of the following is a disadvantage of a transnational strategy?

A) less ability to realize cost savings through scale economies
B) limited ability to adapt to local markets
C) unique managerial challenges in fostering knowledge transfer
D) single locations may lead to higher tariffs and transportation costs

Question 73

As in the case of Siebel Systems (now part of Oracle),elements of a global strategy may facilitate the competitive advantage of differentiation by _______.

A) increased freedom of individual business units to adapt to local tastes
B) the creation of a worldwide network to achieve consistent service regardless of location
C) flexibility in applying Research and Development to meet country-specific needs
D) tailoring products to meet country-specific needs

Question 74

Software Tech,Inc.,a company in the computer software industry,invests heavily in Research and Development,and product design.Thus,most of its value is added ________.

A) upstream
B) in its infrastructure
C) downstream
D) midstream

Question 75

Which of the following is not a risk associated with a global strategy?

A) A firm with only one manufacturing location must export its product, sometimes at great distance from the operation.
B) The geographic concentration of any activity may also tend to isolate that activity from the targeted markets.
C) Concentrating an activity in a single location makes the rest of the firm dependent on that location.
D) The pressures for local adaptation may elevate the cost structure of the firm.

Question 76

Which one of the following is not a limitation of a global strategy?

A) limited ability to adapt to local markets
B) the ability to locate activities in optimal locations
C) the concentration of activities may increase dependence on a single facility
D) single locations may lead to higher tariffs and transportation costs

Question 77

In order to realize the strongest competitive advantage,firms engaged in worldwide competition must ___________.

A) require that all of their various business units follow the same strategy regardless of location
B) ensure that all business units follow a strategy strictly tailored to their respective locations
C) pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy in order to achieve optimal results
D) attempt to use the strategy that was most successful in their home country

Question 78

When firms expand into global markets,they are faced with the choice of reducing costs and/or adapting to the local market.When high pressures exist to lower costs,companies should choose a __________ or __________ in order to compete in the global marketplace.

A) global strategy; transnational strategy
B) global strategy: multidomestic strategy
C) international strategy; multidomestic strategy
D) international strategy; transnational strategy

Question 79

Which one of the following is one of the Theodore Levitt assumptions supporting a pure global strategy?

A) Consumers are willing to pay more for specific product features.
B) Customer needs and interests are becoming more dissimilar.
C) MNCs can successfully compete globally by aggressively pricing products at the sacrifice of product features.
D) If the world markets are treated as heterogeneous, substantial economies of scale are easily achieved.

Question 80

Which of the following is not a limitation of a multidomestic strategy?

A) less ability to realize cost savings through scale economies
B) greater difficulty in transferring knowledge across countries
C) single locations may lead to higher tariffs and transportation costs
D) may lead to overadaptation as conditions change