Deck 16: Corporate Strategy and Foreign Direct Investment

Question 1

In the beginning stages of the exporting process, a major challenge is the

A) Firm's inexperienced staff
B) Lack of knowledge concerning foreign custom's regulations
C) Fear of the unknown foreign business customs
D) ability to realize the full sales potential of a product.

Answer 1

D

Question 2

Economies of __________ exist whenever the same investment can support multiple profitable activities less expensively in combination than separately.

A) scale
B) size
C) distance
D) scope

Answer 2

D

Question 3

One advantage of the senescent multinational is its __________ capability.

A) cross investment
B) vertical integration
C) global scanning
D) horizontal direct investment

Answer 3

C

Question 4

The senescent multinational has an advantage in its __________ capability to seek out lower-cost production sites.

A) global-scanning
B) integration
C) rationalization
D) knowledge-seeking

Question 5

__________ often provides multinationals with a valuable method to reduce currency and political risks.

A) Multiple sourcing
B) Knowledge seeking
C) Economies of scale
D) Economies of scope

Question 6

__________ is the acquisition abroad of plant and equipment.

A) Portfolio investment
B) Financial investment
C) Foreign direct investment
D) Rationalization

Question 7

Successful multinational corporations are those that can

A) acquire lower-cost raw materials or labor abroad
B) be the first entrant in large foreign markets
C) institutionalize the process of creating and transferring competitive advantages abroad
D) acquire the patent for new technology first from a foreign government

Question 8

__________ direct investment is investment that is cross-border but within an industry.

A) Horizontal
B) Vertical
C) Parallel
D) Intangible

Question 9

The most important element in determining whether and how a firm should expand overseas is

A) the degree of government subsidies and protection provided
B) whether the firm's competitive advantages can be transferred abroad and how this can best be done
C) the correlation between the domestic and world economies
D) the extent of political risk overseas

Question 10

Matsushita has leveraged its investment in advertising and distribution of Panasonic products in a number of consumer and industrial markets, ranging from PCs to VCRs. This is an example of

A) economies of scale
B) economies of scope
C) exploiting the learning curve
D) risk minimization

Question 11

Which of the following is likely to be a major long?run competitive advantage of a U.S. multinational?

A) a decline in the real value of the U.S. dollar
B) access to low?cost foreign raw materials
C) its ability to quickly adapt its products and technology in line with changing market conditions
D) offshore banking facilities located in the Gulf of Mexico

Question 12

Which one of the following would NOT be considered intangible capital?

A) trademarks
B) inventories
C) patents
D) general marketing skills

Question 13

_____________ will fade in time and multinationals must continually invest in creating new ones that are transferable overseas.

A) Exchange rate hedges
B) Brand names
C) Competitive advantages
D) International diversification

Question 14

Firms who wish to go global but who are not ready to assume significant risk may resort to __________ in order to compete internationally.

A) licensing a local firm to manufacture the company's products
B) acquiring a local operation
C) government subsidized exporting programs
D) setting up a local factory

Question 15

Economies that exist when increasing production leads to a less-than-proportionate increase in costs are known as economies of __________.

A) scale
B) scope
C) dual currency boards
D) exposure netting

Question 16

Multinationals own intangible capital in the form of __________.

A) fees and royalties
B) direct investment across industries
C) global expansion strategies
D) trademarks, patents, and general marketing skills

Question 17

In industries characterized by rapid production innovation and technical breakthroughs by foreign competitors, the __________ firms are known to excel.

A) German
B) British
C) Japanese
D) American

Question 18

The term used by the author of the text to describe the size of operations required in certain industries to compete effectively in the global market place is known as __________.

A) global integration
B) globalization
C) universal production
D) world-scale

Question 19

Foreign direct investment is most likely to be economically viable in those settings where

A) possible contractual difficulties make it costly to coordinate economic activities via arm's length transactions in the marketplace
B) a firm is interested in accessing low?cost resources overseas
C) a firm is interested in selling its patented products abroad
D) the local government is most corrupt

Question 20

When multinational firms create barriers to entry by continually introducing new products and differentiating existing ones, both domestically and internationally, we may refer to them as __________ multinationals.

A) mature
B) senescent
C) innovation-based
D) politically risky

Question 21

Corporate international diversification will prove beneficial to shareholders

A) since operating in a number of countries whose economic cycles are not perfectly in phase reduces the variability of MNC earnings
B) to the extent that multinationals can supply an indirect means of international diversification to individual investors
C) only if individual investors face barriers to direct international portfolio investment
D) when markets grow more cross-correlated in their price movements

Question 22

Which one of the following is NOT in the typical sequence of foreign expansion?

A) exporting
B) sales subsidiary
C) service facilities
D) franchising

Question 23

In a mature industry, the most important barriers to entry are NOT likely to be

A) technology
B) economies of scale
C) economies of scope
D) excise tariffs

Question 24

The choice of whether to sell abroad by exporting, licensing foreign producers, or manufacturing abroad depends on all of the following EXCEPT

A) the nature of government regulations
B) whether the firm's competitive advantage can be transferred abroad in the products it sells or can be written down and clearly transmitted
C) whether customers are looking for some signals as to the firm's commitment to the local market
D) transfer pricing policies of the parent MNC

Question 25

When automakers adopted just-in-time manufacturing and inventory systems, the only way to meet the logistic challenges for the tire industry was to __________.

A) shift manufacturing overseas
B) decrease the sales force domestically
C) resort to innovative marketing techniques
D) raise prices

Question 26

Which one of the following strategies do the senescent multinationals NOT follow when the competitive advantages in their product lines or markets become dissipated?

A) enter new markets where little competition currently exists
B) use the firm's global?scanning capability to seek out lower cost production sites
C) production rationalization and integration worldwide
D) seek favorable contracts from local country officials

Question 27

The basic Japanese strategy for international expansion has been to

A) invest heavily in R&D and come in with innovative products at the high end of the market and over time move into the lower end of the market
B) start at the low end of the market, build volume and scale economies, and then move into the high end of the market
C) take advantage of American companies who were afraid of cannibalizing their sales of high-margin products
D) b and c only

Question 28

Which one of the following was NOT a strategy used by the Japanese firm, Canon, in its attempts to enter the U.S. copier market that was dominated by Xerox?

A) leasing rather than selling its copiers
B) creating low-end copiers
C) designing reliability and serviceability into its machines
D) using standardized components to reduce costs

Question 29

From a portfolio standpoint, the value of foreign direct investment depends on all of the following EXCEPT:

A) whether shareholders are internationally diversified
B) the relative costs of international diversification for the MNC and for individual investors
C) the extent to which domestic systematic risk is unsystematic from a global standpoint
D) the extent of economies of scale and scope

Question 30

With respect to a global approach to investment planning, which one of the following modes of entry is the most recent?

A) franchising
B) acquisition of a state-owned enterprise
C) licensing
D) exporting

Question 31

Apex Inc., a maker of consumer products, has certain organizational skills. These skills include knowing how best to service a market through new?product development and adaptation, quality control, advertising, distribution, and after?sales service. Based on these skills, Apex's best avenue to international expansion would appear to be

A) exporting
B) licensing a local firm to produce its goods
C) local production
D) joint venturing with a local firm

Question 32

Which one of the following multinational categories emphasizes spending large amounts of funds on research and development?

A) the mature multinational
B) the innovation-based multinational
C) the senescent multinational
D) the hybrid that combines the mature with the senescent multinational