Question 1

What are the motives for firms to pursue international diversification? What are the four basic benefits firms can derive by moving into international markets?

Accepted Answer

The answer of What are the motives for firms to...

Question 2

One of the primary reasons for failure of cross-border strategic alliances is

Accepted Answer

Incompatibility between partners, whether in terms of culture, management style, or strategic goals, is often cited as a major factor in the failure of cross-border strategic alliances. It can lead to misunderstandings, disagreements, and ultimately the dissolution of the alliance. Conflict between legal and business systems, security concerns, and high debt financing can also contribute to failure, but incompatibility is seen as the primary reason.

Question 3

In situations where there is high uncertainty, where cooperation is needed, and where strategic flexibility is important, ____ are most likely to succeed.

Accepted Answer

Strategic alliances allow for flexibility and cooperation between two or more companies, making them well-suited for situations with high uncertainty and where strategic flexibility is important. Acquisitions and new wholly owned subsidiaries may not be feasible or appropriate in such situations, and licensing strategies may not provide the necessary level of cooperation.

Question 4

If intellectual property rights in an emerging economy are not well-protected, the number of firms in the industry is rapidly growing, and the need for global integration is high, ____ is the preferred entry mode.

Accepted Answer

In emerging economies with weak intellectual property protection, there is a high risk of intellectual property theft. Therefore, for firms that want to maintain control over their intellectual property, a wholly-owned subsidiary is the best entry mode as they have complete control over their assets and can protect their intellectual property. Exporting and licensing are not preferred as they expose the firm's intellectual property to potential theft. A strategic alliance is also not preferred as it requires sharing of intellectual property with the partner firm.

Question 5

Which of the following is NOT a disadvantage of international acquisitions?

Accepted Answer

International acquisitions are actually the fastest way to enter a new market as they allow the acquiring firm to gain an established presence and customer base in the host country. However, the other options listed are all valid disadvantages of international acquisitions.

Question 6

All of the following complicate the implementation of an international diversification strategy EXCEPT

Accepted Answer

Widespread multilingualism would actually make the implementation of an international diversification strategy easier, as it would facilitate communication between business units in different countries. The other options listed (increased costs of coordination, cultural diversity, logistical costs) are factors that can complicate international diversification.

Question 7

The means of entry into international markets that offers the greatest control is

Accepted Answer

Greenfield ventures involve building a new subsidiary or operation from scratch in a foreign market, thus providing the greatest control over the operations and strategy. This is because the company has total control over the design, construction, and operation of the new business without any pre-existing contracts, partnerships or joint ventures.

Question 8

Which of the following is NOT one of the advantages associated with international diversification?

Accepted Answer

Ease of coordination is not an advantage associated with international diversification. In fact, coordinating operations across different countries and cultures may be more complex and require more effort than coordinating operations within a single country. The other options (reduction of overall risk, economies of scale and stabilization of returns) are all advantages that can be achieved through international diversification.

Question 9

Rose Petal Cosmetics, a manufacturer of cosmetics and skin care products for women of color in the U.S., wishes to expand to markets in Asia and the Middle East, as well as areas of Europe with many African and Middle Eastern immigrants. A major competence of Rose Petal is effective marketing to American women-of-color. Rose Petal's main barrier to success in its target markets will probably be

Accepted Answer

The main barrier to success for Rose Petal in expanding to Asia, the Middle East, and areas of Europe with many African and Middle Eastern immigrants is likely cultural. These regions have different cultural norms and beauty standards than in the U.S., and Rose Petal will need to adapt its marketing strategies and product formulations accordingly to appeal to these new customers.

Question 10

A product-diversified firm in Kenya has been approached by several large U.S. firms looking for prospective partners. From the perspective of the Kenyan firm, the best partner would be

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The answer of A product-diversified firm in Kenya has been...

Question 11

Bunyan Heavy Equipment, a U.S. firm, is investigating expanding into Russia using a greenfield venture. The committee researching this project has delivered a negative report. The MAIN concern of the committee is probably

Accepted Answer

The answer of Bunyan Heavy Equipment, a U.S. firm, is...

Question 12

Internationally diversified firms

Accepted Answer

Internationally diversified firms have access to multiple markets, which allows them to earn greater returns on innovation. They can test and develop new products in different countries, which helps in diversifying their risk and increasing their chances of success. This ultimately leads to higher returns on investment.

Question 13

A nation's competitiveness depends on the capacity of its industry to ____ and thereby maintain its competitive advantage.

Accepted Answer

The sentence states that a nation's competitiveness depends on its industry's capacity to innovate and maintain its competitive advantage. Therefore, the correct choice is D, innovate.

Question 14

Instability in a national government creates all the following problems EXCEPT

Accepted Answer

Theft of intellectual property is not directly related to instability in a national government. However, corruption, economic risks and uncertainty created by government regulation, and conflicting legal authorities are all potential issues that can arise due to instability in a national government.

Question 15

The positive results associated with increasing international diversification have been shown to

Accepted Answer

The positive results associated with increasing international diversification eventually level off and become negative as diversification increases past some point. This is due to the increased complexity and difficulty of managing a larger and more diverse portfolio.

Question 16

Arkadelphia Polymers, Inc., earns 60% of its revenue from exports to Europe and Asia. The CEO of the company would be

Accepted Answer

If the value of the dollar strengthens, the cost of Arkadelphia Polymers' products to customers in Europe and Asia will increase, making it less competitive in those markets. As a result, the CEO would be concerned as the company's revenue from exports to those regions could decrease.

Question 17

Which of the following is an advantage associated with greenfield ventures?

Accepted Answer

Greenfield ventures provide the advantage of complete control over the firm's technology, marketing, and distribution. This allows the company to operate in the host country according to its own strategies and goals, without the need to rely on third parties or adapt to existing structures. However, this advantage is often offset by higher costs and risks, as the company needs to invest in building its own facilities, infrastructure, and workforce.

Question 18

When a firm INITIALLY becomes internationally diversified, its returns

Accepted Answer

The answer of When a firm INITIALLY becomes internationally diversified,...

Question 19

The decision of what entry mode to use is primarily based on all of the following factors EXCEPT

Accepted Answer

The decision of what entry mode to use is primarily based on the industry's competitive conditions, the country's situation and government policies, and the firm's unique set of resources, capabilities, and core competencies. The worldwide economic situation may have some impact, but it is not a primary factor in the decision-making process.

Question 20

Terrorism creates an economic risk for firms which

Accepted Answer

Terrorism can create a perception of instability and insecurity which can deter foreign investment as investors may perceive terror-prone countries as riskier, leading to reduced investment opportunities and economic growth.

Quiz 8: International Strategy