Question 1

A report issued by the World Trade Organization described the production of a particular U.S. car. The study showed that 30 percent of the car value goes to Korea for assembly, 17.5 percent to Japan for components and advanced technology, 7.5 percent to Germany for design, 4 percent to Taiwan and Singapore for minor parts, 2.5 percent to U.K. for advertising and marketing services, and 1.5 percent to Ireland and Barbados for data processing. This is an example of
A)outsourcing and offshoring.
B)outsourcing and on-shoring.
C)insourcing and offshoring.
D)insourcing and outsourcing.

Accepted Answer

A report issued by the World Trade Organization described the production of a particular U.S. car as follows: 30 percent of the car value goes to Korea for assembly, 17.5 percent to Japan for components and advanced technology, 7.5 percent to Germany for design, 4 percent to Taiwan and Singapore for minor parts, 2.5 percent to U.K. for advertising and marketing services, and 1.5 percent to Ireland and Barbados for data processing. Today, we are increasingly witnessing two interrelated trends: outsourcing and offshoring.

Question 2

Which one of the following is one of the Theodore Levitt assumptions supporting a pure global strategy?
A)Consumers are willing to pay more for specific product features.
B)Customer needs and interests are becoming more dissimilar.
C)MNCs can successfully compete globally by aggressively pricing products at the sacrifice of product features.
D)If the world markets are treated as heterogeneous, substantial economies of scale are easily achieved.

Accepted Answer

Levitt advocated strategies that favored global products and brands. This approach rested on three key assumptions: customer needs and interests are becoming increasingly homogeneous worldwide; people around the world are willing to sacrifice preferences in product features, functions, design, and the like for lower prices at high quality; substantial economies of scale in production and marketing can be achieved through supplying global markets.

Question 3

When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to lower costs, companies should choose a(n) __________ or __________ in order to compete in the global marketplace.
A)global strategy; transnational strategy
B)global strategy: multidomestic strategy
C)international strategy; multidomestic strategy
D)international strategy; transnational strategy

Accepted Answer

The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace: international, global, multidomestic, and transnational. The strategy that a firm selects depends on the degree of pressure that it is facing for cost reductions and the importance of adapting to local markets. When firms are faced with high pressures to lower costs, the international strategy and the multidomestic strategy would be most appropriate.

Question 4

To be responsive to local pressures, companies must ____________ their offerings and strategies from country to country to reflect local consumer preferences.
A)internationalize
B)globalize
C)differentiate
D)standardize

Accepted Answer

In addition to responding to pressures to lower costs, managers must strive to be responsive to local pressures in order to tailor their products to the demand of the local market in which they do business. This requires differentiating their offerings and strategies from country to country to reflect consumer tastes and preferences and making changes to reflect differences in distribution channels, human resource practices, and governmental regulations.

Question 5

As in the case of Siebel Systems (now part of Oracle), elements of a global strategy may facilitate the competitive advantage of differentiation by
A)increased freedom of individual business units to adapt to local tastes.
B)the creation of a worldwide network to achieve consistent service regardless of location.
C)flexibility in applying Research and Development to meet country-specific needs.
D)tailoring products to meet country-specific needs.

Accepted Answer

One advantage of a global strategy is that it can enable a firm to create a standard level of quality throughout the world. Tom Siebel, former chairman of Siebel Systems (now part of Oracle), e-business application software developer, says that his customers, global companies like IBM, Zurich Financial Services, and Citicorp, expect the same high level of service and quality, and the same licensing policies, no matter where they do business with them around the world.

Question 6

Which one of the following is not a limitation of a global strategy?
A)limited ability to adapt to local markets
B)the ability to locate activities in optimal locations
C)the concentration of activities may increase dependence on a single facility
D)single locations may lead to higher tariffs and transportation costs

Accepted Answer

Limitations of global strategies include: a limited ability to adapt to local markets, a concentration of activities that may increase dependence on a single facility, and single locations that may lead to higher tariffs and transportation costs.

Question 7

Which of the following is not a risk associated with a global strategy?
A)A firm with only one manufacturing location must export its product, sometimes at great distance from the operation.
B)The geographic concentration of any activity may also tend to isolate that activity from the targeted markets.
C)Concentrating an activity in a single location makes the rest of the firm dependent on that location.
D)The pressures for local adaptation may elevate the cost structure of the firm.

Accepted Answer

Some risks associated with a global strategy include: if a firm has only one manufacturing facility, it must export its output to other markets, some of which may be a great distance from the operation; the geographic concentration of any activity may also tend to isolate that activity from the targeted markets; concentrating an activity in a single location also makes the rest of the firm dependent on that location.

Question 8

Renault paid 1 billion USD to acquire a 25 percent ownership stake in the Russian automaker AvtoVAZ in 2008. Just one year later, Russian Prime Minister Vladimir Putin threatened to dilute the Renault ownership stake unless it contributed more money to prop up AvtoVAZ, which was then experiencing a significant slide in sales. This is an example of _____________ risk.
A)currency
B)economic
C)political
D)management

Accepted Answer

Another source of political risk in many countries is the absence of the rule of law. In this case, Renault realized its ownership claim may not have held up in the corrupt Russian court system. Therefore, it was forced to negotiate and eventually agreed to transfer over 300 million USD in technology and expertise to the Russian firm to ensure its ownership stake would stay at 25 percent.

Question 9

Recent trends that might lead managers of multinational corporations (MNCs) to adopt a more decentralized strategy for their operations would include all of the following except
A)customer needs, interests, and tastes becoming increasingly homogenized.
B)consumers around the world increasingly willing to tradeoff idiosyncratic preferences in product features for lower price.
C)flexible manufacturing trends allowing a decline in the minimum volume required to reach acceptable levels of production efficiency.
D)fluctuating exchange rates.

Accepted Answer

A decentralized strategy such as that seen within the multidomestic organization, allows for greater adaptation at the local level, which would not be necessary if customers were becoming more homogenous.

Question 10

In the quest to achieve competitive advantage in global markets, competitive pressures require that firms do what they can to _______ unit costs so that consumers will not perceive their product and service offerings as too expensive.
A)raise
B)decentralize
C)define
D)lower

Accepted Answer

The opposing pressures that managers face place conflicting demands on firms as they strive to be competitive. On the one hand, competitive pressures require that firms do what they can to lower unit costs so that consumers will not perceive their product and service offerings as too expensive. This may lead them to consider locating manufacturing facilities where labor costs are low and developing products that are highly standardized across multiple countries.

Question 11

Which would be the appropriate strategy for companies to use to compete in the global marketplace if the marketplace pressure is for lower costs with little pressure for local adaptation?
A)international strategy
B)global strategy
C)multidomestic strategy
D)transnational strategy

Accepted Answer

An international strategy would be the best pure choice for a company to make in its quest to compete in the global marketplace, if both the pressures to lower costs and adapt locally are low.

Question 12

Ricoh Americas Corporation has significant international operations. Faced with local reticence to adapt changes that come from other global regions, what does Ricoh suggest is the most successful approach?
A)Bring in global market representatives to force change locally.
B)Obligate local offices to adopt the corporate decision.
C)Ensure stakeholder participation early in the change process.
D)Ignore the problem because it is only a temporary issue.

Accepted Answer

Another challenge that is fairly typical is that the not-invented-here mentality may set in when one region proposes an idea across the globe. There is no question that the passion for an idea is typically going to lie with the originator; as a result, it may be difficult for that person to understand or accept resistance from another region when that region does not feel the same passion for the idea or concept. It may turn into a long, emotional battle of wills if the other region believes it has a superior idea, concept, or current way of operating. This is often a surprise to a person new to global marketing or communications. The key to success is to ensure that the key stakeholders have a voice in the process early and can see their fingerprints on the finished idea.

Question 13

Firms following a global strategy strive to offer __________ products and services as well as locate manufacturing, Research and Development, and marketing activities in a limited number of locations.
A)widely differentiated
B)more expensive local
C)internationally differentiated
D)standardized

Accepted Answer

Firms following a global strategy strive to offer standardized products and services as well as to locate manufacturing, Research and Development, and marketing activities in only a few locations.

Question 14

Industries in which proportionally more value is added in __________ activities are more likely to benefit from a global strategy.
A)downstream
B)upstream
C)marketing
D)sales

Accepted Answer

Primary activities that are downstream (e.g., marketing and sales, and service), or closer to the customer, tend to require more decentralization in order to adapt to local market conditions (a multidomestic strategy). Primary activities that are upstream (e.g., logistics and operations), or further away from the customer, tend to be centralized (a global strategy). This is because there is less need for adapting these activities to local markets and the firm can benefit from economies of scale.

Question 15

In considering the transnational strategy, Nestle evaluates the limits of decentralization. The closer they are to the consumer in activities such as branding and pricing, the more then tend to decentralize. The more they deal with production and logistics, the more they centralize decision-making. The production and logistics decisions involve _______ activities.
A)upstream
B)in its infrastructure
C)downstream
D)midstream

Accepted Answer

Primary activities that are upstream (e.g., logistics and operations), or further away from the customer, tend to be centralized. This is because there is less need for adapting these activities to local markets and the firm can benefit from economies of scale. Additionally, many support activities, such as information systems and procurement, tend to be centralized in order to increase the potential for economies of scale.

Question 16

According to the Euromoney magazine 2014 annual Country Risk Rating, which one of the following countries has the highest economic risk?
A)South Korea
B)China
C)Colombia
D)Argentina

Accepted Answer

According to the Euromoney magazine 2014 annual Country Risk Rating, the country listed with the highest economic risk is Libya with a rating of 5 out of 5. In the selection of choices given for this question, the country with the high economic risk is Argentina with a rating of 4 out of 5. Note that the overall ratings range from 1 to 5, with higher risk receiving the higher score.

Question 17

When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to adapt locally, companies should choose a(n) __________ or __________ in order to compete in the global marketplace.
A)global strategy; transnational strategy
B)global strategy: multidomestic strategy
C)international strategy; global strategy
D)transnational strategy; multidomestic strategy

Accepted Answer

The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace: international, global, multidomestic, and transnational. The strategy that a firm selects depends on the degree of pressure that it is facing for cost reductions and the importance of adapting to local markets. When firms are faced with high pressures to adapt locally, the transnational strategy and the multidomestic strategy would be most appropriate.

Question 18

Which of the following types of international firms are most likely to benefit from a global strategy as opposed to a multidomestic strategy?
A)firms that compete in industries in which consumer preferences vary substantially in each country
B)firms in industries that are expanding very rapidly
C)firms in industries that have value added by sales and marketing departments
D)firms in industries that have much value added in research and design or manufacturing

Accepted Answer

Primary activities that are downstream (e.g., marketing and sales, and service), or closer to the customer, tend to require more decentralization in order to adapt to local market conditions (a multidomestic strategy). Primary activities that are upstream (e.g., Research and Development, design, or manufacturing), or further away from the customer, tend to be centralized (a global strategy). This is because there is less need for adapting these activities to local markets and the firm can benefit from economies of scale.

Question 19

High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy?
A)global strategy
B)multidomestic strategy
C)transnational strategy
D)overall cost leadership strategy

Accepted Answer

A multidomestic strategy is used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low.

Question 20

When differentiating products and services to local markets, strategies and tactics are likely to __________ company costs.
A)decrease
B)increase
C)obliterate
D)decentralize

Accepted Answer

This requires differentiating their offerings and strategies from country to country to reflect consumer tastes and preferences and making changes to reflect differences in distribution channels, human resource practices, and governmental regulations. However, since the strategies and tactics to differentiate products and services to local markets can involve additional expenses, a firm's costs will tend to rise.

Quiz 7: International Strategy: Creating Value in Global Markets

Which one of the following is one of the Theodore Levitt assumptions supporting a pure global strategy?

When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to lower costs, companies should choose a(n) or in order to compete in the global marketplace.

To be responsive to local pressures, companies must ____________ their offerings and strategies from country to country to reflect local consumer preferences.

As in the case of Siebel Systems (now part of Oracle) , elements of a global strategy may facilitate the competitive advantage of differentiation by

Which one of the following is not a limitation of a global strategy?

Which of the following is not a risk associated with a global strategy?

Recent trends that might lead managers of multinational corporations (MNCs) to adopt a more decentralized strategy for their operations would include all of the following except

In the quest to achieve competitive advantage in global markets, competitive pressures require that firms do what they can to _______ unit costs so that consumers will not perceive their product and service offerings as too expensive.

Which would be the appropriate strategy for companies to use to compete in the global marketplace if the marketplace pressure is for lower costs with little pressure for local adaptation?

Ricoh Americas Corporation has significant international operations. Faced with local reticence to adapt changes that come from other global regions, what does Ricoh suggest is the most successful approach?

Firms following a global strategy strive to offer __________ products and services as well as locate manufacturing, Research and Development, and marketing activities in a limited number of locations.

Industries in which proportionally more value is added in __________ activities are more likely to benefit from a global strategy.

According to the Euromoney magazine 2014 annual Country Risk Rating, which one of the following countries has the highest economic risk?

When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to adapt locally, companies should choose a(n) or in order to compete in the global marketplace.

Which of the following types of international firms are most likely to benefit from a global strategy as opposed to a multidomestic strategy?

High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy?

When differentiating products and services to local markets, strategies and tactics are likely to __________ company costs.