Deck 8: International Strategy

Question 1

The primary reason for investing in international markets is to generate above-average returns on investments.

Answer 1

True

Question 2

A firm is more likely to invest R&D to build competitive advantage in smaller markets, even though those markets offer lower potential returns and pose more risk for the firm's investments.

Answer 2

False

Question 3

It is generally easier to negotiate employee layoffs in Europe than in the United States because of the generous government-provided social services in Europe.

Answer 3

False

Question 4

The benefits of international diversification must be tempered by political and economic risks and the problems of managing a complex international firm with operations in multiple countries.

Question 5

The four benefits of international strategies are 1) increased market size; 2) greater return on investment; 3) greater economies of scale and learning; and 4) location advantages.

Question 6

In some industries, technology drives globalization because the economies of scale necessary to reduce costs cannot be met by competing in domestic markets alone.

Question 7

In the Opening Case, the primary benefit realized by General Motors' expansion into the Chinese market was location advantages.

Question 8

The liability of foreignness is generally unaffected by the cultural distance between the two countries in an international transaction.

Question 9

The Opening case gives examples of Chinese firms such as Huawei Technologies Co. Ltd. which has been more successful abroad than in China.

Question 10

After a firm decides to compete internationally, it must select its strategy and choose a mode of entry into international markets.

Question 11

An important aspect of doing business internationally is that firms develop relationships with suppliers, customers, and partners and learn from these relationships as SAIC did in its partnerships with GM and Volkswagen.

Question 12

The three corporate-level international strategies are cost leadership, differentiation, and focus.

Question 13

Many firms choose direct investment in assets in foreign countries (e.g., establishing new subsidiaries, making acquisitions, or building joint ventures) over direct investment because it provides better protection for their assets.

Question 14

According to the Opening Case about entry into China, a common entry strategy for automobile firms such as General Motors and Volkswagen is licensing.

Question 15

Location advantages are influenced by costs of production, access to natural resources and critical supplies, as well as the needs of customers, but not culture.

Question 16

Multinational firms have many opportunities to learn from their experiences in international markets, but they must have a strong R&D system to absorb the knowledge.

Question 17

As noted in the Opening Case, the Chinese market is attractive only for manufacturing firms such as those in the automobile industry.

Question 18

A traditional motive for internationalization has been to secure needed resources, especially minerals and energy.

Question 19

To the extent that a firm is able to standardize its products across country borders, use the same or similar production facilities, and coordinate critical resource functions, the more likely it is to achieve optimum economies of scale.

Question 20

One reason why firms pursue international opportunities is to extend the product's life cycle.

Question 21

Part of Japan's success in the video game industry is derived from two related and support industries, cartoons and animation, and electronics.

Question 22

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.

Question 23

When a firm initially pursues an international business-level strategy, the resources and capabilities established in the home country frequently allow the firm to pursue the strategy into markets located in other countries.

Question 24

A major advantage of multidomestic strategies is the ability to customize for the specific market, although this sacrifices economies of scale.

Question 25

Research suggests that the performance of the global strategy in enhanced if it deploys in areas where regional integration across countries is occurring, such as the European Union.

Question 26

A global strategy assumes that the strategic business units operating in each country are interdependent and the home office attempts to achieve integration across these businesses.

Question 27

In the chapter Strategic focus, Yandex in Russia developed a search tool for the complex Russian language, and this ability later became an advantage in global competition. This example illustrates how domestic country conditions can contribute to a firm's global success.

Question 28

Firms must formulate and implement business strategies that take advantage of the determinants of national advantage in order to achieve competitive success.

Question 29

Even if effectively implemented, the transnational strategy often produces lower performance than does the implementation of either the multidomestic or global strategies.

Question 30

A transnational strategy is an international strategy in which the firm seeks to achieve both global efficiency and local responsiveness.

Question 31

Both the size and the nature of a country's domestic demand for a particular industry's good or service are important in Porter's model of national competitive advantage.

Question 32

A multidomestic strategy assumes that consumer needs, industry conditions, political and legal structures and social norms are homogeneous in every country.

Question 33

The global strategy is easier to manage because of the limited need to coordinate strategies and decisions across country borders.

Question 34

Having substantial supplies of critical basic natural resources is a necessary condition for a country to support businesses which can successfully compete in international markets.

Question 35

Italy has become the leader in the shoe industry because of related and supporting industries such as a well-established leather-processing industry which provides the leather needed to construct shoes and related products.

Question 36

In the chapter Strategic Focus, SunTech's success has been attributed in part to country conditions such as the availability of low-cost manufacturing and the strong engineering talents in China.

Question 37

Michael Porter's Determinants of National Advantage describe factors associated with the firm's domestic environment that contribute to its dominance in a particular global industry.

Question 38

South Korea's success in international markets is primarily a result of its abundant natural resources.

Question 39

A multidomestic strategy uses a highly decentralized approach meaning that country managers have the autonomy to customize the firm's products as necessary to meet the needs and preferences of local customers.

Question 40

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

Question 41

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.

Question 42

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.

Question 43

As shown in the Opening Case, Google used licensing agreements in China with the top four music producers to support its strategy to gain more market share from Baidu Inc.

Question 44

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

Question 45

When the country risk is high, firms prefer to enter with a greenfield investment rather than a joint venture.

Question 46

Export, licensing, and the strategic alliance entry modes are all appropriate for early market development.

Question 47

Research suggests that wholly owned subsidiaries and expatriate staff are inappropriate for service industries because those industries require close contact with customers, high levels of professional skills, specialized know-how, and customization.

Question 48

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

Question 49

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.

Question 50

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.

Question 51

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

Question 52

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.

Question 53

By choosing a region where markets are more similar, the firm may be able to better understand those markets and cater to their needs, but also achieve economies through sharing of resources.

Question 54

The current weak dollar makes imports to the United States cheaper, but exports more costly to foreign buyers.

Question 55

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

Question 56

The "liability of foreignness" means that many firms need to focus more on local adaptation or risk problems such as the Walt Disney Company faced opening its theme park in France.

Question 57

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

Question 58

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

Question 59

The "regionalization" environmental trend means that firms can focus on a region (customization) but also have some standardization or sharing within the region.

Question 60

The growing number of global competitors heightens the requirements to keep costs down and there is the desire for more specialized products to meet customer needs. These two pressures make transnational strategies increasingly necessary.

Question 61

Counterfeit products are mostly a nuisance to companies and rarely result in fatalities.

Question 62

Counterfeit products are especially problematic for firms that have significant profit margins associated with intellectual property rights such as software makers, entertainment content businesses (i.e., music producers), and branded products.

Question 63

Some products such as fashion and clothing items can be protected by sophisticated labels that guard against counterfeiters.

Question 64

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

Question 65

U.S. firms should find it more difficult to expand their operations into Mexico, Canada, and Western European countries than into Asian countries.

Question 66

Raymond Vernon states that the classic rationale for international diversification is to

A) pre-emptively dominate world markets before foreign companies can establish dominance.
B) avoid domestic governmental regulation.
C) extend the product's life cycle.
D) avoid international governmental regulation.

Question 67

There is no "ideal" level of internationalization as the amount of international diversification that can be managed varies from firm to firm and according to the abilities of each firm's managers.

Question 68

Some of the costs incurred by firms pursuing international diversification may derive from higher coordination expenses, trade barriers, and lack of familiarity with local cultures.

Question 69

The increased pressures for global integration of operations have been driven mostly by

A) new low cost entrants.
B) universal product demand.
C) increased levels of joint ventures.
D) the rise of governmental regulation.

Question 70

Research has shown that, as international diversification increases, firms' returns decrease initially but then increase quickly as firms learn to manage international expansion.

Question 71

Fluctuation in the value of different currencies is a major economic risk associated with international diversification.

Question 72

A U.S. manufacturer of pigments for household paint that exports about 40 percent of its production to European markets will find its sales will be harmed by a weak dollar.

Question 73

Which of the following is NOT a motive for firms to become multinational?

A) to take advantage of potential opportunities to expand the market for the firm's products.
B) to secure needed resources.
C) to avoid high domestic taxation on corporate income.
D) increasing universal product demand.

Question 74

The Opening Case indicates that many Chinese firms are doing all of the following EXCEPT

A) forming joint ventures with U.S. and other foreign firms.
B) competing in global markets such as the U.S. and Europe.
C) focusing on the Chinese domestic market only because of the influx volume of foreign entrants.
D) competing in both manufacturing and service industries.

Question 75

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.

Question 76

According to the Opening Case about entry into China, a common entry strategy for automobile firms such as General Motors and Volkswagen is

A) exporting.
B) acquisitions.
C) licensing.
D) joint ventures.

Question 77

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

Question 78

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

Question 79

Legal challenges to counterfeiting generally are successful in emerging economies such as China and Russia.

Question 80

International strategy refers to a(an)

A) action plan pursued by American companies to compete against foreign companies operating in the United States.
B) strategy through which the firm sells products in markets outside the firm's domestic market.
C) political and economic action plan developed by businesses and governments to cope with global competition.
D) strategy American firms use to dominate international markets.