Deck 12: The Strategy of International Business

Question 1

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.

Answer 1

True

Question 2

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

Answer 2

True

Question 3

When a firm creates a global web of value creation activities,the company disperses different stages of the value chain to those locations in the world where perceived value is maximized or where the costs of value creation are minimized.

Answer 3

True

Question 4

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

Question 5

Support activities include the design,creation,and delivery of a product.

Question 6

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

Question 7

The skills within the firm that competitor can easily match or imitate are known as core competencies.

Question 8

Core competencies 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.

Question 9

The amount of value a firm creates is measured by the difference between its costs of production and the price that it charges for its products.

Question 10

R&D,production,marketing and sales,and customer service are all examples of primary activities.

Question 11

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 and are prepared to pay a premium price.

Question 12

Diminishing returns 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.

Question 13

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

Question 14

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

Question 15

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

Question 16

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.

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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 22

Costs saving that come from learning by doing are known as economies of scale.

Question 23

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

Question 24

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

Question 25

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

Question 26

To create value,managers should have a process for identifying when valuable new skills have been created at a subsidiary,and then act as a facilitator to transfer the new skills within the firm.

Question 27

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

Question 28

Skills in an MNE are always generated at the headquarters location and are then dispersed to the rest of the organization.

Question 29

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 localization strategy.

Question 30

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 31

A company can create value by leveraging the skills created at the subsidiary level and applying them to other operations with the organization.

Question 32

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

Question 33

Moving down the experience curve allows a firm to reduce its cost of creating value and increase its profitability.

Question 34

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

Question 35

Two types of competitive pressure that affect the ability of MNEs to compete in the global marketplace are pressure for cost reductions and pressure for local responsiveness.

Question 36

Pressures for cost reduction are minimal in industries where major competitors are based in low-cost locations,where there is persistent excess capacity,and where consumers are powerful and face low switching costs.

Question 37

Because differentiation across countries can involve significant duplication and a lack of product standardization,it may reduce costs.

Question 38

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Question 39

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

Question 40

The creation of skills that help to lower the costs of production,or to enhance perceived value and support higher product pricing,is the monopoly of the corporate center.

Question 41

Michael Porter has argued that _____ and _____ are two basic strategies for creating value and attaining a competitive advantage in an industry.

A)differentiation; price competition
B)economies of scale; diversification.
C)low cost; differentiation
D)efficiency; promotion

Question 42

_____ 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 43

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

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

Question 44

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 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 percentage increase in net profits over time measures:

A)capital return.
B)profitability.
C)net profits.
D)profit growth.

Question 47

The basic strategy paradigm suggests that to maximize its profitability,a firm should do all of the following,except:

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 enough demand to support that choice.
C)configure its internal operations so that they support the position on the efficiency frontier.
D)make sure that the right organization structure is in place to execute the strategy.

Question 48

Global expansion allows firms to achieve all of the following,except:

A)standardize their product offering,marketing strategy,and business strategy for all national conditions.
B)realize location economies by dispersing value creation activities to the optimal location.
C)realize cost economies from experience effects generated by serving a larger market from a central location.
D)expand the market for their domestic product offerings by selling those products in international markets.

Question 49

A firm focusing on _____ will benefit 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.

A)organizational advantage
B)core competency
C)competitive gains
D)technical skill sets

Question 50

_____ 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 51

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 52

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 53

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 54

_____ 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 55

The _____ function creates value by ensuring the company has the right mix of people to perform activities effectively.

A)information systems
B)company infrastructure
C)human resources
D)logistics

Question 56

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

A)strategic choice curve
B)strategy convex
C)efficiency frontier
D)experience curve

Question 57

The marketing and sales functions of a firm can help to create value through all of the following ways,except:

A)creating goods and services.
B)brand positioning.
C)advertising.
D)communicating consumer needs to R&D.

Question 58

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:

A)consumer surplus per unit.
B)producer surplus per unit.
C)profit growth.
D)profit per unit sold.

Question 59

Which of the following statements is not true?

A)The way to increase the profitability of a firm is to create more value.
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 higher 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 60

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

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

Question 61

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 62

_____ exist 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 63

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 64

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 65

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 66

Economies of scale arise from all of the following sources,except:

A)increasing fixed costs by limiting them to small volumes.
B)serving domestic and international markets from the same production facilities
C)serving global markets.
D)bargaining with suppliers to bring down the cost of key inputs.

Question 67

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 68

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 69

_____ strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences.

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

Question 70

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

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

Question 71

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.

Question 72

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 73

Which strategy makes most sense when there are strong pressures for cost reductions and minimal demands for local responsiveness?

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

Question 74

A firm will face intense pressure for cost:

A)when competitors are based in low-cost locations.
B)where there is persistent excess capacity.
C)where industries produce commodity-type products.
D)where consumers have low switching costs.

Question 75

Which of the following is not associated with firms following the global standardization strategy?

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

Question 76

_____ 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 77

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 R&D expenditure of a firm.

Question 78

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 79

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

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

Question 80

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