Question 1

In reviewing the Indian Software industry and the diamond of national advantage, which of the following is a growing detractor to the national competitive advantage in this industry?

Accepted Answer

It is interesting to note that the cost advantage of Indian firms has eroded. For example, TCS engineer compensation soared 13 percent in 2010. Further, IBM and Accenture are aggressively building up their Indian operations, hiring tens of thousands of sought-after Indians by paying them more, thereby lowering their costs while raising those of TCS.

Question 2

In considering the decision to offshore, which of the following generally is not one of the hidden costs?

Accepted Answer

Common savings from offshoring, such as lower wages, benefits, energy costs, regulatory costs, and taxes, are all easily visible and immediate. In contrast, there are a host of hidden costs that arise over time and often overwhelm the cost savings of offshoring. These hidden costs include: total wage costs, indirect costs, increased inventory, reduced market responsiveness, coordination costs, intellectual property rights, and wage inflation.

Question 3

For years O.R.T. Technologies resisted moving any operations outside Israel. However, when faced with a sharp rise in the value of the shekel, the maker of specialized software for managing gas stations froze all local hiring and decided to transfer some developmental work to Eastern Europe. This is an example of _____________ risk.

Accepted Answer

Currency fluctuations can pose substantial risks. A company with operations in several countries must constantly monitor the exchange rate between its own currency and that of the host country to minimize currency risks. Even a small change in the exchange rate can result in a significant difference in the cost of production or net profit when doing business overseas.

Question 4

In the Porter Diamond of National Advantage framework, which of the following factors does not affect nation competitiveness?

Accepted Answer

Porter concluded that there are four broad attributes of nations that individually, and as a system, constitute what is termed the Diamond of National Advantage. In effect, these attributes jointly determine the playing field that each nation establishes and operates for its industries. These factors are: factor endowments, demand condition, related and supporting industries, and firm strategy, structure, and rivalry.

Question 5

Which of the factors below has not made the software services industry in India extremely competitive on a global scale?

Accepted Answer

In India, the Diamond of National Advantage framework for software shows a large pool of skilled workers, a large network of public and private educational institutions, a large, growing market, and sophisticated customers.

Question 6

According to Michael Porter, firms that have experienced intense domestic competition are

Accepted Answer

Competitive rivalry increases the efficiency with which firms develop, market, and distribute products and services within the home country. This intense rivalry forces firms to look outside their national boundaries for new markets, setting up the conditions necessary for global competitiveness.

Question 7

In reviewing the Indian Software industry and the diamond of national advantage, which of the following is a growing detractor to the national competitive advantage in this industry?

Accepted Answer

It is interesting to note that the cost advantage of Indian firms has eroded. For example, TCS engineer compensation soared 13 percent in 2010. Further, IBM and Accenture are aggressively building up their Indian operations, hiring tens of thousands of sought-after Indians by paying them more, thereby lowering their costs while raising those of TCS. Finally, many low-labor-cost countries, such as China, the Philippines, and Vietnam, are emerging as threats to the Indian competitors.

Question 8

Related industries create the probability that new companies will enter the market. This ________ competition and forces existing firms to improve ___________.

Accepted Answer

Related industries create the probability that new companies will enter the market, increasing competition and forcing existing firms to become more competitive through efforts such as cost control, product innovation, and novel approaches to distribution. Combined, these give the home country's industries a source of competitive advantage.

Question 9

In reviewing the Indian Software industry and the diamond of national advantage, which of the following is a relatively weak set of factors in the national competitive advantage in this industry?

Accepted Answer

Although the Indian success cannot be explained in terms of its home-market demand (according to the Porter model), the nature of the industry enables software to be transferred among different locations simultaneously by way of communications links. Thus, competitiveness of markets outside India can be enhanced without a physical presence in those markets.

Question 10

Which of the following is not a motivation for a company to pursue international expansion?

Accepted Answer

There are many motivations for a company to pursue international expansion. The most obvious one is to increase the size of potential markets for its products and services. A second reason is that the company can take advantage of arbitrage opportunities. A third reason is that a company wishes to enhance the growth rate of a product that is in its maturity state in the home country. A fourth reason is that the company wishes to benefit from optimizing the physical location for every activity in its value chain. A fifth reason is that possibilities exist for reverse innovation, whereby a company develops new products for emerging markets that have adequate functionality at a low cost and then often are introduced to the home country after successfully penetrating the emerging market.

Question 11

The sale of Boeing commercial aircraft and Microsoft operating systems in many countries enables these companies to benefit from

Accepted Answer

Expanding the global presence of a company automatically increases its scale of operations, providing it with a larger revenue and asset base, which potentially enables a firm to attain economies of scale. One advantage is the spreading of fixed costs such as research and development over a larger volume of production. Examples include the sale in many foreign countries of commercial aircraft by Boeing and operating systems by Microsoft.

Question 12

Rivalry is intense in nations with conditions of __________ consumer demand, __________ supplier bases, and __________ new entrant potential from related industries.

Accepted Answer

Rivalry is particularly intense in nations with conditions of strong consumer demand, strong supplier bases, and high new entrant potential from related industries. This competitive rivalry increases the efficiency with which firms develop, market, and distribute products and services within the home country.

Question 13

L'Oreal acquired two U.S. firms that developed and sold hair care products to African-American customers. This permitted it to build a new ethnic hair care division in Europe and Africa. This represents an advantage of international expansion using ____________.

Accepted Answer

By expanding into new markets, corporations expose themselves to differing market demands, research and development capabilities, functional skills, organizational processes, and managerial practices. This provides opportunities for managers to transfer the knowledge that results from these exposures back to their home office and to other divisions in the firm. Thus, expansion into new markets provides a range of learning opportunities.

Question 14

If a company is considering optimizing the physical location for every activity in the value chain, which of the following is not a possible strategic advantage for that decision?

Accepted Answer

Optimizing the location for every activity in the value chain can yield one or more of three strategic advantages: performance enhancement, cost reduction, and risk reduction.

Question 15

If the U.S. dollar appreciates relative to foreign currency, what is likely to be the result for the U.S. company that has branches abroad?

Accepted Answer

When the U.S. dollar appreciates against other currencies, U.S. goods can be more expensive to consumers in foreign countries. Appreciation of the U.S. dollar can have negative implications for American companies that have branch operations overseas. The reason for this is that profits from abroad must be exchanged for dollars at a more expensive rate of exchange, reducing the amount of profit when measured in dollars.

Question 16

Which of these points on the Porter diamond of national advantage is the strongest indicator of global competitive success?

Accepted Answer

Among all the points on the Porter diamond of national advantage, domestic rivalry is perhaps the strongest indicator of global competitive success. Firms that have experienced intense domestic competition are more likely to have designed strategies and structures that allow them to successfully compete in world markets.

Question 17

GE Healthcare developed a portable, inexpensive ultrasound device for the emerging Chinese market. It expects to sell the device in the United States at a price cheap enough for every physician, paramedic, and emergency room nurse to purchase. This is an example of

Accepted Answer

A number of firms have seen the need to develop technologies and products that are appropriate to developing markets, only to find that these innovations are valuable in their home markets as well. Reverse innovation is a motivation for international expansion in which new products developed by developed-country multinational firms for emerging markets have adequate functionality at a low cost and often are marketed later to developed countries.

Question 18

__________ occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house.

Accepted Answer

Outsourcing occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house. It may be a new activity that the firm is perfectly capable of doing but chooses to have someone else perform for cost or quality reasons. Outsourcing can be to either a domestic or foreign firm.

Question 19

Countries with demanding consumers, like environmentally-concerned Denmark, drive __________ to meet the demand.

Accepted Answer

Consumers who demand highly specific, sophisticated products and services force firms to create innovative, advanced products and services to meet the demand. This consumer pressure presents challenges to a country's industries. But in response to these challenges, improvements to existing goods and services often result, creating conditions necessary for competitive advantage over firms in other countries.

Question 20

Sources of political risk do not include

Accepted Answer

Some countries around the globe may be hazardous to the health of corporate initiatives because of political risk. Forces such as social unrest, military turmoil, demonstrations, and even violent conflict and terrorism can pose serious threats. Another source of political risk in many countries is the absence of the rule of law. The absence of rules or the lack of uniform enforcement of existing rules leads to what might often seem to be arbitrary and inconsistent decisions by government officials. This can make it difficult for foreign firms to conduct business.

Quiz 7: International Strategy: Creating Value in Global Markets

In reviewing the Indian Software industry and the diamond of national advantage, which of the following is a growing detractor to the national competitive advantage in this industry?

In considering the decision to offshore, which of the following generally is not one of the hidden costs?

In the Porter Diamond of National Advantage framework, which of the following factors does not affect nation competitiveness?

Which of the factors below has not made the software services industry in India extremely competitive on a global scale?

According to Michael Porter, firms that have experienced intense domestic competition are

In reviewing the Indian Software industry and the diamond of national advantage, which of the following is a growing detractor to the national competitive advantage in this industry?

Related industries create the probability that new companies will enter the market. This competition and forces existing firms to improve ___.

In reviewing the Indian Software industry and the diamond of national advantage, which of the following is a relatively weak set of factors in the national competitive advantage in this industry?

Which of the following is not a motivation for a company to pursue international expansion?

The sale of Boeing commercial aircraft and Microsoft operating systems in many countries enables these companies to benefit from

Rivalry is intense in nations with conditions of consumer demand, supplier bases, and __ new entrant potential from related industries.

L'Oreal acquired two U.S. firms that developed and sold hair care products to African-American customers. This permitted it to build a new ethnic hair care division in Europe and Africa. This represents an advantage of international expansion using ____________.

If a company is considering optimizing the physical location for every activity in the value chain, which of the following is not a possible strategic advantage for that decision?

If the U.S. dollar appreciates relative to foreign currency, what is likely to be the result for the U.S. company that has branches abroad?

Which of these points on the Porter diamond of national advantage is the strongest indicator of global competitive success?

GE Healthcare developed a portable, inexpensive ultrasound device for the emerging Chinese market. It expects to sell the device in the United States at a price cheap enough for every physician, paramedic, and emergency room nurse to purchase. This is an example of

__________ occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house.

Countries with demanding consumers, like environmentally-concerned Denmark, drive __________ to meet the demand.

Sources of political risk do not include