Deck 13: The Strategy of International Business

Question 1

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

Answer 1

True

Question 2

When consumer tastes and preferences differ significantly between countries, there is low pressure for local responsiveness.

Answer 2

False

Question 3

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.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

As competition intensifies, global standardization strategies and transnational strategies tend to become less viable, and managers need to direct their companies toward either an international strategy or a localization strategy.

Question 8

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.

Question 9

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

Question 10

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.

Question 11

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

Question 12

Enterprises that pursue an international strategy tend to decentralize control over marketing and product strategies.

Question 13

Research has shown that in the modern multinational enterprise, core competencies and skills typically reside in the home country.

Question 14

The skills within the firm that a competitor cannot easily match or imitate are known as the core knowledge base.

Question 15

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

Question 16

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

Question 17

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

Question 18

Threats of protectionism, economic nationalism, and local content rules dictate that international businesses manufacture locally.

Question 19

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

Question 20

In a multinational enterprise, skills are typically generated at the home location and are then dispersed to the rest of the organization.

Question 21

The percentage increase in net profits over time measures

A) capital return.
B) profitability.
C) market growth.
D) profit growth.

Question 22

Research and development, production, marketing and sales, and customer service are all examples of

A) core competencies.
B) primary activities.
C) value creation.
D) secondary activities.

Question 23

________ include the design, creation, and delivery of a product.

A) Primary activities
B) Core competencies
C) Support activities
D) Universal needs

Question 24

________ 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 25

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 26

Which of the following statements is true?

A) The way to increase the profitability of a firm is to create a greater number of products.
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 lower 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 27

The amount of value a firm creates is measured by the

A) economies of scale they are able to achieve.
B) difference between its costs of production and the value that consumers perceive in its products.
C) profitability the firm achieves.
D) difference between its costs of production and the price that it charges for its products.

Question 28

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 29

________ 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 30

The efficiency frontier has a convex shape because of

A) consumer surplus.
B) diminishing returns.
C) profitability.
D) differentiation strategy.

Question 31

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

A) economies of scale are
B) diminishing returns imply
C) efficiency frontier shows
D) value creation scale shows

Question 32

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

A) Profit growth
B) Value
C) Profitability
D) Operational economy

Question 33

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 34

The basic strategy paradigm suggests that to maximize its profitability, a firm should do which of the following?

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 a low product demand anticipated.
C) Configure its external operations so that they support the position of diminishing returns.
D) Make sure that the right organization structure is in place to execute its strategy.

Question 35

________ 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 36

Top management should be viewed as part of the firm's

A) primary activities.
B) experience curve.
C) infrastructure.
D) universal strategy.

Question 37

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

A) exploit core competencies
B) attain a comparative advantage
C) experience a learning curve
D) attain a competitive advantage

Question 38

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

A) research and development
B) customer service
C) human resources
D) marketing and sales

Question 39

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 40

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

A) a differentiation strategy.
B) a low-cost strategy.
C) an effectiveness strategy.
D) an efficiency strategy.

Question 41

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 42

Learning effects tend to be

A) the same regardless of whether a task is simple or complex.
B) more significant when a technologically simple task is repeated.
C) less significant when a technologically complex task is repeated.
D) more significant when a technologically complex task is repeated.

Question 43

It has been observed that a product's production costs decline by some quantity about each time cumulative output

A) increases by 25 percent.
B) quadruples.
C) doubles.
D) triples.

Question 44

________ 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.

A) Core competencies
B) Global standardization strategies
C) Operations
D) Location economies

Question 45

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 46

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

A) value creation.
B) economies of scale.
C) location economies.
D) the domestic market.

Question 47

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, despite the complexity of the task.
D) are more significant after two or three years of the introduction of a new process.

Question 48

The term ________ refers to skills within the firm that competitors cannot easily match or imitate and that may exist in the firm's value creation activities.

A) experience curves
B) core competence
C) economies of scale
D) learning effects

Question 49

Lenovo's ThinkPad laptop computers are designed in the United States; the case, keyboard, and hard drive are made in Thailand; the display screen and memory in South Korea; the built-in wireless card in Malaysia; and the microprocessor in the United States. In each case, these components are manufactured and sourced from the optimal location given current factor costs. In this example, Lenovo has

A) vertical integration advantages.
B) a global web of value creation activities.
C) learning effects.
D) high local responsiveness.

Question 50

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

A) international strategies.
B) location economies.
C) localization strategies.
D) economies of scale.

Question 51

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

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

Question 52

Cost savings that come from learning by doing are known as

A) learning curves.
B) economies of scale.
C) learning effects.
D) experience curves.

Question 53

________ 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 54

It has been suggested that learning effects are important only during the start-up period of a new process and that they cease after two or three years. Any decline in the experience curve after such a point is due to

A) reduction in fixed costs.
B) higher depreciation costs.
C) economies of scale.
D) obsolescence.

Question 55

Location economies are the economies that arise from performing a ________ activity in the optimal location for that activity.

A) universal need
B) core competence
C) value creation
D) localization strategy

Question 56

________ allows a firm to reduce its cost of creating value and increase its profitability.

A) Moving down the experience curve
B) Moving up the experience curve
C) Moving down the learning effect curve
D) Moving up the learning effect curve

Question 57

Michael Porter argues that

A) those firms that create superior value will achieve superior profitability.
B) standardization of product is a basic strategy for attaining a competitive advantage in an industry.
C) it is necessary for a firm to have the lowest cost structure or create the most valuable product.
D) it is important that the gap between value and the cost of production be smaller than that of competitors.

Question 58

A firm benefits 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. Firms that pursue such a strategy can realize

A) differentiation.
B) location economies.
C) vertical integration.
D) horizontal integration.

Question 59

The ________ refers to systematic reductions in production costs that have been observed to occur over the life of a product.

A) economies of scale
B) value creation
C) location economies
D) experience curve

Question 60

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 61

Economies of scale arise from which of the following sources?

A) increasing fixed costs by limiting them to small volumes
B) serving domestic and international markets from the same production facilities
C) serving only domestic markets
D) bargaining with distributors to drive up the product costs

Question 62

Which of the following is associated with firms following the global standardization strategy?

A) high pressures for local responsiveness
B) cost advantage used to support aggressive pricing in world markets
C) low pressures for cost reductions
D) product offering and marketing strategy customized to local conditions

Question 63

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

A) Universal
B) Homogenous
C) Basic
D) Bundled

Question 64

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

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

Question 65

A multinational firm may need to delegate marketing functions to national subsidiaries to

A) fully implement the firm's localization strategy.
B) employ economies of scale.
C) meet the requirements for a global standardization strategy.
D) be responsive to local differences in distribution channels.

Question 66

When a firm has a strategic goal of pursuing a low-cost strategy on a worldwide scale, the firm should follow ________ strategy.

A) a global standardization
B) a localization
C) an international
D) a customization

Question 67

The distinguishing feature of many firms that pursue ________ strategy is that they are selling a product that serves universal needs, but they do not face significant competitors.

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

Question 68

When a firm focuses on increasing profitability by customizing the product or service so that it provides a good match to tastes and preferences in different national markets, the firm is following ________ strategy.

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

Question 69

According to researchers Bartlett and Ghoshal, for transnational enterprises to be successful, they must focus on

A) selling a product that serves universal needs.
B) leveraging subsidiary skills.
C) increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets.
D) ensuring that the flow of skills from the home country to the foreign subsidiaries is one way and uninterrupted.

Question 70

Pressures for cost reduction are intense in industries where

A) major competitors are based in high-cost locations.
B) consumers are weak and face high switching costs.
C) there is persistent excess capacity.
D) the company is located in a low-cost location.

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

Pressures for ________ imply that it may not be possible for a firm to realize the full benefits from economies of scale, learning effects, and location economies.

A) local responsiveness
B) profitability
C) value creation
D) global standardization

Question 73

A multinational enterprise doing business in Nigeria decided to change the labeling on its product to conform to local customs and preferences. What type of competitive pressure did this company experience?

A) pressure for cost increases
B) pressure for local responsiveness
C) pressure for value creation
D) pressure for increased profitability

Question 74

When AMD sells its computer chips in countries across the world, it doesn't need to worry too much about customizing the product to local needs and preferences because computer chips are ________ needs.

A) universal
B) homogenous
C) basic
D) single-user

Question 75

Universal needs exist when

A) the tastes and preferences of consumers in different nations are similar if not identical.
B) conventional commodity products requested in one country are different than those requested in another country.
C) the tastes and preferences of consumers in the same nation are similar if not identical.
D) consumers are willing to pay a high price for a product regardless of what country they reside in.

Question 76

Responding to pressure for ________ requires that a firm differentiate its products and marketing strategy from country to country, even though it may raise costs.

A) cost reductions
B) experience effects
C) lowering the costs of value creation
D) being locally responsive

Question 77

Which of the following is one of the two types of competitive pressure that affects the ability of multinational enterprises to compete in the global marketplace?

A) pressure for cost increases
B) pressure for local responsiveness
C) pressure for value creation
D) pressure for increased profitability

Question 78

Which of the following is true of firms that compete in the global marketplace?

A) They must employ a transnational policy in order to have a competitive edge.
B) Because differentiation across countries can involve significant duplication and a lack of product standardization, it may raise costs.
C) They must employ a domestic policy in order to have a competitive edge.
D) Because differentiation across countries can involve significant duplication and a lack of product standardization, it may reduce costs.

Question 79

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

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

Question 80

________ 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.

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