Question 1

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

Accepted Answer

A decentralized strategy such as that seen within the multidomestic organization, allows for greater adaptation at the local level, which would not be necessary if customers were becoming more homogenous.

Question 2

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

Accepted Answer

A multidomestic strategy is one of decentralization, meaning more likelihood of local production. One benefit of this is reduced shipping and transportation costs.

Question 3

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

Accepted Answer

A multidomestic strategy is used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low.

Question 4

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

Accepted Answer

Primary activities that are downstream (e.g., marketing and sales, and service), or closer to the customer, tend to require more decentralization in order to adapt to local market conditions (a multidomestic strategy). Primary activities that are upstream (e.g., Research and Development, design, or manufacturing), or further away from the customer, tend to be centralized (a global strategy). This is because there is less need for adapting these activities to local markets and the firm can benefit from economies of scale.

Question 5

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

Accepted Answer

Common savings from offshoring, such as lower wages, benefits, energy costs, regulatory costs, and taxes, are all easily visible and immediate. In contrast, there are a host of hidden costs that arise over time and often overwhelm the cost savings of offshoring. These hidden costs include: total wage costs, indirect costs, increased inventory, reduced market responsiveness, coordination costs, intellectual property rights, and wage inflation.

Question 6

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

Accepted Answer

Firms following a global strategy strive to offer standardized products and services as well as to locate manufacturing, Research and Development, and marketing activities in only a few locations.

Question 7

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

Accepted Answer

A principal characteristic of the transnational organization is the integration of unique contributions of all units into worldwide operations. Thus, a joint innovation by headquarters and by one of the overseas units can lead potentially to the development of relatively standardized and yet flexible products and services that are suitable for multiple markets.

Question 8

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

Accepted Answer

The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace: international, global, multidomestic, and transnational. The strategy that a firm selects depends on the degree of pressure that it is facing for cost reductions and the importance of adapting to local markets. When firms are faced with high pressures to adapt locally, the transnational strategy and the multidomestic strategy would be most appropriate.

Question 9

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

Accepted Answer

Primary activities that are downstream (e.g., marketing and sales, and service), or closer to the customer, tend to require more decentralization in order to adapt to local market conditions (a multidomestic strategy). Primary activities that are upstream (e.g., logistics and operations), or further away from the customer, tend to be centralized (a global strategy). This is because there is less need for adapting these activities to local markets and the firm can benefit from economies of scale.

Question 10

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

Accepted Answer

A transnational strategy is used in industries where the pressures for both local adaptation and lowering costs are high.

Question 11

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

Accepted Answer

An international strategy would be the best pure choice for a company to make in its quest to compete in the global marketplace, if both the pressures to lower costs and adapt locally are low.

Question 12

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

Accepted Answer

Limitations of transnational strategies include unique challenges in determining optimal locations of activities to ensure cost and quality and unique managerial challenges in fostering knowledge transfer.

Question 13

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

Accepted Answer

One advantage of a global strategy is that it can enable a firm to create a standard level of quality throughout the world. Tom Siebel, former chairman of Siebel Systems (now part of Oracle), e-business application software developer, says that his customers, global companies like IBM, Zurich Financial Services, and Citicorp, expect the same high level of service and quality, and the same licensing policies, no matter where they do business with them around the world.

Question 14

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

Accepted Answer

Research and development, and product design are primary activities in the value-chain that are far from the customer, and are therefore considered upstream activities. Such activities are often centralized in transnational organizations.

Question 15

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.

Accepted Answer

Some risks associated with a global strategy include: if a firm has only one manufacturing facility, it must export its output to other markets, some of which may be a great distance from the operation; the geographic concentration of any activity may also tend to isolate that activity from the targeted markets; concentrating an activity in a single location also makes the rest of the firm dependent on that location.

Question 16

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

Accepted Answer

Limitations of global strategies include: a limited ability to adapt to local markets, a concentration of activities that may increase dependence on a single facility, and single locations that may lead to higher tariffs and transportation costs.

Question 17

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

Accepted Answer

A transnational strategy strives to optimize the trade-offs associated with efficiency, local adaptation, and learning. A core tenet of the transnational model is that the assets and capabilities of the firm are dispersed according to the most beneficial location for each activity. Thus, managers avoid the tendency to either concentrate activities in a central location (a global strategy) or disperse them across many locations to enhance adaptation (a multidomestic strategy).

Question 18

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

Accepted Answer

The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace: international, global, multidomestic, and transnational. The strategy that a firm selects depends on the degree of pressure that it is facing for cost reductions and the importance of adapting to local markets. When firms are faced with high pressures to lower costs, the international strategy and the multidomestic strategy would be most appropriate.

Question 19

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.

Accepted Answer

Levitt advocated strategies that favored global products and brands. This approach rested on three key assumptions: customer needs and interests are becoming increasingly homogeneous worldwide; people around the world are willing to sacrifice preferences in product features, functions, design, and the like for lower prices at high quality; substantial economies of scale in production and marketing can be achieved through supplying global markets.

Question 20

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

Accepted Answer

Limitations of multidomestic strategies include: a decreased ability to realize cost savings through scale economies, a greater difficulty in transferring knowledge across countries, and it may lead to overadaptation as conditions change.

Quiz 7: International Strategy: Creating Valuein Global Markets

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 ______.

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

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

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

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

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.

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?

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.

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

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

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?

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

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

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 ________.

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

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

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

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.

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

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