Question 1

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with
A) differences in climates and time zones.
B) the absence of a trading bloc.
C) physical remoteness.
D) the lack of connective ethnic and social networks.

Accepted Answer

Administrative and political distance between two countries increases with absence of trading bloc.

Question 2

Planet Resource Inc. is a global internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries it serves. Planet Resource is most likely doing this to
A) reduce its geographical distance from the other countries.
B) increase its administrative distance from the other countries.
C) increase its economic distance from the other countries.
D) reduce its cultural distance from the other countries.

Accepted Answer

Planet Resource Inc. is most likely doing this to reduce its cultural distance from the other countries. Cultural differences find their expression in language, ethnicity, religion, and social norms.

Question 3

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of
A) location economies.
B) economies of scope.
C) learning races.
D) network effects.

Accepted Answer

In this example, Unilever is trying to reap the benefits of location economies, which are benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be.

Question 4

Which of the following is most likely an accurate statement?
A) The multinational enterprise Starship benefited from advances in communications technology.
B) The multinational enterprise United Allies was hindered by falling investment barriers.
C) The multinational enterprise MegaStore benefited from rising trade barriers.
D) The multinational enterprise Global Partners was hindered by reduced transportation costs.

Accepted Answer

Multinational enterprises (MNE) are closely involved with the globalization process. This process benefits from advances in communications, falling trade and investment barriers, and reduced transportation costs.

Question 5

Downshift Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Downshift Autos Inc. is reaping the benefits of
A) economies of scope.
B) location economies.
C) resource immobility.
D) resource ambiguity.

Accepted Answer

In this scenario, Downshift Autos Inc. is reaping the benefits of location economies. Location economies are benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be.

Question 6

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?
A) benefits from lower labor costs in manufacturing and services
B) free use of formerly protected intellectual property
C) increasing trade barriers that protect businesses
D) exporting newly available raw materials, such as rubber and coal

Accepted Answer

Access to low-cost raw materials such as lumber, iron ore, oil, and coal was a key driver behind Globalization 1.0 and 2.0. During Globalization 3.0, firms have expanded globally to benefit from lower labor costs in manufacturing and services.

Question 7

Managers at Durkmunder, a firm in West Feenistan, want to make their company a global leader in business process outsourcing (BPO). What should the Durkmunder managers look for as they decide where to locate their BPO facilities?
A) large, undeveloped plots of land for greenfield projects
B) plentiful natural resources
C) many uneducated workers who are highly trainable
D) an abundance of well-educated English speakers

Accepted Answer

India carved out a competitive advantage in business process outsourcing (BPO), not only because of low-cost labor but also because of an abundance of well-educated, English-speaking young people.

Question 8

Which of the following is part of Geert Hofstede's cultural dimensions?
A) short-term orientation
B) groupthink
C) embrace of risk taking
D) power distance

Accepted Answer

Four dimensions of culture have emerged: power distance, individualism, masculinity-femininity, and uncertainty avoidance. More recently, Hofstede added two more cultural dimensions: long-term orientation and indulgence.

Question 9

Culinary Solutions Inc. manufactures cooking and baking equipment and has its base in the country of Vandevar. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself in the country of Balalaika, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Culinary Solutions Inc. incurs huge financial losses in Balalaika. In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because
A) it overestimated its need to protect its intellectual property.
B) it underestimated its liability of foreignness when entering the Balalaika market.
C) it underestimated its dwindling reputation before it enters the Balalaika market.
D) it overestimates the geographic and cultural distance between Vandevar and Balalaika.

Accepted Answer

In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because it underestimated its liability of foreignness when entering the Balalaika market. Liability of foreignness consists of the additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances.

Question 10

A firm is said to be pursuing a polycentric innovation strategy when
A) its research facility is situated in the headquarters and all other business activities are located around the world.
B) it draws from multiple, equally important research facilities located throughout the world.
C) it restricts its innovation to Western economies and production to developing markets.
D) its knowledge flow takes a one-way path-from its headquarters to the subsidiaries.

Accepted Answer

Many multinational enterprises (MNEs) now are replacing the one-way innovation flow from Western economies to developing markets with a polycentric innovation strategy-a strategy in which MNEs now draw on multiple, equally important innovation hubs throughout the world.

Question 11

How has China been affected by its one-child-per-family policy and appreciation of its currency?
A) The purchasing power of its workforce has declined.
B) The government no longer cares about capturing more of the value added.
C) The standard of living within the economy has become lower.
D) The country's advantage in low-cost manufacturing is now reduced.

Accepted Answer

Rising wages, fewer workers due to the effects of China's one-child-per-family policy, and appreciation of the Chinese currency now combine to lessen the country's advantage in low-cost manufacturing.

Question 12

Carpatia and Novenica are neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of
A) food processed in Novenica.
B) movies and TV shows produced in Carpatia.
C) iron ore extracted in Novenica.
D) luxury items manufactured in Carpatia.

Accepted Answer

Between the two countries, trade of luxury items manufactured in Carpatia will be most affected. Economic distance most affects industries or products for which demand varies by income (such as cars).

Question 13

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer
A) higher quality for lower costs for international routes.
B) higher quality for similar costs for U.S. domestic routes.
C) similar quality for lower costs for international routes.
D) similar quality for lower costs for U.S. domestic routes.

Accepted Answer

As mentioned in Strategy Highlight 10.1, Emirates, Etihad Airways, and Qatar Airways are using a blue ocean strategy to attract new customers and thereby threaten the dominance of U.S. legacy carriers. This strategy involves offering higher quality at lower cost for international routes than the U.S. carriers.

Question 14

Which of the following describes a firm in the Globalization 1.0 stage?
A) Asha Inc. had a large office in New York, which was one cog in a global network.
B) Asha Inc. had a large office in New York, which functioned with other large offices in Europe and Asia.
C) Asha Inc. had a base office in New York and a replica office in Amsterdam.
D) Asha Inc. had a base office in New York and distributed some of its products overseas.

Accepted Answer

In Globalization 1.0 stage, basically all the important business functions were located in the home country. Typically, only sales and distribution operations took place overseas-essentially exporting goods to other markets.

Question 15

Frederica, the chief financial officer at a moped manufacturer in Canada, wants to build new plants in Canada rather than overseas. Which of these points should she make as she argues her case to the board of directors?
A) "As the rest of the world globalizes, we will lead the way in strengthening our home nation."
B) "Keeping our factories in Canada means facing up to the liability of foreignness."
C) "Canada's wages and benefits are so low compared with the rest of the world that it makes the most sense to build factories here."
D) "It will be much more difficult to protect our intellectual property if we build factories overseas."

Accepted Answer

The issue of protecting intellectual property in foreign markets looms large. The software, movie, and music industries have long lamented large-scale copyright infringements in many foreign markets. In addition, when required to partner with a foreign host firm, companies may find their intellectual property being siphoned off and reverse-engineered. Japanese and European engineering companies entered China to participate in building the world's largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners' advanced technology to create their own, next-generation high-speed trains. To make matters worse, they also claim that the Chinese companies now compete against them in other lucrative markets, such as Saudi Arabia, Brazil, and even California, with trains of equal or better capabilities but at much lower prices.

Question 16

Badlands Corp., a tool and die maker, is considering where to locate its new factories and offices. According to the CAGE distance model, which of these countries is statistically most attractive to Badlands?
A) one that is much poorer than the country where Badlands has its headquarters
B) one that is in the same trading bloc as Badlands' home country
C) a country that does not share the same currency as Badlands' home country
D) the country that is the greatest physical distance from existing Badlands facilities

Accepted Answer

Most of the costs and risks involved in expanding beyond the domestic market are created by distance. Distance not only denotes geographic distance (in miles or kilometers), but also includes, as the CAGE acronym points out, cultural, administrative and political, and economic distance.

Question 17

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.
A) political
B) geographic
C) administrative
D) cultural

Accepted Answer

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high cultural distance. Cultural differences find their expression in language, ethnicity, religion, and social norms.

Question 18

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany?
A) inability to implement its trademark focused-differentiation strategy in the German market
B) significant differences between its U.S. personnel policies and Germany's culture
C) Germany's unfamiliarity with retail discount powerhouses
D) Metro's hostile takeover of Walmart in Germany

Accepted Answer

As mentioned in Strategy Highlight 10.2, Walmart attempted to implement its U.S. personnel policies and procedures: the Walmart cheer, a door greeter, every associate within 10 feet of a customer smiling and offering help, bagging groceries at the checkout, video surveillance, a prohibition against dating co-workers, and so on. German employees, however, simply refused to accept these policies. Worse, the first Walmart boss in Germany-installed directly from the Arkansas headquarters-spoke no German. He decreed that English would be the official in-house language.

Question 19

Which of the following will most likely harm a multinational enterprise's (MNE's) reputation?
A) Principal-agent problems cause an MNE to merge with another MNE.
B) Increased competition causes an MNE to close a factory in a developing country.
C) Wages for workers in a factory owned by an MNE increase, causing profits to decline.
D) A sweatshop owned by an MNE has an explosion that kills hundreds of workers.

Accepted Answer

The explosion in a sweatshop will most likely harm an MNE's reputation because sweatshops are known for having poor, often dangerous working conditions and low wages. Therefore, for an MNE to use a sweatshop lowers its reputation. Having an explosion that kills hundreds of workers in the sweatshop will harm the MNE's reputation even more.

Question 20

How will an increase in coordinated economic and political integration between countries affect the world economy?
A) The world's market economies will become self-sufficient and independent.
B) There will be gains in social welfare and living standards across the globe.
C) The cost of labor will further decline in emerging economies.
D) There will be a movement away from global collaboration networks among multinational enterprises (MNEs).

Accepted Answer

More gains in social welfare and living standards can be had through further globalization if future integration is managed effectively through coordinated efforts by governments.

Quiz 10: Global Strategy: Competing Around the World

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with

Planet Resource Inc. is a global internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries it serves. Planet Resource is most likely doing this to

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of

Which of the following is most likely an accurate statement?

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?

Managers at Durkmunder, a firm in West Feenistan, want to make their company a global leader in business process outsourcing (BPO) . What should the Durkmunder managers look for as they decide where to locate their BPO facilities?

Which of the following is part of Geert Hofstede's cultural dimensions?

A firm is said to be pursuing a polycentric innovation strategy when

How has China been affected by its one-child-per-family policy and appreciation of its currency?

Carpatia and Novenica are neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer

Which of the following describes a firm in the Globalization 1.0 stage?

Frederica, the chief financial officer at a moped manufacturer in Canada, wants to build new plants in Canada rather than overseas. Which of these points should she make as she argues her case to the board of directors?

Badlands Corp., a tool and die maker, is considering where to locate its new factories and offices. According to the CAGE distance model, which of these countries is statistically most attractive to Badlands?

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany?

Which of the following will most likely harm a multinational enterprise's (MNE's) reputation?

How will an increase in coordinated economic and political integration between countries affect the world economy?