Deck 13: The Strategy of International Business

Question 1

When consumer tastes and preferences differ significantly between countries, there is low pressure for local responsiveness.

Answer 1

False
Explanation: Strong pressures for local responsiveness emerge when customer tastes and preferences differ significantly between countries, as they often do for deeply embedded historic or cultural reasons.

Question 2

A global standardization strategy is appropriate when a firm is facing low pressures for cost reduction but high pressure for local responsiveness.

Answer 2

False
Explanation: Firms that pursue a global standardization strategy focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies; that is, their strategic goal is to pursue a low-cost strategy on a global scale. This strategy makes most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal.

Question 3

The customer is able to garner the benefit of the consumer surplus because one firm is competing with other firms for the customer's business, so the firm must charge a lower price than it could if it were a monopoly supplier.

Answer 3

True
Explanation: The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because the customer captures some of that value in the form of what economists call a consumer surplus. The customer is able to do this because the firm is competing with other firms for the customer's business, so the firm must charge a lower price than it could, were it a monopoly supplier.

Question 4

One of the sources of economies of scale is the ability to spread fixed costs over a large volume.

Question 5

Enterprises that pursue an international strategy tend to decentralize control over marketing and product strategies.

Question 6

Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical.

Question 7

A firm's strategy can be defined as the actions that managers take to attain the goals of the firm.

Question 8

For a firm, all positions on the efficiency frontier are viable.

Question 9

Once a firm has established a low-cost position, it can act as a barrier to new competition.

Question 10

The preeminent strategic goal for most firms is to maximize the value of the firm for its owners.

Question 11

To leverage subsidiary skills, companies should establish incentive systems that encourage local employees to acquire new skills.

Question 12

Support activities are always less important than the primary activities in achieving a competitive advantage.

Question 13

According to Porter, the way to create superior value is to drive down the cost structure of the business and/or differentiate the product in some way so that consumers value it more.

Question 14

In a multinational enterprise, skills are always generated at the headquarters location and are then dispersed to the rest of the organization.

Question 15

Threats of protectionism, economic nationalism, and local content rules dictate that international businesses manufacture locally.

Question 16

As competition intensifies, global standardization strategies and transnational strategies tend to become less viable, and managers need to orientate their companies toward either an international strategy or a localization strategy.

Question 17

The success of many multinational corporations is based not just upon the goods or services that they sell in foreign nations, but also upon the core competencies that underlie the development, production, and marketing of those goods or services.

Question 18

Research has shown that in the modern multinational enterprise, core competencies and skills typically reside in the home country.

Question 19

Systematic increases in sales that have been observed to occur over the life of the product are referred to as the experience curve.

Question 20

The skills within the firm that a competitor cannot easily match or imitate are known as core competence.

Question 21

Pressures for _____ imply that it may not be possible for a firm to realize the full benefits from economies of scale, learning effects, and location economies.

A) local responsiveness
B) profitability
C) value creation
D) global standardization

Question 22

The strategy, operations, and organization of a firm must all be consistent with each other if the firm is to _____ and achieve superior profitability.

A) exploit core competencies
B) attain a comparative advantage
C) experience a learning curve
D) attain a competitive advantage

Question 23

Top management should be viewed as part of the firm's _____.

A) primary activities
B) experience curve
C) infrastructure
D) universal strategy

Question 24

Cost savings that come from learning by doing are known as _____.

A) learning curves
B) economies of scale
C) learning effects
D) experience curves

Question 25

_____ include the design, creation, and delivery of a product.

A) Primary activities
B) Core competencies
C) Support activities
D) Universal needs

Question 26

A multinational firm may need to delegate marketing functions to national subsidiaries to:

A) fully implement the firm's localization strategy.
B) employ economies of scale.
C) meet the requirements for a global standardization strategy.
D) be responsive to local differences in distribution channels.

Question 27

Global expansion offers companies the opportunity to generate greater profits than companies that focus strictly on _____.

A) value creation
B) economies of scale
C) location economies
D) the domestic market

Question 28

Research and development, production, marketing and sales, and customer service are all examples of _____.

A) core competencies
B) primary activities
C) value creation
D) secondary activities

Question 29

Which of the following is one of the two types of competitive pressure that affect the ability of multinational enterprises to compete in the global marketplace?

A) Pressure for cost increases
B) Pressure for local responsiveness
C) Pressure for value creation
D) Pressure for increased profitability

Question 30

Learning effects tend to be:

A) the same regardless of whether a task is simple or complex.
B) more significant when a technologically simple task is repeated.
C) less significant when a technologically complex task is repeated.
D) more significant when a technologically complex task is repeated.

Question 31

Economies that arise from performing a value creation activity in the optimal location are known as _____.

A) international strategies
B) location economies
C) localization strategies
D) economies of scale

Question 32

Pressures for cost reduction are intense in industries where:

A) major competitors are based in high-cost locations.
B) consumers are weak and face high switching costs.
C) there is persistent excess capacity.
D) the company is located in a low-cost location.

Question 33

Which of the following is true of firms that compete in the global marketplace?

A) They must employ a transnational policy in order to have a competitive edge.
B) Because differentiation across countries can involve significant duplication and a lack of product standardization, it may raise costs.
C) They must employ a domestic policy in order to have a competitive edge.
D) Because differentiation across countries can involve significant duplication and a lack of product standardization, it may reduce costs.

Question 34

_____ enable a firm to reduce the costs of value creation and/or to create perceived value in such a way that premium pricing is possible.

A) Core competencies
B) Global standardization strategies
C) Operations
D) Location economies

Question 35

_____ allows a firm to reduce its cost of creating value and increase its profitability.

A) Moving down the experience curve
B) Moving up the experience curve
C) Moving down the learning effect curve
D) Moving up the learning effect curve

Question 36

When the firm simultaneously faces both strong cost pressures and strong pressures for local responsiveness, the ideal strategy to follow is the _____ strategy.

A) global standardization
B) localization
C) transnational
D) international

Question 37

_____ is measured by the percentage increase in net profits over time.

A) Profit growth
B) Value
C) Profitability
D) Operational economy

Question 38

The amount of value a firm creates is measured by the:

A) economies of scale they are able to achieve.
B) difference between its costs of production and the value that consumers perceive in its products.
C) profitability the firm achieves.
D) difference between its costs of production and the price that it charges for its products.

Question 39

The _____ all of the different positions that a firm can adopt with regard to adding value to the product and low cost assuming that its internal operations are configured efficiently to support a particular position.

A) economies of scale are
B) diminishing returns are
C) efficiency frontier shows
D) value creation scale shows

Question 40

When a firm focuses on increasing profitability by customizing the product or service so that they provide a good match to tastes and preferences in different national markets, the firm is following a(n) _____ strategy.

A) transnational
B) localization
C) international
D) global standardization

Question 41

A strategy that focuses on increasing the attractiveness of a product is referred to as a(n) _____.

A) differentiation strategy
B) low cost strategy
C) effectiveness strategy
D) efficiency strategy

Question 42

Economies that arise from performing a value creation activity in the optimal place for that activity are referred to as _____.

A) factor economies
B) production economies
C) location economies
D) value creation economies

Question 43

When companies disperse different stages of the value chain to those locations around the world where perceived value is maximized or where the costs of value creation are minimized, companies create:

A) a differentiated organization.
B) a location economy curve.
C) economies of scale.
D) a global web of value creation activities.

Question 44

The distinguishing feature of many firms that pursue a(n) _____ strategy is that they are selling a product that serves universal needs, but they do not face significant competitors.

A) international
B) localization
C) transnational
D) global standardization

Question 45

Which of the following is an example of a primary activity in a firm's value chain?

A) Information systems
B) Research and development
C) Logistics
D) Human relations

Question 46

The efficiency frontier has a convex shape because of _____.

A) consumer surplus
B) diminishing returns
C) profitability
D) differentiation strategy

Question 47

Which of the following statements is true?

A) The way to increase the profitability of a firm is to create a greater number of products.
B) The amount of value a firm creates is measured by the difference between its costs of production and the value that consumers perceive in its products.
C) The more value customers place on a firm's products, the lower the price the firm is able to charge for those products.
D) The price a firm charges for a good or service is typically more than the value the customer places on that good or service.

Question 48

Which of the following is an example of a support activity in a firm's value chain?

A) Research and development
B) Customer service
C) Human resources
D) Marketing and sales

Question 49

The basic strategy paradigm suggests that to maximize its profitability, a firm should do which of the following?

A) Choose, according to strategy, any position on the efficiency frontier as all positions are viable.
B) Pick a position on the efficiency frontier that is viable in the sense that there is a low product demand anticipated.
C) Configure its external operations so that they support the position of diminishing returns.
D) Make sure that the right organization structure is in place to execute the strategy.

Question 50

According to researchers Bartlett and Ghoshal, for transnational enterprises to be successful, they must focus on:

A) selling a product that serves universal needs.
B) leveraging the skills found at their subsidiaries around the world.
C) increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets.
D) ensuring that the flow of skills from the home country to the foreign subsidiaries is one way and uninterrupted.

Question 51

A(n) _____ strategy makes most sense when demands for local responsiveness are high, but cost pressures are moderate or low.

A) global standardization
B) transnational
C) international
D) localization

Question 52

A firm benefits by basing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity. Firms that pursue such a strategy can realize _____.

A) differentiation
B) location economies
C) vertical integration
D) horizontal integration

Question 53

_____ imply that when a firm already has significant value built into its product offering, increasing value by a relatively small amount requires significant additional costs.

A) Efficiency matrixes
B) Diminishing returns
C) Cost plus curves
D) Strategy convex curves

Question 54

The value of a product to an average consumer is V; and the average price that the firm can charge a consumer for that product is P. Here, V - P can be termed as:C. The firm's profit per unit sold (π) is equal to P - C, while the consumer surplus per unit is equal to V - P.

A) consumer surplus per unit.
B) producer surplus per unit.
C) profit growth.
D) profit per unit sold.
The value of a product to an average consumer is V; the average price that the firm can charge a consumer for that product given competitive pressures and its ability to segment the market is P; and the average unit cost of producing that product is

Question 55

_____ activities are basically concerned with creating the product, marketing and delivering the product to buyers, and providing support and after-sales service.

A) Support
B) Subordinate
C) Ancillary
D) Primary

Question 56

A consumer surplus can be best described as:

A) what the consumer has "left-over" after a purchase.
B) how much extra a consumer has to pay for a product.
C) value for the money.
D) the premium charged for a quality product.

Question 57

The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because:

A) the customer's disposable income is significantly higher than what the market demands.
B) the customer captures some of that value in the form of a consumer surplus.
C) regulatory mechanisms ensure that the customer is not overcharged for products/services.
D) marketers implement psychological pricing tactics to ensure that customers perceive the prices to be low.

Question 58

_____ can be defined as the rate of return that the firm makes on its invested capital, which is calculated by dividing the net profits of the firm by total invested capital.

A) Profitability
B) Performance
C) Cash flow
D) Efficiency

Question 59

The percentage increase in net profits over time measures _____.

A) capital return
B) profitability
C) market growth
D) profit growth

Question 60

_____ activities of the value chain provide inputs that allow the primary activities to occur.

A) Complementary
B) Basic
C) Core
D) Support

Question 61

When individuals gain knowledge of the most efficient ways to perform particular tasks, they are saving costs through _____.

A) location economies
B) value creation effects
C) experience curve effects
D) learning effects

Question 62

Which strategy focuses on increasing profitability by customizing the firm's goods or services so they provide a good match to tastes and preferences in different national markets?

A) Global standardization strategy
B) Transnational strategy
C) Localization strategy
D) International strategy

Question 63

_____ exists when the tastes and preferences of consumers in different nations are similar if not identical.

A) Universal needs
B) Homogenous needs
C) Basic needs
D) Bundled needs

Question 64

Lenovo's ThinkPad laptop computers are designed in the United States, the case, keyboard, and hard drive are made in Thailand; the display screen and memory in South Korea; the built-in wireless card in Malaysia; and the microprocessor in the United States. In each case, these components are manufactured and sourced from the optimal location given current factor costs. In this example, Lenovo has:

A) vertical integration advantages.
B) a global web of value creation activities.
C) learning effects.
D) high local responsiveness.

Question 65

Responding to pressure for _____ requires that a firm differentiate its product offering and marketing strategy from country to country.

A) cost reductions
B) experience effects
C) lowering the costs of value creation
D) being locally responsive

Question 66

Moving down the experience curve:

A) increases the cost of a firm's raw material.
B) allows a firm to reduce its cost of creating value.
C) decreases a firm's profitability.
D) increases the research and development expenditure of a firm.

Question 67

It has been observed that a product's production costs decline by some quantity about each time cumulative output _____.

A) increases by twenty five percent
B) quadruples
C) doubles
D) triples

Question 68

It has been observed in the aircraft industry that, each time cumulative output of airframes was doubled, unit costs typically declined to 80 percent of their previous level. This is an example of the _____ curve.

A) core performance
B) location
C) strategic
D) experience

Question 69

Learning effects:

A) tend to be less significant when a technologically complex task is repeated.
B) will be less significant in an assembly process involving 1,000 complex steps than in one of only 100 simple steps.
C) typically disappear after a while, in spite of the complexity of the task.
D) are more significant after two or three years of the introduction of a new process.

Question 70

Economies of scale arise from which of the following sources?

A) Increasing fixed costs by limiting them to small volumes.
B) Serving domestic and international markets from the same production facilities.
C) Serving only domestic markets.
D) Bargaining with distributors to drive up the product costs.

Question 71

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

A) Decrease in the value of the product in the local market
B) Duplication of functions
C) Inability to accommodate varying tastes and preferences in different markets
D) Reduced customization

Question 72

Which of the following is less likely to add to the pressure for a firm to be locally responsive?

A) National differences in consumer tastes and preferences
B) Differences in infrastructure and traditional practices
C) Switching costs for consumers
D) Host-government demands

Question 73

It has been suggested that learning effects are important only during the start-up period of a new process and that they cease after two or three years. Any decline in the experience curve after such a point is due to:

A) reduction in fixed costs.
B) higher depreciation costs.
C) economies of scale.
D) obsolescence.

Question 74

A firm that is facing both strong cost pressures and strong pressures for local responsiveness should follow a(n) _____ strategy.

A) localization
B) global standardization
C) international
D) transnational

Question 75

When a firm has a strategic goal of pursuing a low-cost strategy on a worldwide scale, the firm should follow a(n) _____ strategy.

A) global standardization
B) localization
C) international
D) customization

Question 76

Which of the following is associated with firms following the global standardization strategy?

A) High pressures for local responsiveness
B) Use cost advantage to support aggressive pricing in world markets
C) Low pressures for cost reductions
D) Customize product offering and marketing strategy to local conditions

Question 77

A firm that is pursuing a(n) _____ strategy is simultaneously trying to achieve low costs through location economies, economies of scale, and learning effects, and trying to differentiate its product offering across geographic markets.

A) global customization
B) international
C) localization
D) transnational

Question 78

_____ refer(s) to systematic reductions in production costs that have been observed to occur over the life of a product.

A) Experience curve
B) Economies of scale
C) Location economies
D) Production possibility

Question 79

_____ strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense.

A) Localization
B) Transnational
C) Global standardization
D) International

Question 80

Firms usually respond to pressures for cost reduction by trying to:

A) lower the costs of value creation.
B) be locally responsive.
C) undertaking product differentiation.
D) diversifying product lines.