Deck 12: The Strategy of International Business

Question 1

A strategy that focuses primarily on increasing the attractiveness of a product is referred to as a low-cost strategy.

Answer 1

False

Question 2

Superior value creation relative to rivals requires that the gap between the value and cost of production achieved by a company be lesser than the gap attained by its competitors.

Answer 2

False

Question 3

For services such as banking or health care,production typically occurs when the service is being designed by in-house professionals.

Answer 3

False

Question 4

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

Question 5

Maintaining the company infrastructure is a support activity.

Question 6

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

Question 7

The higher the firm's profit per unit sold is,the greater its profitability will be,all else being equal.

Question 8

The term organizational structure refers to the totality of a firm's organization,including organization architecture,control systems and incentives,organizational culture,processes,and people.

Question 9

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

Question 10

Successful global expansion requires the transfer of core competencies to foreign markets where indigenous competitors lack them.

Question 11

The various value creation activities that a firm undertakes are referred to as operations.

Question 12

The actions that managers take to attain the goals of the firm are referred to as a firm's strategy.

Question 13

The greater the consumer surplus,the lower the value for the money the consumer gets.

Question 14

Processes are the manner in which decisions are made and work is performed within the organization.

Question 15

Firms that operate internationally are able to realize location economies by dispersing individual value creation activities to locations where they are performed most efficiently and effectively.

Question 16

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.

Question 17

In terms of attaining a competitive advantage,support activities can be as important as the primary activities of the firm.

Question 18

The human resource function controls the transmission of physical materials through the value chain.

Question 19

Consumer surplus captures some of the value of a product thereby reducing the price a firm can charges for it.

Question 20

According to Michael Porter,all positions on the efficiency frontier are viable.

Question 21

According to researchers,firms facing strong pressures for local responsiveness should pursue a global standardization strategy.

Question 22

Learning effects will be more significant in an assembly process which involves 100 simple steps than in an assembly process which involves 1,000 complex steps.

Question 23

_____ is a support activity.

A) Research and development
B) Production
C) Marketing and sales
D) Logistics
E) Customer service

Question 24

A localization strategy involves some duplication of functions and smaller production runs.

Question 25

Location economies are the economies that arise from performing a value creation activity in the optimal location for that activity,wherever in the world that might be.

Question 26

Strategic alliances allow firms to share the fixed costs of developing new products or processes.

Question 27

Firms that pursue an international strategy focus on increasing profitability by reaping the cost reductions that come from economies of scale,learning effects,and location economies.

Question 28

Profit growth is measured by:

A) dividing the net profits of the firm by total invested capital.
B) subtracting the previous years gross profit from the current year's gross profit.
C) calculating the difference between the previous year's profitability and the current year's profitability.
D) the percentage increase in net profits over time.
E) adding the profitability of the last two fiscal years.

Question 29

The rate of return that a firm makes on its invested capital is referred to as _____.

A) stakeholder return
B) profitability
C) profit growth
D) process value
E) strategic fit

Question 30

An international strategy involves taking products first produced for their domestic market and selling them internationally with only minimal local customization.

Question 31

The experience curve refers to systematic increase in production costs that have been observed to occur over the life of a product.

Question 32

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

Question 33

Pressures for local responsiveness imply that it may not be possible to leverage skills and products associated with a firm's core competencies wholesale from one nation to another.

Question 34

Responding to pressures for cost reduction requires a firm to try to lower the costs of value creation.

Question 35

A global standardization strategy makes most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal.

Question 36

The firm that moves up the experience curve most rapidly will have a cost advantage vis-à-vis its competitors.

Question 37

Universal needs exist when the tastes and preferences of consumers in different nations are different.

Question 38

Managers are most likely to increase the profitability of their firm by pursuing strategies that:

A) add value to the firm's products.
B) increase costs.
C) enable the firm to reduce the depth of its product line.
D) allow the firm to sell less products in existing markets.
E) allow the firm to exit from relatively new markets.

Question 39

One key to progressing downward on the experience curve is to decrease the volume produced by a single plant.

Question 40

Strategies that increase profitability can also expand a firm's business and thus enable it to attain a higher rate of profit growth.

Question 41

According to Michael Porter,superior portability goes to a firm that:

A) creates similar products as their competitors.
B) keeps the gap between value and cost of production smaller than the gap attained by competitors.
C) drives down the cost structure of its business.
D) has the highest cost structure in the industry.
E) has the least valuable product in the industry.

Question 42

The amount of value a firm creates is measured by:

A) the difference between the previous year's profitability and the current year's profitability.
B) dividing the market price of its products by the price that customers are actually willing to pay.
C) the difference between its costs of production and the value that consumers perceive in its products.
D) dividing the net profits of the firm by total invested capital.
E) the sum of the profitability of the last two fiscal years.

Question 43

In general,the more value customers place on a firm's products:

A) the lesser the profitability of the firm.
B) the higher the competitive pressure from other firms.
C) the lesser the quality of the product.
D) the lesser the consumer surplus for those products.
E) the higher the price the firm can charge for those products.

Question 44

A firm's profitability maximizes when it:

A) creates products similar to the products of its competitors.
B) strips all the value out of its product offering.
C) ensures that it has the right organization structure in place to execute its strategy.
D) picks a position on the efficiency frontier that is not viable.
E) does not configure its internal operations to reduce costs.

Question 45

A firm maximizes its profitability when it:

A) creates products similar to the products of its competitors.
B) minimizes the value provided by its products.
C) picks a position on the efficiency frontier that is not viable.
D) strips all the value out of its product offering.
E) configures its internal operations to support the position selected by it on the efficiency frontier.

Question 46

The efficiency frontier has a convex shape because of:

A) a high-cost structure.
B) diminishing returns.
C) a significantly low product value.
D) low production costs.
E) high profit growth.

Question 47

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

A) standardization
B) differentiation
C) target-identification
D) low-cost
E) profitability

Question 48

One of the reasons why a firm typically charges for a good or service less than the value placed on that good or service by the customer is because:

A) the firm attempts to create value for the consumers by providing them a wide range of products
B) it is normally impossible to segment a market based on each customer's reservation price.
C) the value creation results in a corresponding reduction in costs of production.
D) the firm frequently modifies its products to compete with the products introduced by other firms.
E) it is highly unlikely that the same good or service will be available to the customers from other firms.

Question 49

Typically,the price a firm charges for a good or service is:

A) less than the value placed on that good or service by the customer.
B) more than what customers assume it would be.
C) more than the market price for similar goods or services.
D) the same as the value placed on that good or service by the customer.
E) less than the lowest priced similar good or service in the market.

Question 50

According to Michael Porter,_____ and _____ are the two basic strategies for improving creating value and attaining a competitive advantage in an industry.

A) differentiation; low-cost
B) value creation; generalization
C) one-size-fits-all; zero-sum
D) comparison; standardization
E) profitability; strategic fit

Question 51

The price that reflects an individual's assessment of the value of a product is referred to as:

A) the market price.
B) the customer's negotiated price.
C) the base value of the product.
D) the customer's reservation price.
E) the profit growth price.

Question 52

A company can create more value for a product by:

A) charging a higher price for the product.
B) raising production costs.
C) generating more profits.
D) making the product more attractive.
E) increasing the profitability of the product.

Question 53

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 consumer captures some of that value in the form of what economists call a _____.

A) firm value
B) consumer surplus
C) customer loyalty
D) firm deficit
E) profit growth

Question 54

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

A) demand-value model
B) experience curve
C) efficiency frontier
D) optimal output model
E) surplus curve

Question 55

As a result of consumer surplus,a firm typically charges less price for a good or service than the value placed on it by customers because:

A) the value creation results in a corresponding reduction in costs of production.
B) it is highly unlikely that the same good or service will be available to the customers from other firms.
C) the firm is competing with other firms for the customer's business.
D) the firm charges a price that reveals a consumer's assessment of the product's value.
E) the firm creates value for the customer by producing a wide range of products

Question 56

For a firm to maximize its profitability,it is necessary that it:

A) creates products similar to the products of its competitors.
B) does not configure its internal operations to reduce costs.
C) minimizes the value of the consumer surplus
D) picks a position on the efficiency frontier that is viable.
E) strips all the value out of its product offering.

Question 57

Which of the following statements is true of the efficiency frontier?

A) To maximize its profitability, a firm should avoid a position that lies on the efficiency frontier.
B) Not all positions on the efficiency frontier are viable.
C) The efficiency frontier is a function of the cost and revenue of a product.
D) Positions inside the frontier are more efficient than the positions that are located on the frontier.
E) It is always concave in shape because of diminishing returns.

Question 58

The value creation activities of a firm are categorized as _____ and _____.

A) primary activities; support activities
B) strategic activities; functional activities
C) ancillary functions; tertiary functions
D) primary activities; core activities
E) goal-oriented activities; organizational activities

Question 59

Superior value creation relative to rivals requires that the firm:

A) creates similar products as its competitors so that consumers do not have to pay a premium price.
B) has the highest cost structure in the industry.
C) creates the least valuable product in the eyes of consumers.
D) ensures that the gap between value and cost of production is greater than the gap attained by competitors.
E) drives up the cost structure of its business.

Question 60

The _____ of a firm is measured by the difference between the value of a product to an average consumer and the average unit cost of producing that product.

A) customer surplus
B) value creation
C) cost curve
D) value efficiency
E) customer reservation

Question 61

Which of the following terms best represents the norms and value systems that are shared among the employees of an organization?

A) Process scenario
B) Organizational structure
C) Business structure
D) Organizational culture
E) Management structure

Question 62

Which of the following is a part of the organization architecture that consists of the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits?

A) Reports
B) Controls
C) Rewards
D) Knowledge flows
E) Dominions

Question 63

The _____ function of a value chain controls the transmission of physical materials through the value chain,from procurement through production and into distribution.

A) human resource
B) finance
C) marketing
D) logistics
E) research and development

Question 64

Which of the following is a primary activity in the operations of a firm?

A) Logistics function
B) Research and development
C) Information systems
D) Human resource function
E) Company infrastructure

Question 65

Which of the following support functions is most likely to involve dealing with the organizational structure,control systems,and culture of the firm?

A) Human resource function
B) Logistics
C) Information systems
D) Company infrastructure
E) Inventory management

Question 66

Who among the following should be viewed as part of a firm's infrastructure?

A) Procurement manager
B) Top management
C) Production manager
D) Research and development scientist
E) Marketing personnel

Question 67

_____ are considered a part of an organization architecture and are used to reward appropriate managerial behavior.

A) Knowledge flows
B) Reports
C) Processes
D) Incentives
E) Controls

Question 68

Processes are:

A) the manner in which decisions are made and work is performed within the organization.
B) the metrics used to measure the performance of subunits.
C) the devices used to reward appropriate managerial behavior.
D) the metrics used to make judgments about how well managers are running the subunits.
E) the norms and value systems that are shared among the employees of an organization.

Question 69

For services such as banking or health care,"production" typically occurs when:

A) the customer specifies the service requirements.
B) the service is paid for by the customer.
C) the service is designed in-house.
D) the service is delivered to the customer.
E) the customer gives a feedback.

Question 70

The _____ function of a value chain ensures that the company has the right mix of skilled people to perform its value creation activities effectively.

A) finance
B) marketing
C) human resource
D) logistics
E) marketing and sales

Question 71

A firm's ability to increase its profitability and profit growth by expanding globally is constrained:

A) by the imperative of localization.
B) by the economies of scale.
C) due to customer surplus.
D) due to the leveraging of skills developed in foreign operations.
E) due to the dispersion of individual value creation activities.

Question 72

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

A) lateral functions
B) support activities
C) core activities
D) central activities
E) secondary activities

Question 73

The _____ activities of a firm have to do with the design,creation,and delivery of the product; its marketing; and its support and after-sale service.

A) support
B) tertiary
C) ancillary
D) primary
E) secondary

Question 74

Of all the value creation activities in a firm,_____ create(s)value by discovering consumer needs and communicating them back to the R&D function of the company,which can then design products that better match those needs.

A) production
B) marketing and sales
C) human resources
D) logistics
E) information systems

Question 75

Which of the following operations of a firm is concerned with the design of products and production processes?

A) Human resources
B) Research and development
C) Marketing and sales
D) Materials management
E) Company infrastructure

Question 76

Which of the following is a support activity in the operations of a firm?

A) Research and development
B) Customer service
C) Marketing and sales
D) Creation and maintenance of information systems
E) Production

Question 77

The term _____ refers to the totality of a firm's organization,including its organizational structure,control systems,incentives,processes,and people.

A) primary structure
B) organization architecture
C) organizational hierarchy
D) organizational model
E) management structure

Question 78

_____ is a value creation activity which falls into the category of primary activities.

A) Creation and maintenance of information systems
B) Customer service
C) Human resources
D) Logistics
E) Company infrastructure maintenance

Question 79

A company can increase its growth rate by taking goods or services developed at home and selling them internationally.The returns from such a strategy are likely to be greater if:

A) the product is already being offered by local companies in the nations that the company enters.
B) the product is a generic product that requires little differentiation.
C) indigenous competitors in the nations that the company enters lack comparable products.
D) there is a high inflation in the nations that the company enters.
E) the product is perceived to be very costly in the home country of the company.

Question 80

Which of the following functions creates a perception of superior value in the minds of consumers by solving consumer problems and by supporting them after they have purchased the product?

A) Production
B) Marketing and sales
C) Human resources
D) Customer service
E) Logistics