Deck 11: The Strategy of International Business

Question 1

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

Answer 1

False
Explanation: Superior value creation relative to rivals does not necessarily require a firm to have the lowest cost structure in an industry,or to create the most valuable product in the eyes of consumers.However,it does require that the gap between value and cost of production be greater than the gap attained by competitors.

Question 2

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

Answer 2

True
Explanation: The support activities of the value chain provide inputs that allow the primary activities to occur.In terms of attaining a competitive advantage,support activities can be as important as,if not more important than,the "primary" activities of the firm.

Question 3

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

Answer 3

True
Explanation: Since core competencies are by definition the source of a firm's competitive advantage,the successful global expansion is based not just on leveraging products and selling them in foreign markets,but also on the transfer of core competencies to foreign markets where indigenous competitors lack them.

Question 4

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

Question 5

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 6

Processes are conceptually synonymous to the location of decision-making responsibilities within an organization,as both involve decisions.

Question 7

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 8

In a global strategy,the corporate center exercises more control over manufacturing,marketing,and product development decisions.

Question 9

The company infrastructure is a support activity.

Question 10

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

Question 11

People also refer to the strategy used to recruit,compensate,and retain those individuals and the type of people that they are in terms of their skills,values,and orientation.

Question 12

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 13

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

Question 14

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

Question 15

Adding value to the firm's products enables the firm to lower prices.

Question 16

The shift from a global strategy to a localization strategy is a response to the increasing localization of markets.

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

The amount of value created by a firm is measured by:

A)calculating 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)estimating 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.

Question 25

A firm that bases each value creation activity it performs at that location where internal and environmental factors are most conducive to the performance of that activity is bound to realize location economies.

Question 26

The text defines _____ as the rate of return that the firm makes on its invested capital (ROIC).

A)stakeholder returns
B)profitability
C)value
D)revenue

Question 27

Pressures for cost reduction can be particularly intense in many industrial and consumer products like handheld calculators,semiconductor chips,personal computers,and liquid crystal display screens.

Question 28

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

Question 29

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

Question 30

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

Question 31

A strategy of holding prices low in order to increase global market share and attain greater scale economies rather than raising prices to reflect the higher perceived value of the product could increase the firm's rate of profit growth even further.

Question 32

Learning effects will be more significant in an assembly process involving 100 simple steps than in one of 1000 complex steps.

Question 33

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

A)systems
B)value chain
C)mission
D)strategy

Question 34

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

Question 35

The key to making a strategic alliance work is that the two firms must approach the alliance with radically different agendas.

Question 36

Pressures for local responsiveness imply that it is easier to leverage skills and products associated with a firm's core competencies wholesale from one nation to another.

Question 37

Strategic alliances also allow firms to share the fixed costs (and associated risks)of developing new products or processes.

Question 38

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

Question 39

Which of the following is NOT a strategy for a firm to achieve profitability?

A)Raising costs.
B)Expanding internationally.
C)Selling more products in existing markets.
D)Entering new markets.

Question 40

Profit growth is measured by:

A)dividing the net profits of the firm by total invested capital.
B)subtracting the previous year's 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.

Question 41

Which of the following is one of the reasons that consumers are able to capture consumer surpluses?

A)Because the firm is a monopoly supplier
B)Because it is difficult to segment a market to reflect reservation prices of all customers
C)Because value creation results in a corresponding reduction in costs of production
D)Because firms can charge consumers a price that reveals a consumer's assessment of the product's value

Question 42

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

Question 43

The _____ of a firm is measured by the difference between value and cost of a product.

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

Question 44

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

A)Positions outside the efficiency frontier are easily attainable.
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)Sufficient demand exists for all positions on the efficiency frontier.

Question 45

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

Question 46

When MTV engages in the creation,programming,and broadcasting of content,such as music videos and thematic shows,it is carrying out the function of:

A)marketing and sales.
B)logistics.
C)production.
D)human resource management.

Question 47

Which of the following is an example of support activity in a firm?

A)Research and development
B)Customer service
C)Marketing and sales
D)Information systems

Question 48

Why does the efficiency frontier manifest itself in a convex shape?

A)Because of diminishing returns
B)Because of constant returns to specialization
C)Because of the consumer surplus
D)Because of value deficit

Question 49

The price that reflects an individual's assessment of the value of a product constitutes:

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

Question 50

Superior value creation relative to rivals requires a firm to:

A)differentiate their products so that consumers do not have to pay a premium for it.
B)have the lowest cost structure in the industry.
C)create the most valuable product in the eyes of consumers.
D)ensure that the gap between value and cost of production be greater than the gap attained by competitors.

Question 51

For a service organization,at which stage does production typically occur?

A)When the service involves production of tangibles
B)When the service is paid for by the customer
C)When the service is designed in-house
D)When the service is delivered to the customer

Question 52

According to the text,it is useful to think of the operations of a firm as a(n)_____ composed of a series of distinct activities,including production,marketing and sales,materials management,R&D,human resources,information systems,and the firm infrastructure.

A)functional stream
B)assembly line
C)supply chain
D)value chain

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)firm value
B)a consumer surplus
C)customer loyalty
D)firm deficit

Question 54

When a firm already has significant value built into its product offering,increasing value by a relatively small amount requires significant additional costs.The converse also holds,when a firm already has a low-cost structure,it has to give up a lot of value in its product offering to get additional cost reductions.These are the implications relate to the concept of _____.

A)diminishing returns
B)marginal utility
C)surplus value
D)production possibility

Question 55

Which function 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

Question 56

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

A)primary;support
B)strategic;functional
C)ancillary;tertiary
D)primary;core

Question 57

There are two basic strategies for improving a firm's profitability.These are:

A)a differentiation strategy and a low-cost strategy.
B)a premier strategy and a generic strategy.
C)a one-size-fits-all strategy and a zero-sum strategy.
D)a comparison strategy and a standardization strategy.

Question 58

Which of the following is one of the ways in which a company can create more value for a product?

A)By charging a higher price for the product
B)By raising production costs
C)By generating more profits
D)By making the product more attractive

Question 59

Which of the following is an example of a primary activity in a firm?

A)Materials management
B)Research and development
C)Information system
D)Human relations

Question 60

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

Question 61

_____ refers to the manner in which decisions are made and work is performed within the organization.

A)Processes
B)Mores
C)Modes
D)Controls

Question 62

Devices used to reward appropriate managerial behavior are called _____.

A)loyalties
B)reports
C)processes
D)incentives

Question 63

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

A)hub
B)support
C)core
D)central

Question 64

Which support function denotes the context within which all the other value creation activities occur,and includes the organizational structure,control systems,and culture of the firm?

A)Human resource function
B)Logistics
C)Information systems
D)Infrastructure

Question 65

_____ comprises three things: the formal division of the organization into subunits,the location of decision-making responsibilities within these,and the establishment of integrating mechanisms to coordinate the activities of subunits.

A)Organizational structure
B)Organizational model
C)Corporate ladder
D)Corporate culture

Question 66

_____ are 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)Incentives

Question 67

The term _____ can be used to refer to the totality of a firm's organization,including its organizational structure,control systems and incentives,and people.

A)organization tree
B)organization architecture
C)organizational culture
D)organizational model

Question 68

One of the ways in which the _____ can create value in a firm is 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

Question 69

The _____ function ensures that the company has the right mix of skilled people to perform its value creation activities effectively and it also ensures that people are adequately trained,motivated,and compensated to perform their value creation tasks.

A)finance
B)marketing
C)human resource
D)logistics

Question 70

Skills within the firm that competitors cannot easily match or imitate are referred to as _____.

A)core competencies
B)barriers to entry
C)internalities
D)externalities

Question 71

Ford has produced a high-value version of its Ford Expedition SUV.Sold as the Lincoln Navigator and priced around $10,000 higher,the Navigator has the same body,engine,chassis,and design as the Expedition,but through skilled advertising and marketing,supported by some fairly minor features changes (e.g. ,more accessories and the addition of a Lincoln-style engine grille and nameplate),Ford has fostered the perception that the Navigator is a "luxury SUV." This demonstrates how the marketing function can:

A)help a firm reduce cost of production across product lines.
B)create value by giving valuable inputs to the research and development function.
B)increase the value that consumers perceive to be contained in a firm's product.
C)create value by performing its activities efficiently so lower costs result.

Question 72

In terms of organizational architecture,"people" include:

A)the suppliers to the firm.
B)the employees of the organization.
C)the firm's customers.
D)the shareholders of the firm.

Question 73

Which of the following constrains a firm's ability to increase its profitability and profit growth by expanding globally?

A)The imperative of localization
B)The realization of location economies
C)The realization of cost economies
D)The leveraging of skills developed in foreign operations

Question 74

The _____ function 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

Question 75

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

A)Diversification
B)Value
C)Location
D)Support

Question 76

The norms and value systems that are shared among the employees of an organization refer to its _____.

A)process scenario
B)organizational structure
C)business structure
D)organizational culture

Question 77

When customers place an order for a Dell product over the firm's Web site,that data is immediately transmitted,via the Internet,to suppliers,who then configure their production schedules to produce and ship that product so that it arrives at the right assembly plant at the right time,thus reducing the amount of inventory held at factories and saving costs.This is an example of how a company can use its _____ to create value.

A)finance function
B)information systems
C)human resources
D)service function

Question 78

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 host country.
B)it is a generic product that requires little differentiation.
C)indigenous competitors in the host nations lack comparable products.
D)there is a high inflation situation in the host country.

Question 79

This function can create a perception of superior value in the minds of consumers by solving customer problems and supporting customers after they have purchased the product.

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

Question 80

_____ are the bedrock of a firm's competitive advantage.

A)Internalities
B)Generic skills
C)Core competencies
D)Standard competencies