Deck 3: Developing Transnational Strategies: Building Layers of Competitive Advantage

Question 1

Companies using multinational strategies are characterized by asset and capability configurations that are dispersed, interdependent and specialized.

Answer 1

False
Companies that use a multinational strategy configure their assets and capabilities as decentralized and nationally self-sufficient. This will result in considerable local autonomy, and high flexibility and responsiveness to the local environment. However, they suffer problems of inefficiencies and inability to exploit the knowledge and competencies of other national units. Dispersed, interdependent and specialized asset configuration is the characteristic of a transnational strategy.

Question 2

The main drivers of MNEs' continual growth and prosperity are the desire to protect existing revenues and to increase profits.

Answer 2

False
Search for additional profit or desire to protect existing revenue may explain why MNEs come to exist, but they do not provide a complete explanation of why some of them continue to grow and flourish. The multinational's exposure to the diversity of environments, however, allows it to develop diverse capabilities that may help the MNE in its continual growth.

Question 3

Which of the following best describes an international company's asset and capability configuration?

A) assets and capabilities are decentralized and nationally self-sufficient.
B) assets and capabilities are centralized and globally scaled.
C) assets and capabilities are dispersed, interdependent and specialized.
D) sources of core competences are centralized, while other assets and capabilities are decentralized.

Answer 3

D
The strategic orientation of an international company is based on exploiting parent company knowledge and capabilities. This will require the company to configure it assets and capabilities so that the sources of core competencies remain centralized, while other assets and capabilities may be decentralized. Choices a, b, and c describe the configuration of assets and capabilities of multinational, global, and transnational companies respectively.

Question 4

Cost reductions due to scale-economies are static and constant over time and few dynamic benefits are associated with scale economies.

Question 5

Having a city-specific strategy is always a better choice than country-specific strategy in emerging markets.

Question 6

Which of the following describes the strategic orientation of a multinational company?

A) focused on developing global efficiency, flexibility and worldwide learning capability simultaneously.
B) focused on exploiting parent company knowledge and capabilities through worldwide diffusion and adaptation.
C) focused on building cost advantages through centralized, global scale operations.
D) focused on building flexibility to respond to national differences through strong, resourceful and entrepreneurial national operations.

Question 7

Which of the following best describes scope economies?

A) cost advantage resulting from production, development or distribution in more than one country.
B) cost advantage resulting from large volume production, development or distribution.
C) cost advantage resulting from the joint production, development or distribution of more than one product.
D) cost advantage resulting from the production, development or distribution of very high quality products.

Question 8

Which of the following is not considered a source of global competitive advantage?

A) scale economies.
B) market leadership.
C) national differences in input or output markets.
D) scope economies.

Question 9

Which of the following is not a source of environmental volatility?

A) macroeconomic risks.
B) risk ratings attributed to the MNE.
C) political risks.
D) resource risks.

Question 10

The CEO of Informatix Co., suggested to the board of directors that if the firm was going to adopt a transnational strategy, rather than having treasury operations situated in the headquarters, the company should relocate this operation to London in order to enhance access to financial markets. Consequently, the treasury operations would still be centralized, but situated in a different location. Flexible specialization, or excentralization, is an important attribute of firms that adopt a transnational strategy.

Question 11

Which of the following is not a benefit associated with higher production volumes?

A) exploiting scale economies.
B) enhancing innovation.
C) accumulating learning.
D) taking advantage of the learning curve effect to further reduce production costs.

Question 12

In order to secure worldwide competitive advantage, a multinational firm should pursue all of the following objectives, except:

A) the development of global-scale efficiencies.
B) the development of multinational flexibility.
C) the ability to develop innovation.
D) maximizing market share in all subsidiaries simultaneously.

Question 13

Which of the following explain why cost reduction occurs in the context of scope economies?

A) high production volumes.
B) high production volumes and similarities in the resource requirements for different products.
C) high production volumes and the tendency of the firm to fully exploit its existing resources.
D) similarities in resource requirements for different products, as well as the tendency of the firm to fully exploit its existing resources.

Question 14

Which of the following strategies can be employed to enhance the efficiency of an MNE?

A) pursue scale and scope economies.
B) pursue scope economies alone.
C) benefit from inter-country differences in factor costs.
D) pursue both scale and scope economies, as well as benefit from inter-country differences in factor costs.

Question 15

MNEs can maximize each of the following objectives independently: global scale efficiency, multinational flexibility and innovation development.

Question 16

The diversity of environments in which MNEs operate enables them to develop diverse capabilities and experience multiple learning opportunities.

Question 17

Which of the following describes the strategic orientation of a transnational company?

A) focused on building flexibility to respond to national differences through strong, resourceful and entrepreneurial national operations.
B) focused on developing global efficiency, flexibility and worldwide learning capability simultaneously.
C) focused on building cost advantages through centralized, global scale operations.
D) focused on exploiting parent company knowledge and capabilities through worldwide diffusion and adaptation.

Question 18

At the annual meeting of the board of directors of LabZaws Co., James Wilson, the CEO of the company, was directed to focus primarily on enhancing the firm's efficiency. How could he achieve this objective?

A) focus on cost reduction alone.
B) focus on revenue enhancement alone.
C) focus on both cost reduction and revenue enhancement.
D) downsize and outsource many of the firm's activities.

Question 19

Since efficiency, flexibility and learning are conflicting goals, a transnational company should focus on only one of these goals and try to exploit it through the three sources of worldwide competitive advantage - national differences in both input and output markets, scale economies and scope economies.

Question 20

Lindux Co., intends to enhance its competitive advantage by exploiting the national differences that prevail in the countries that host its subsidiaries. Which of the following is consistent with this intention?

A) moving the manufacture of labor-intensive components to Vietnam in order to capitalize on the lower cost labor found in Vietnam.
B) hiring local managers for its foreign subsidiaries rather than employing expatriates.
C) centralizing the company's R&D activities in the home country for reasons of strategic security.
D) using a common distribution channel for multiple products.

Question 21

Cool-Colas Ltd. is a national beverage manufacturer situated in India. During the past few years, the company has suffered intense competition from major multinationals such as Coca Cola, Nestlé and Pepsi. What can Cool-Colas do to protect its domestic market?

Question 22

Explain why some firms adopt a transnational strategy, while others adopt a multinational strategy?

Question 23

As the CEO of an India based company, how will the rise of the middle class in India help you expand the business?

Question 24

How will global trends such as the increase in labor costs in some emerging markets (e.g. China) impact national differences in the future and companies' decisions to exploit them?

A) Companies should consider both the current state of cost differences and the future state based on these trends, before they make a sound long-term commitment.
B) Some decisions may be economically viable based on the current differences but not as much attractive in the future.
C) An economically viable decision is time-independent.
D) Options a and b are both correct.

Question 25

Describe different types of volatility in the global environment that force the MNE to adjust its strategies.

Question 26

Which of the following best describes a global company's asset and capability configuration?

A) assets and capabilities are centralized and globally scaled.
B) core competences are centralized, while other assets and capabilities are decentralized.
C) assets and capabilities are dispersed, interdependent and specialized.
D) assets and capabilities are decentralized and nationally self-sufficient.

Question 27

Which of the following best describes a transnational company's asset and capability configuration?

A) assets and capabilities are centralized and globally scaled.
B) core competences are centralized, while other assets and capabilities are decentralized.
C) assets and capabilities are dispersed, interdependent and specialized.
D) assets and capabilities are decentralized and nationally self-sufficient.

Question 28

On his way to a meeting with a colleague, Mike Thornville, CEO of Ajaxiss Co., was debating how to explain the importance of national differences in both input and output markets to Ajaxiss and the need to exploit these differences. If you were Mike, how would you approach this conversation?

Question 29

According to an article in McKinsey Quarterly on June 2012 , about 40 percent of the growth of the global economy over the next 15 years will be generated in 400 midsized emerging-market cities. What are implications of this statement for MNEs in advanced and emerging economies?