Deck 11: Global Strategy and the Multinational Corporation

Question 1

Internationalization occurs through two main mechanisms: trade and government policy.

Answer 1

False

Question 2

In an international context,comparative advantage and competitive advantage are identical concepts.

Answer 2

False

Question 3

Switzerland's comparative advantage in clocks and watches is likely to reflect national demand characteristics (e.g.the Swiss emphasis on punctuality)rather than national resource endowments.

Answer 3

True

Question 4

When competition is international,competitive advantage depends not just on a firm's internal resources and capabilities,it also depends upon the availability of resources within each firm's country base.

Question 5

Porter's "national diamond" framework suggests that a significant factor explaining the dominance by German firms of the world market for luxury and high-performance automobiles is to be found more in the factors of production available in Germany than in the demand characteristics of German consumers.

Question 6

In general,internationalization of an industry results in more competition and lower profitability

Question 7

The benefits from fragmenting a product's value chain across multiple locations almost always outweigh the costs of coordinating globally dispersed activities.

Question 8

Service industries such as commercial banking and hotels tend to be "multidomestic" in their pattern of internationalization.

Question 9

Internationalization offers a remarkable opportunity for businesses to expand and prosper.Only the unimaginative and the pessimistic would regard it as a threat.

Question 10

For high-tech products such as aircraft and smartphones,the international fragmentation of the value chain tends to be driven less by cost considerations and more by the availability of sophisticated technical capabilities.

Question 11

Sheltered industries are shielded from imports by government restrictions such as import quotas and high tariffs and .

Question 12

In pharmaceuticals (where patent protection tends to be strong),exports or direct foreign investment will tend to be preferred over licensing as a means of exploiting overseas markets.

Question 13

If the firm's competitive advantage is country-based,the firm can exploit foreign markets either by exports or by direct investment

Question 14

Porter's "national diamond" framework implies that government policies which foster "national champions" within technology-based industries are likely to be successful in stimulating national competitiveness in these sectors.

Question 15

In most countries of the world,Starbucks owns and operates its retail coffee shops.It's decision to enter India by means of a joint venture with Tata Group reflects the complexity of the Indian market and Starbucks need for local knowledge and local connections.

Question 16

The revealed comparative advantage of the US,India and Australia in cereals is a reflection of these countries' large natural endowments of land.

Question 17

International trade is motivated by the quest for market opportunities in other countries,while foreign direct investment is motivated by the desire to exploit resources and capabilities in other countries.

Question 18

Internationalization often involves mergers and acquisitions,hence,it tends to reduce seller concentration within individual national markets.

Question 19

Comparative advantage refers to countries' relative efficiencies in producing different products

Question 20

Internationalization tends to increase competition by increasing overseas firms entering and building capacity in domestic markets and increasing the diversity of competitors within each national market.
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Question 21

Internationalization among New York-based law firms is the result of:

A)The US possessing a comparative advantage in legal services
B)US law firms following the opportunity to provide global service to their multinational clients
C)US law firms seeking to benefit from knowledge transfer between different legal systems
D)US law firms seeking to exploit economies of scale in human capital and IT systems.

Question 22

A global strategy involves supplying globally-standardized products.

Question 23

Large countries have an advantage over small countries in technology-intensive and capital-intensive industries,because:

A)They can influence the rest of the world's technical standards
B)Small markets discourage ambition among the firms that serve them
C)A large home market facilitates exploitation of scale economies
D)Large countries tend to have superior educational systems

Question 24

According to Porter's "national diamond" analysis,the competitive advantage of Swiss firms in watches,German firms in luxury cars,and Japanese firms in cameras is a result of:

A)The availability of highly skilled workers in each of these countries
B)The lack of natural resources in each of these countries
C)The characteristics of local demand in each of these countries
D)High levels of domestic competition

Question 25

A key difference between Bartlett and Ghoshal's "transnational corporation" and the conventional US multinational corporation (described by Bartlett and Ghoshal as a "coordinated federation")is that communication and coordination occurs between national units rather than exclusively between each national unit and the corporate HQ

Question 26

Global industries are those where:

A)International trade (imports and exports)are high in relation to industry sales
B)Technology transfers are high
C)Foreign direct investment is high
D)Both trade and direct investment are high

Question 27

With internationalization,the threat of new entry into domestic industries are increases because:

A)Customers prefer imported products to domestically-produced products
B)The World Trade Organization (WTO)prevents governments protecting their domestic industries through subsidies and import restrictions
C)Barriers to entry that would deter domestic firms may be easily overcome by large firms from other countries
D)Foreign-based,state-owned enterprises are not deterred by losses earned in overseas markets

Question 28

A firm would be unwise to pursue a global strategy if global scale does not confer cost advantage,

Question 29

Firms internationalize through two mechanisms:

A)Exports and imports
B)Trade in goods (visible trade)and trade in services (invisible trade)
C)Direct and indirect investment
D)Trade and direct investment.

Question 30

The theory of comparative advantage is concerned with:

A)The sources of real income differentials among countries
B)The impact of resource availability on national competitiveness in particular industries
C)The competitive advantages of low-wage countries
D)The determinants of purchasing power parity (PPP)exchange rates between countries

Question 31

A common approach to reconciling the benefits of global scale with the need for national differentiation is to:

A)Develop a global brand but rely on local promotional activities
B)Create standard product platforms in terms of design and components,then adapt product features,complementary services,and marketing approaches to national market conditions.
C)Allow major national subsidiaries to the freedom to develop new products,then encourage other national subsidiaries to adopt them
D)Develop globally standardized products but sell them under local brand names

Question 32

The declining performance of multinational corporations (MNCs)relative to nationally-focused firms suggests that,for many MNCs,the costs of reconciling the benefits of aggregation,arbitrage,and adaptation may exceed the benefits.

Question 33

In Ghemawat's "Aggregation,Adaptation,Arbitrage" framework,the potential for a multinational enterprise to exploit arbitrage benefits are likely to be greater in a capital-intensive industry than in a labor-intensive industry

Question 34

The value chain for a product will tend to be dispersed across different countries when:

A)Different stages of the value chain require different types of resources and capabilities
B)The product is subject to import tariffs and quotas
C)The product is knowledge-intensive
D)The different stages of the value chain need to be closely coordinated.

Question 35

Many retailers that have been outstandingly successful in their how markets have experienced much poorer performance when they have entered overseas markets.These include: Tesco,Marks & Spencer,Laura Ashley,and Body Shop in the UK);Best Buy,Sears,Macy's,and Walmart in the US.This reflects:

A)The lack of major efficiency benefits from international scope in retailing
B)The lack of scale economies in retailing
C)Limited opportunities for exploiting learning benefits in retailing (e.g.by transferring best practices)
D)The lack of major efficiency benefits from international scope combined with the need for national differentiation.

Question 36

Traditionally,European-based multinational companies such as Unilever,Shell,and Philips have been highly centralized;Japanese multinationals such as Honda,Sony,and Hitachi have been highly decentralized.

Question 37

Saudi Aramco and Statoil are both major oil producers.Saudi Aramco's competitive advantage is based on its access to low-cost domestic oil reserves;Statoil's competitive advantage is its capability in offshore exploration and production.The implications for the internationalization strategies of the two companies are:

A)Both companies should focus on exporting from their own countries
B)Saudi Aramco should focus on exporting;Statoil should pursue direct foreign investment
C)Saudi Aramco should pursue direct foreign investment;Statoil should focus on exporting
D)Both companies should use a mixture of exporting and direct investment depending upon the nature of the foreign opportunity

Question 38

Pankaj Ghemawat's "CAGE framework," which analyzes the cultural,administrative and political,geographical,and economic differences between countries,can help firms adapt their strategies to the particular characteristics of a foreign market .

Question 39

A start-up company based in Canada and led by an academic microbiologist has patented genetically-modified,drought-resistant maize particularly suitable to arid regions of Africa.The firm has been unable to attract significant venture capital investment.How should the firm exploit commercial opportunities for its product in Africa?

A)It should form a joint venture with a multinational agricultural seed company
B)It should establish seed production in Canada and set up sales offices in African countries
C)It should establish seed production in Canada and appoint sales agents in different African countries
D)It should license its patent to a multinational agricultural seed company and continue research on other projects for the genetic modification of agricultural crops

Question 40

The rise of Shenzhen to become one of the world's most important industrial centers is evidence of:

A)The superiority of the Chinese economic model over western market
B)The transformative potential of internationalization
C)The spillover benefits from being close to a dynamic business hub such as Hong Kong.

Question 41

McKinsey & Company's finding that found that successful MNCs are underperforming successful "national Champions" is evidence of:

A)The benefits of exploiting the benefits of multinationality being outweighed by the cost imposed by the complexity
B)The rise of economic nationalism and the governments' waning commitment to free trade
C)The declining importance of global scale economies
D)The increasing difficulties of managing business activities across national borders

Question 42

The costs of national differentiation can be low if:

A)A firm does not differentiate its products very much
B)The firm has a strong brand
C)A "global customer" exists
D)A common basic design and common components are used

Question 43

The Dutch-based electrical and consumer electronics multinational,Philips,has transferred the headquarters for several of its global business away from the Netherlands.In terms of Bartlett and Ghoshal's typology of multinational strategies,this represents a transition from:

A)A "centralized hub" to a "decentralized federation"
B)A "centralized hub" to a "transnational"
C)A "decentralized federation" to a "transnational"
D)A "coordinated federation" to a "decentralized federation"

Question 44

McDonald's introduction of a greater number of local products on its menus,then transferring these items across national borders points to:

A)The tendency for global products to lose their appeal
B)The versatility of the McDonald's business system
C)The potential for localized adaptation within the multinational enterprise to be a source of innovation and strategic renewal
D)Growing competition in the fast food industry as the McDonald's system is increasingly imitated by local rivals.

Question 45

The "centralized hub" strategy that Japanese multinationals pursued during the 1970s and 1980s is likely to be most successful in industries with:

A)Innovation as the primary source of competitive advantage
B)Large economies of scale and limited need for national differentiation
C)Substantial opportunities for transfer of learning among countries
D)Rapid rates of technological change