Deck 6: Strategy in the Global Environment

Question 1

Companies that compete in the global marketplace typically face two types of competitive pressures, cost reductions and expanding globally.

Answer 1

False

Question 2

Walmart opened its first stores in Mexico in 1993.

Answer 2

False

Question 3

The globalization of production has been increasing as companies take advantage of lower barriers to international trade and investment to disperse important parts of their production process around the globe.

Answer 3

True

Question 4

A transnational strategy makes the most sense when there are strong pressures for cost reductions and demand for local responsiveness is minimal.

Question 5

A localization strategy involves manufacturing global output in a limited number of centralized locations to realize scale economies.

Question 6

The average tariff rate on manufactured goods traded between advanced nations has fallen from around 40 percent to under 4 percent.

Question 7

The trend toward the globalization of production and markets is on the rise because industry boundaries do not stop at national borders.

Question 8

Companies pursuing a low-cost strategy on a global scale are following a global standardization strategy.

Question 9

Responding to pressures to be locally responsive requires that a company differentiate its products and marketing strategy.

Question 10

Proctor & Gamble's global success was based only on its portfolio of consumer goods.

Question 11

The success of many multinational companies is based only upon the goods or services they sell in foreign nations.

Question 12

Expanding globally can enable a company to increase its profitability and grow its profits more rapidly.

Question 13

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

Question 14

The volume of world merchandise trade has grown slower than the world's economy since 1950.

Question 15

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

Question 16

The shift from national to global markets has intensified competitive rivalry in industry after industry.

Question 17

A company can increase it growth rate by taking goods or services developed at home and selling them internationally.

Question 18

Rivalry for any company is understood by examining what happens only within the boundaries of its home country.

Question 19

Global strategy affects firms only at the corporate level.

Question 20

Many believe that the world's economic system is moving toward a system in which national markets are merging into one huge global marketplace.

Question 21

A problem with the international strategy is that over time, competitors inevitably emerge, and if managers do not take pro-active steps to reduce their cost structure, their company may be rapidly out-flanked by efficient global competitors.

Question 22

In companies following a transnational strategy, the flow of skills and product offerings moves in one direction-from the home company to foreign subsidiaries.

Question 23

Sony came to dominate the global television market via franchising.

Question 24

A localization 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.

Question 25

Through transnational strategy a firm tries to achieve low costs, product differentiation across geographic markets, and foster skills among different subsidiaries.

Question 26

One advantage of exporting is that it avoids the cost of establishing manufacturing operations in the host country.

Question 27

Franchising is a specialized form of licensing in which the franchiser sells the franchisee intangible property (normally a trademark) and insists that the franchisee agree to abide by strict rules about how it does business.

Question 28

Companies that pursue a global standardization strategy are trying to develop a business model that simultaneously achieves low costs and differentiates the product offering across geographic markets.

Question 29

Establishing a wholly owned subsidiary is generally the least costly method of serving a foreign market.

Question 30

Companies following an international strategy avoid any attempt at local customization of product offering.

Question 31

An international strategy may not be viable in the long term, and to survive, companies that are able to pursue it might ultimately need to shift towards a global standardization strategy.

Question 32

Companies pursuing an international strategy tend to centralize product development functions, such as R&D at home.

Question 33

Many of the issues that arise in the case of technological know-how do not arise in the case of management know-how.

Question 34

Most manufacturing companies begin their global expansion via international licensing.

Question 35

The greater the pressures for cost reduction are, the more likely it is that a company will want to pursue some combination of exporting and wholly owned subsidiaries.

Question 36

An international strategy is appropriate when firms face high cost pressures and low pressures for local responsiveness.

Question 37

One advantage of joint ventures is that a company may benefit from a local partner's knowledge of the many dimensions of a host country.

Question 38

MTV is a good example of a company that has had to pursue a localization strategy by varying its programming to match the demands of viewers in different nations.

Question 39

International licensing is an arrangement whereby a foreign licensee buys the rights to produce a company's product in the licensee's country for a negotiated fee.

Question 40

When a company licenses its technology, it can quickly lose control over it.

Question 41

When a company expands its sales volume through international expansion it can realize cost savings from economies of scale through all of the following except

A) spreading fixed costs over its global sales volume.
B) utilizing its production facilities more intensely.
C) increased bargaining power with its suppliers.
D) improved customer responsiveness.
E) all of these are ways that a company can realize cost savings from economies of scale.

Question 42

Which of the following is not an implication of the globalization of production and markets for competition within an industry?

A) Industry boundaries do not stop at national borders so managers must understand what is happening globally.
B) Increasing competitive rivalry in numerous industries
C) Creation of significant opportunities
D) Profit potential of any company rests on their international strategy.
E) All of these are implications of the globalization of production and markets.

Question 43

When a company increases its growth rate by taking goods or services developed at home and selling them internationally it is

A) leveraging its existing products.
B) taking the path of least resistance.
C) engaging in product positioning.
D) realizing cost economies from global expansion.
E) realizing location economies.

Question 44

The globalization of production has allowed firms to

A) increase their market share.
B) lower their cost structure.
C) respond to individual market segments.
D) avoid international competition.
E) meet all of these goals.

Question 45

When toy maker Mattel sells Barbie dolls in the Middle East, it changes the doll's shape to one that is a more accurate portrayal of a female body. Mattel does this in order to

A) create a commodity-type product.
B) transfer technological know-how.
C) respond to differences in local tastes.
D) realize experience curve effects.
E) increase product standardization

Question 46

Which of the following does not allow a company to reduce unit costs?

A) Outsourcing some functions to low-cost foreign suppliers
B) Customizing the product to meet local requirements
C) Realizing location economies
D) Pushing its suppliers to outsource some functions to low-cost foreign suppliers
E) Performing an activity at the lowest-cost location

Question 47

In which of the following circumstances does a global standardization strategy make the most sense?

A) Global market standardization is not possible, and there are no significant economies of scale to be realized from centralizing global manufacturing.
B) Global market standardization is possible, but there are no significant economies of scale to be realized.
C) Global market standardization is not possible, but there are significant economies of scale to be realized from centralizing global manufacturing.
D) Consumer tastes and preferences differ among national markets, and economies of scale are insubstantial.
E) Global market standardization is possible, and there are significant economies of scale and location economies to be realized.

Question 48

A company with a business-level strategy of cost leadership should pursue which of the following global expansion strategies?

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

Question 49

Which of the following factors increases pressures for local responsiveness?

A) Differences in customer tastes and preferences
B) Persistent excess capacity
C) Low-cost competitors
D) Powerful buyers
E) High international trade barriers

Question 50

A localization strategy is most appropriate in an industry in which pressures for cost reductions are _________ and pressures for local responsiveness are _________.

A) high; high
B) high; low
C) low; low
D) low; high
E) variable; high

Question 51

When a company performs a value creation activity in the optimal location for that activity, wherever in the world that might be, they are trying to capitalize on

A) location economies
B) economies of scope.
C) the transnational strategy.
D) economies of scale.
E) their localization strategy.

Question 52

Differences in tastes and preferences

A) increase pressures for cost reductions.
B) reduce profit potential.
C) prevent a company from pursuing a licensing strategy
D) reduce pressures from the host government.
E) increase pressures for local responsiveness.

Question 53

A global standardization strategy is most appropriate in an industry in which pressures for cost reductions are ____________ and pressures for local responsiveness are ___________.

A) low; high
B) high; high
C) low; low
D) high; low
E) variable; high

Question 54

A commodity oil producer would probably achieve the highest level of profitability with a(n) ___________ strategy.

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

Question 55

Which of the following factors increases pressures for cost reductions?

A) Differences in distribution channels between home and foreign markets are modest.
B) Increasing national wealth is expanding the market.
C) The product has great transportation needs.
D) The product has high switching costs.
E) Differentiation on nonprice factors is difficult, and price is the main competitive weapon in a market.

Question 56

Global expansion

A) is feasible only for large companies.
B) can enable companies to increase their profitability and grow their profits more rapidly.
C) allows domestic companies in the mature stage of the industry life cycle to maintain profits but not to increase them.
D) requires locating facilities in foreign countries.
E) makes sense for manufacturing firms, but not for service firms.

Question 57

Which of the following is not one of the ways in which expanding globally can enable companies to increase their profitability and grow their profits more rapidly?

A) Leveraging existing products in new markets.
B) Realizing economies of scale.
C) Locating in foreign countries with significant trade barriers.
D) Realizing location economies.
E) Leveraging skills created within subsidiaries applying them to other operations.

Question 58

Responding to pressures for cost reductions requires that a company try to minimize its ____________.

A) overhead costs.
B) tangible asset costs.
C) unit costs.
D) intangible asset costs.
E) none of the above.

Question 59

Host government demands generally

A) discourage foreign companies from operating in the home country.
B) increase pressures for cost reductions.
C) increase pressures for local responsiveness.
D) impede a company's ability to minimize its transaction costs.
E) impede a company's ability to differentiate its product offering across national borders.\

Question 60

When Dell opened a service call center in India to take advantage of an educated, English-speaking workforce and lower its costs, it was realizing which of the following benefits of global expansion?

A) Economies of scale
B) Leveraging organizational skills
C) Leveraging competencies
D) Location economies
E) None of these

Question 61

Identify and discuss the general ways in which companies can increase their profitability and profit growth through global expansion.

Question 62

Consider the case of a family-owned furniture making business, headquartered in the U.S., with fewer than 50 employees, that is contemplating exporting its products for the first time. What market do you recommend it enter, and when and how should it enter? Explain your answers.

Question 63

Pursuing an international strategy includes all of the following except

A) centralize product development at home.
B) establish manufacturing functions in each major country.
C) international licensing
D) establish marketing functions in each major country.
E) All of the above

Question 64

A company that enters a foreign market by entering into a licensing agreement with a local company

A) will realize location economies.
B) must engage in global strategic coordination.
C) will realize experience curve effects.
D) risks losing control over its technology to the venture partner.
E) must engage in global strategic coordination and will realize experience curve effects.

Question 65

Which entry mode gives a multinational the tightest control over foreign operations?

A) Exporting from the home country and letting a foreign agent organize local marketing
B) Licensing
C) Franchising
D) Entering into a joint venture with a foreign company to set up overseas operations
E) Setting up a wholly owned subsidiary

Question 66

Whirlpool, a leading U.S. maker of household appliances, has a wholly owned subsidiary that is responsible for R&D, manufacturing, and sales in over two dozen European countries, from Norway to Greece. What are some of the potential advantages that Whirlpool may gain from its use of a wholly owned subsidiary for global expansion? What are some of the potential disadvantages?

Question 67

For a hotel company whose competitive advantage is based on high brand name recognition, which of the following ways of serving an overseas market makes the most sense?

A) Exporting
B) Licensing
C) Franchising
D) Entering into a joint venture with a foreign company
E) Setting up a wholly owned subsidiary

Question 68

All of the following are consistent for a company pursuing a transnational strategy except

A) achieve low costs.
B) differentiate the product offering across geographic markets.
C) increasing profitability.
D) foster a flow of skills.
E) focus on leveraging subsidiary skills.

Question 69

Which of the following is not a drawback to licensing?

A) A company does not have tight control over operations in foreign countries.
B) Licensing limits a company's ability to coordinate strategy.
C) A company may lose control of technological know-how.
D) A company's brand could become damaged if the licensee does not perform up to established standards.
E) All of these are drawbacks to licensing.

Question 70

If a company lacks the capital to develop operations overseas and/or they are unwilling to commit resources to an unfamiliar or politically volatile foreign market, which of the following entry options is the most viable?

A) International licensing
B) Setting up a wholly owned subsidiary
C) Joint venture
D) Franchising
E) Global standardization

Question 71

If a company wishes to achieve high local customization and it can charge higher prices for this customization, a company should pursue a(n) __________ strategy.

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

Question 72

A telecommunications firm develops new wireless cellular phones, a technology in which foreign competition is low and the need for local responsiveness is low. What is the most appropriate short-term strategy for this firm?

A) Global standardization
B) International
C) Localization
D) Transnational
E) Forming a joint venture

Question 73

Which of the following entry modes is generally the most costly method of serving a foreign market?

A) Exporting
B) Wholly owned subsidiaries
C) Joint ventures
D) Licensing
E) Joint ventures and wholly owned subsidiaries are equally costly.

Question 74

A localization strategy is based on which of the following ideas?

A) There is a convergence in the tastes of consumers in different nations of the world.
B) There are substantial economies of scale to be realized from centralizing global production.
C) Consumer tastes and preferences differ among national markets.
D) There are cost advantages associated with manufacturing a standard product for global consumption.
E) Competitive strategy should be centralized at the world head office.