Question 1

A global standardization strategy is appropriate when a firm is facing low pressures for cost reduction but high pressure for local responsiveness.

Accepted Answer

Firms that pursue a global standardization strategy focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies; that is, their strategic goal is to pursue a low-cost strategy on a global scale. This strategy makes most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal.

Question 2

Learning effects tend to be more significant when a technologically simple task is repeated.

Accepted Answer

The answer of Learning effects tend to be more significant...

Question 3

When a firm focuses on increasing profitability by customizing the product or service so that they provide a good match to tastes and preferences in different national markets, the firm is following a transnational strategy.

Accepted Answer

A transnational strategy involves both global efficiency and local responsiveness, but customizing products for different national markets is more characteristic of a localization strategy.

Question 4

When the firm simultaneously faces both strong cost pressures and strong pressures for local responsiveness, the ideal strategy to follow is the transnational strategy.

Accepted Answer

The transnational strategy aims to balance cost-effectiveness and local responsiveness, making it an ideal strategy to adopt when facing both strong cost pressures and strong pressures for local responsiveness simultaneously.

Question 5

Two types of competitive pressure that affect the ability of multinational enterprises to compete in the global marketplace are pressure for cost reductions and pressure for local responsiveness.

Accepted Answer

Pressure for cost reductions refers to the pressure on multinational enterprises to lower their production costs in order to remain competitive. Pressure for local responsiveness refers to the pressure to adapt products, services, and business practices to the unique needs and preferences of local markets. Both types of pressure can affect the ability of multinational enterprises to compete in the global marketplace.

Question 6

Threats of protectionism, economic nationalism, and local content rules dictate that international businesses manufacture locally.

Accepted Answer

Protectionism, economic nationalism, and local content rules are all policies designed to promote domestic production and discourage imports. These policies often include requirements for companies to manufacture locally as a way to support local industries and create jobs.

Question 7

Pressures for local responsiveness imply that it may not be possible for a firm to realize the full benefits from economies of scale, learning effects, and location economies.

Accepted Answer

Local responsiveness refers to the need for a company to tailor its products or services to meet the specific needs and preferences of local markets. This often requires adapting to local laws, regulations, or cultural norms, which can limit a company's ability to fully leverage economies of scale, learning effects, and location economies. Companies may need to establish new production facilities or distribution channels to meet local demand, which can increase costs and reduce efficiency. Therefore, pressures for local responsiveness may result in a trade-off between responsiveness and efficiency.

Question 8

Moving up the experience curve allows a firm to reduce its cost of creating value and increase its profitability.

Accepted Answer

The answer of Moving up the experience curve allows a...

Question 9

The distinguishing feature of many firms that pursue an international strategy is that they are selling a product that serves local needs, but they do not face significant competitors.

Accepted Answer

The distinguishing feature of many firms that pursue an international strategy is that they are selling a product that serves global needs and faces significant competitors.

Question 10

A multinational firm may need to delegate marketing functions to national subsidiaries to be responsive to local differences in distribution channels.

Accepted Answer

National subsidiaries often have better knowledge of local markets and can adapt marketing strategies to local distribution channels. Delegating marketing functions to national subsidiaries can also help the multinational firm to be more responsive to local cultural differences and preferences.

Question 11

Once a firm has established a low-cost position, it can act as a barrier to new competition.

Accepted Answer

When a firm has established itself as a low-cost producer, it can set lower prices than competitors and still maintain profitability, making it difficult for new entrants to compete on price. This can create a barrier to entry and protect the firm's position in the market.

Question 12

To leverage subsidiary skills, companies should establish incentive systems that encourage local employees to acquire new skills.

Accepted Answer

By establishing incentive systems that promote skill acquisition, companies can encourage their local employees to develop specialized capabilities that complement the parent company's strengths, resulting in greater competitiveness and innovation potential.

Question 13

Because differentiation across countries can involve significant duplication and a lack of product standardization, it may reduce costs.

Accepted Answer

Differentiation across countries typically involves customization of products to meet local preferences and requirements, leading to increased costs due to the need for additional research and development, production, marketing, and distribution efforts. It may also lead to a lack of standardization, making it difficult to achieve economies of scale and cost reductions through mass production and procurement.

Question 14

As competition intensifies, global standardization strategies and transnational strategies tend to become less viable, and managers need to orientate their companies toward either an international strategy or a localization strategy.

Accepted Answer

International strategy may not be viable in the long term, and to survive, firms need to shift toward a global standardization strategy or a transnational strategy in advance of competitors. The same can be said about a localization strategy.

Question 15

One of the sources of economies of scale is the ability to spread fixed costs over a large volume.

Accepted Answer

Spreading fixed costs (such as rent or machinery) over larger production volumes reduces the per-unit cost, which leads to economies of scale.

Question 16

A localization strategy makes most sense when demands for local responsiveness are high, but cost pressures are moderate or low.

Accepted Answer

A localization strategy focuses on adapting products and marketing strategies to meet the unique needs of local markets. This is most appropriate when demand for local responsiveness is high, such as when cultural factors, regulations, or customer preferences vary across different regions. However, if cost pressures are high, it may be difficult to achieve economies of scale by producing standardized products or using centralized marketing efforts. Therefore, a localization strategy makes the most sense when cost pressures are moderate or low, to balance the need for local responsiveness with the need for cost efficiency.

Question 17

When consumer tastes and preferences differ significantly between countries, there is low pressure for local responsiveness.

Accepted Answer

When consumer tastes and preferences differ significantly between countries, there is a high pressure for local responsiveness. This means that companies need to adapt their products or marketing strategies to cater to the specific needs of each local market. Failing to do so can result in a loss of sales and market share.

Question 18

Pressures for cost reduction are minimal in industries where major competitors are based in low-cost locations, where there is persistent excess capacity, and where consumers are powerful and face low switching costs.

Accepted Answer

In such industries, pressures for cost reduction are actually high because competitors in low-cost locations can offer lower prices, excess capacity can lead to price wars, and powerful consumers with low switching costs can easily switch to cheaper alternatives.

Question 19

Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical.

Accepted Answer

When the tastes and preferences of consumers in different nations are similar if not identical, there is a universal need for products that cater to those preferences. This is known as a global market segment.

Question 20

In a multinational enterprise, skills are always generated at the headquarters location and are then dispersed to the rest of the organization.

Accepted Answer

Skills can be generated at any location within a multinational enterprise, not just at the headquarters. In fact, it is often beneficial to develop skills and expertise locally to respond to specific market or operational needs. Additionally, skills may also be acquired through acquisitions or partnerships with other companies in different locations.

Quiz 13: The Strategy of International Business