Question 1

The primary reason for investing in international markets is to generate above-average returns on investments.

Accepted Answer

The primary reason for investing in international markets is to diversify a portfolio, which may lead to potentially higher returns than investing solely in domestic markets. However, it is important to note that investing in international markets also carries additional risks such as currency fluctuations and political instability.

Question 2

A firm is more likely to invest R&D to build competitive advantage in smaller markets, even though those markets offer lower potential returns and pose more risk for the firm's investments.

Accepted Answer

Firms are generally more likely to invest in R&D in larger markets with higher potential returns and lower risks, as these investments are more likely to yield significant competitive advantages and financial benefits.

Question 3

It is generally easier to negotiate employee layoffs in Europe than in the United States because of the generous government-provided social services in Europe.

Accepted Answer

European labor laws are generally more stringent, making layoffs more complex and difficult compared to the United States, where labor laws are more flexible.

Question 4

The benefits of international diversification must be tempered by political and economic risks and the problems of managing a complex international firm with operations in multiple countries.

Accepted Answer

While international diversification can provide benefits such as increased market access and reduced reliance on any one market or country, there are also political and economic risks that must be considered, as well as the challenges of managing a complex multinational organization.

Question 5

The four benefits of international strategies are 1) increased market size; 2) greater return on investment; 3) greater economies of scale and learning; and 4) location advantages.

Accepted Answer

These are indeed four benefits of international strategies.

Question 6

In some industries, technology drives globalization because the economies of scale necessary to reduce costs cannot be met by competing in domestic markets alone.

Accepted Answer

This statement is true. Industries that rely heavily on technology for production and distribution may find it necessary to expand globally in order to achieve the necessary economies of scale to reduce costs and remain competitive. Domestic markets may not be large enough to support this level of production, so global expansion becomes necessary.

Question 7

In the Opening Case, the primary benefit realized by General Motors' expansion into the Chinese market was location advantages.

Accepted Answer

The answer of In the Opening Case, the primary benefit...

Question 8

The liability of foreignness is generally unaffected by the cultural distance between the two countries in an international transaction.

Accepted Answer

Cultural distance refers to the differences in language, norms, values, and customs between two countries. The greater the cultural distance, the higher the liability of foreignness. Therefore, the liability of foreignness is affected by cultural distance in an international transaction.

Question 9

The Opening case gives examples of Chinese firms such as Huawei Technologies Co. Ltd. which has been more successful abroad than in China.

Accepted Answer

The opening case states that Huawei Technologies Co. Ltd. is an example of a Chinese firm that has been more successful abroad than in China.

Question 10

After a firm decides to compete internationally, it must select its strategy and choose a mode of entry into international markets.

Accepted Answer

This statement is true. Once a firm decides to enter international markets, it needs to choose a strategy and mode of entry into those markets.

Question 11

An important aspect of doing business internationally is that firms develop relationships with suppliers, customers, and partners and learn from these relationships as SAIC did in its partnerships with GM and Volkswagen.

Accepted Answer

Developing relationships with suppliers, customers, and partners is an important aspect of doing business internationally as it helps firms learn and grow from these interactions, as seen in SAIC's partnerships with GM and Volkswagen.

Question 12

The three corporate-level international strategies are cost leadership, differentiation, and focus.

Accepted Answer

The three corporate-level international strategies are multidomestic, global-standardization, and transnational.

Question 13

Many firms choose direct investment in assets in foreign countries (e.g., establishing new subsidiaries, making acquisitions, or building joint ventures) over direct investment because it provides better protection for their assets.

Accepted Answer

Direct investment in assets in foreign countries provides better protection for assets because the firm has more control and ownership over their assets, compared to direct investment where the firm may only have partial ownership or control. Additionally, direct investment in assets allows for the firm to customize and adjust their operations in the foreign country more easily, compared to direct investment where the firm may be limited by the policies and regulations of the foreign country.

Question 14

According to the Opening Case about entry into China, a common entry strategy for automobile firms such as General Motors and Volkswagen is licensing.

Accepted Answer

The opening case about entry into China mentioned that joint ventures are a common entry strategy for automobile firms such as General Motors and Volkswagen, not licensing.

Question 15

Location advantages are influenced by costs of production, access to natural resources and critical supplies, as well as the needs of customers, but not culture.

Accepted Answer

Culture can also play a significant role in location advantages, such as the availability of skilled labor, business-friendly laws and regulations, and consumer preferences.

Question 16

Multinational firms have many opportunities to learn from their experiences in international markets, but they must have a strong R&D system to absorb the knowledge.

Accepted Answer

Multinational firms have access to a variety of markets, cultures, and experiences, providing them with opportunities to learn and improve their products and services. However, to fully benefit from this knowledge, they must have an effective research and development (R&D) system in place to absorb and apply what they learn.

Question 17

As noted in the Opening Case, the Chinese market is attractive only for manufacturing firms such as those in the automobile industry.

Accepted Answer

This statement is false. The Chinese market is attractive for a wide range of industries and businesses, including technology, consumer goods, finance, and more. While manufacturing is certainly an important segment, it is not the only one that can find success in China.

Question 18

A traditional motive for internationalization has been to secure needed resources, especially minerals and energy.

Accepted Answer

Internationalization, particularly in the context of multinational corporations, has often been driven by the desire to secure access to strategic resources such as minerals and energy. This allows companies to reduce their dependence on domestic suppliers and ensure a reliable supply chain for their production processes.

Question 19

To the extent that a firm is able to standardize its products across country borders, use the same or similar production facilities, and coordinate critical resource functions, the more likely it is to achieve optimum economies of scale.

Accepted Answer

By standardizing products, using the same facilities, and coordinating resource functions, a company can reduce duplication of efforts and achieve efficiencies in production, which can lead to lower costs per unit and thus economies of scale.

Question 20

One reason why firms pursue international opportunities is to extend the product's life cycle.

Accepted Answer

By entering new markets with their products, firms can introduce them to customers in different stages of the product life cycle, thus potentially extending their lifespan.

Quiz 8: International Strategy