Question 1

A company that chooses a truly global corporate-level strategy assumes that the liability of foreignness will be minimal.

Accepted Answer

A global corporate-level strategy involves operating in multiple countries with a standardized approach. This reduces the liability of foreignness as the company is familiar with the cultural, legal and economic aspects of the different countries they operate in. Therefore, the statement is true.

Question 2

When a firm establishes its first overseas operation, this is known as its "greenfield venture."

Accepted Answer

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Question 3

The chief risks in the international environment are political and cultural.

Accepted Answer

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Question 4

Because of the lack of protection of intellectual property in some foreign countries, licensing arrangements are one of the best ways for a firm to protect its technology from being appropriated by potential competitors.

Accepted Answer

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Question 5

A transnational strategy is difficult to achieve because the multiple objectives involved are contradictory.

Accepted Answer

A transnational strategy involves balancing the need for global integration with local responsiveness, which can be difficult to achieve as these objectives can often be contradictory. Achieving both simultaneously requires complex coordination and strong communication across multiple regions and functions within a company.

Question 6

The primary rational for a small firm to utilize exporting as a way of entering international markets is the potential for high rates of return.

Accepted Answer

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Question 7

Although licensing is the least costly method to enter a foreign market, its disadvantages include high costs of transportation and low control over the marketing and distribution of goods.

Accepted Answer

The statement is incorrect. Licensing is actually a low-cost method to enter a foreign market. The statement confuses licensing with exporting, which does have high transportation costs. Additionally, while licensing may have limitations on control over marketing and distribution, it still allows for some control through the licensing agreement.

Question 8

Exporting and licensing are the most appropriate ways for smaller firms to first enter international markets.

Accepted Answer

Exporting and licensing are less risky and require less investment compared to other market entry modes such as direct investment. They are suitable for smaller firms to test the waters before committing to larger investments in international markets.

Question 9

Research has shown international diversification leads to lower firm performance if firms do not diversify in both products and geographic locations.

Accepted Answer

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Question 10

While there are multiple means of entering new international markets, firms should use one method consistently with all of its various products and across its different markets in order to reduce administrative complexity.

Accepted Answer

While consistency can be beneficial for reducing complexity, it is not always necessary or optimal. The most appropriate entry method may vary based on the specific product and market at hand.

Question 11

As a general rule of thumb, if a company cannot make a profit in its home market, it cannot make a profit in the international market.

Accepted Answer

While there may be some correlation between a company's ability to make a profit in its home market and its success in international market, it is not a hard and fast rule. There are many factors that can impact a company's success in global markets, including cultural differences, regulatory environments, and competition. Additionally, a company may be able to tap into new markets and revenue streams internationally that were not available to them domestically.

Question 12

A global strategy is an international strategy through which the firm offers standardized products across country markets, with competitive strategy being dictated by offices within the host markets served.

Accepted Answer

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Question 13

International associations such as the European Union, the Organization of American States and the North American Free Trade Association encourage regionalization of competition rather than globalization.

Accepted Answer

Regionalization of competition promotes cooperation between countries within a specific region, leading to the development of regional economic blocs. The organizations mentioned in the statement emphasize regionalization over globalization as a means to increase trade and economic growth within their respective regions.

Question 14

International diversification can help to reduce a firm's overall risk through the stabilization of returns.

Accepted Answer

International diversification allows a firm to spread its operations and investments across different countries, currencies, and economic conditions, reducing the overall risk of the firm. If one country or market experiences a downturn, the firm can rely on its operations and investments in other markets to offset the loss and stabilize returns.

Question 15

The greenfield venture option is useful when control of technology is important in an international expansion.

Accepted Answer

Greenfield venture involves starting a new business from scratch with new facilities, equipment, personnel, and technology, which provides complete control over the technology and operations of the business. Therefore, it is a useful option when control of technology is crucial in an international expansion.

Question 16

International strategies are complex and can therefore produce greater uncertainty for the firm.

Accepted Answer

International strategies involve different cultures, laws, and economic systems, which can make decision-making and implementation more challenging and uncertain for the firm.

Question 17

The "liability of foreignness" will have a greater negative impact on a firm using a multi-domestic strategy than on a firm using a global strategy.

Accepted Answer

The liability of foreignness refers to the challenges and costs that come with operating in a foreign market due to differences in culture, language, regulations, and other factors. A multi-domestic strategy involves customizing products and operations to each local market, which can increase the liability of foreignness as the firm must navigate different cultural and regulatory environments in each country. In contrast, a global strategy involves standardizing products and operations across markets, which can reduce the liability of foreignness as the firm can leverage economies of scale and learnings from other markets. Therefore, a firm using a global strategy may experience less negative impact from the liability of foreignness than a firm using a multi-domestic strategy.

Question 18

Strategic alliances tend to increase the risk associated with international expansion for the U.S. partner because of the greater dependence on the foreign firm.

Accepted Answer

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Question 19

Firms in developed countries benefit more from international (geographic) diversification than from product diversification, whereas firms in developing countries benefit more if they diversify both geographically and in products.

Accepted Answer

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Question 20

Establishing a wholly-owned subsidiary provides the quickest access to a new market.

Accepted Answer

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Quiz 8: International Strategy