Question 1

A firm's strategy can be defined as the reactions of managers to the firm's goals.

Accepted Answer

A firm's strategy is a comprehensive plan formulated to achieve the firm's goals, not merely reactions to those goals. It involves deliberate planning and direction-setting to guide the firm's actions in the competitive marketplace.

Question 2

There are two basic strategies for improving a firm's profitability: a diversification strategy and a low-cost strategy.

Accepted Answer

The two basic strategies for improving a firm's profitability are typically identified as cost leadership (low-cost strategy) and differentiation strategy, not diversification. Diversification is a growth strategy, focusing on entering new markets or industries.

Question 3

Because of diminishing returns, the efficiency frontier has a convex shape.

Accepted Answer

The efficiency frontier, or production possibility frontier, is convex due to diminishing returns, indicating that as production of one good increases, more of the other good must be sacrificed, reflecting increasing opportunity costs.

Question 4

Value-chain activities can be divided into initial activities and final activities.

Accepted Answer

Value-chain activities are divided into primary activities and support activities, not initial and final activities.

Question 5

Michael Porter has argued that low cost and high quality are two basic strategies for creating and attaining a competitive advantage in an industry.

Accepted Answer

Michael Porter identified three generic strategies for competitive advantage: cost leadership, differentiation, and focus, not specifically low cost and high quality.

Question 6

Firms that pursue a global standardisation strategy focus on economies of scale, learning effects and location economies.

Accepted Answer

A global standardisation strategy aims to reap significant economies of scale by producing a standardized product for all markets, benefiting from learning effects and location economies to reduce costs and increase efficiency.

Question 7

Ford and ABB have embraced a transnational strategy and found this easier to pursue than a localisation or global standardisation strategy.

Accepted Answer

A transnational strategy is complex as it requires balancing global efficiency with local responsiveness, making it more challenging than purely local or global strategies.

Question 8

Which of the following retailing rules relating to international success did IKEA largely ignore when it initially entered the North American market?

Accepted Answer

IKEA initially ignored the rule of tailoring products to national tastes and preferences when it entered the North American market. The company initially tried to sell Europeansized products, which did not always meet the size and taste preferences of the North American consumers.

Question 9

The concept of diminishing returns implies that when a firm already has significant _____________ built into its product offering, increasing that value by a relatively small amount requires ________________ costs.

Accepted Answer

The concept of diminishing returns suggests that as a firm continues to increase a particular input (in this case, value built into its product offering), the additional benefits gained from that increase will eventually start to decline, requiring significantly higher costs for relatively smaller improvements in value.

Question 10

R&D, production, marketing and sales and customer service are all examples of:

Accepted Answer

Primary activities are those that are directly involved in the production and delivery of a product or service.

Question 11

For superior performance to be attained, there must be a 'strategic fit' between market conditions and:

Accepted Answer

For superior performance, there must be a strategic fit between strategy, operations, and organization. This alignment ensures that the company's direction, its operational capabilities, and its organizational structure are all synchronized to effectively respond to market conditions.

Question 12

While IKEA is pragmatic about adapting to local tastes and preferences, to exploit economies of scale it still centralises functions such as:

Accepted Answer

IKEA centralizes functions like the selection of menu items for its in-store restaurants and the production of catalogues to maintain consistency across its global operations, which helps in exploiting economies of scale by standardizing certain aspects of its business model.

Question 13

The Pearl River success story is based on a ________________ strategy.

Accepted Answer

The Pearl River success story is based on a low-cost, high-quality strategy, which has allowed it to become competitive in the global market by offering good quality products at lower prices.

Question 14

Michael Porter has argued that ________________ and _____________ are two basic strategies for creating value and attaining a competitive advantage.

Accepted Answer

Porter identified low cost and differentiation as the two primary strategies for achieving a competitive advantage in a market. By either minimizing costs or offering unique products and services, companies can outperform their competitors.

Question 15

The successful global expansion of manufacturing companies such as Toyota was based not just on ______________ products and selling them in foreign markets, but also on transferring ______________ to foreign markets where indigenous competitors lacked them.

Accepted Answer

The correct answer is D) leveraging; core competencies. This is because Toyota and similar companies have succeeded globally by leveraging their unique strengths or core competencies, such as advanced manufacturing techniques and strong brand reputation, and transferring these advantages to new markets where local competitors may not have the same level of expertise or capabilities.

Question 16

Leveraging of a firm's core competencies refers to:

Accepted Answer

Leveraging a firm's core competencies involves developing unique skills or capabilities that give the firm a competitive advantage, which are difficult for competitors to imitate.

Question 17

Many industries are now so competitive that firms must adopt a _____________________ strategy. This involves a ___________________ focus on reducing costs, transferring skills and products, and boosting local responsiveness.

Accepted Answer

The correct answer is D) transnational; simultaneous. This is because a transnational strategy involves a simultaneous focus on reducing costs, transferring skills and products, and boosting local responsiveness to compete effectively in various global markets.

Question 18

Within the context of value chain analysis, which of the following is an example of a support activity?

Accepted Answer

Support activities in value chain analysis include functions that assist the primary activities. Information systems is a support activity as it provides the necessary infrastructure and technology to enhance the efficiency and effectiveness of primary activities.

Question 19

Economies that arise from performing a value-creation activity in the optimal location for that activity at a cost advantage to the firm are referred to as:

Accepted Answer

Location economies are achieved when a firm performs a value-creation activity in the most advantageous location for that activity, thus gaining a cost advantage.

Question 20

The _____________ curve refers to the systematic _______________ in production costs that have been observed to occur over the life of a product.

Accepted Answer

The experience curve refers to the observed systematic reduction in production costs over the life of a product, as companies gain experience in manufacturing and efficiency improves.

Quiz 10: The Strategy of International Business