Question 1

Trading blocs and free trade zones promote the rise of international expansion.

Accepted Answer

Another reason for regional expansion is the rise of the trading blocs and free trade zones. A number of regional agreements have been created that facilitate the growth of business within these regions by easing trade restrictions, and taxes and tariffs.

Question 2

Typically,joint ventures involve less control and risk than franchising.

Accepted Answer

A joint venture has a higher degree of ownership (both investment and risk) and control than does franchising.

Question 3

Multinational firms are constantly faced with the dilemma of choosing between _______ and __________.
A) local adaptation; global integration
B) local adaptation; local integration
C) global adaptation; local integration
D) global adaptation; global integration

Accepted Answer

Some governments make better use of inflows of foreign investment and know-how than others. Explanations include the need of governments to have track records of business-friendly policies to attract multinationals and local entrepreneurs to train workers, invest in modern technology, and nurture local suppliers and managers. Also, it means carefully managing the broader economic factors in an economy, such as interest rates, inflation, and unemployment.

Question 4

PepsiCo successfully captured the Indian market by using a joint venture strategy.

Accepted Answer

What explains Pepsi's success in India? Coke pulled out of the market in 1977 after new government regulations forced it to partner with an Indian company and share its secret formula. In contrast, Pepsi formed a joint venture in 1988 with two Indian companies and introduced products under the Lehar brand. (Lehar Pepsi was introduced in 1990.) With no real international competition, Pepsi became the catch-all for anything that was bottled, fizzy, and from abroad.

Question 5

When considering the exporting decision,companies should consider that the ability to tailor their products to meet local market needs typically is very limited.

Accepted Answer

Exporting is a relatively inexpensive way to enter foreign markets, but it is not without significant downsides. The ability to tailor company products to meet local market needs typically is very limited.

Question 6

When considering the export decision,firms should not partner with local distributors because many foreign markets are nationally regulated.

Accepted Answer

Exporting consists of producing goods in one country to sell in another. The entry strategy enables a firm to invest the least amount of resources in terms of its product, its organization, and its overall corporate strategy. Because many foreign markets are nationally regulated and dominated by networks of local intermediaries, firms need to partner with local distributors to benefit from their valuable expertise and knowledge of their own markets.

Question 7

__________ occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house.
A) Offshoring
B) A global strategy
C) Outsourcing
D) A transnational strategy

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 8

Which of the following is not a risk normally associated with Bottom of the Pyramid strategies?
A) A low-end version of a brand may detract from the overall brand attractiveness.
B) The new low-cost products they develop may cannibalize the sales of their core products.
C) Entrenched competitors can impact the ability of the new firm to enter the market successfully.
D) New products may be perceived as exploiting the privileged customer with substandard products.

Accepted Answer

Multinational firms are constantly faced with the dilemma of choosing between local adaptation (in product offerings, locations, advertising, and pricing) and global integration.

Question 9

The sale of Boeing commercial aircraft and Microsoft operating systems in many countries enables these companies to benefit from ____________.
A) higher prices in their domestic markets
B) reducing their exposure to currency risks
C) economies of scale
D) optimizing the location for many activities in their value chain

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 10

According to Michael Porter,firms that have experienced intense domestic competition are _________________________________.
A) unlikely to have the time or resources to compete abroad
B) more likely to demand protection from their governments
C) most likely to design strategies aimed primarily at the domestic market
D) more likely to design strategies and structures that allow them to successfully compete abroad

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 11

In the Porter Diamond of National Advantage framework which of the following factors does not affect nation competitiveness?
A) The position of the nation in factors of production necessary to compete in a given industry.
B) The presence or absence in the nation of supplier industries that are internationally competitive.
C) The conditions in the nation governing the nature of foreign rivalry.
D) The nature of home-market demand of the products or services of the industry.

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 12

If the U.S.dollar appreciates relative to foreign currency,what is likely to be the result for the U.S.company that has company branches abroad?
A) Profits will increase, when measured in U.S. dollars.
B) Profits will decrease, when measured in U.S. dollars.
C) Foreign exports to the United States will decrease.
D) Foreign demand for U.S. goods and services will decrease.

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 13

A franchise generally expires after a few years,whereas a license is designed to last into perpetuity.

Accepted Answer

Licensing enables a company to receive a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable items of intellectual property. Franchising contracts generally include a broader range of factors in an operation and have a longer time period during which the agreement is in effect.

Question 14

Typically,the least risky method of entry into a foreign market is through the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control.

Accepted Answer

Establishing a wholly owned subsidiary is the most expensive and risky of the various entry modes. However, it can also yield the highest returns. In addition, it provides the multinational company with the greatest degree of control of all activities, including manufacturing, marketing, distribution, and technology development. Wholly owned subsidiaries are most appropriate where a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations.

Question 15

According to studies by Rugman and Verbeke,most of the 500 largest companies in the world are global.

Accepted Answer

Extensive analysis of the distribution data of sales across different countries and regions led Alan Rugman and Alain Verbeke to conclude that there is a strong case to be made that most companies today are regional or biregional, not global.

Question 16

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?
A) Performance enhancement
B) Cost reduction
C) Political risk reduction
D) Life-cycle enhancement

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 17

Rivalry is intense in nations with conditions of __________ consumer demand,__________ supplier bases,and __________ new entrant potential from related industries.
A) weak; weak; high
B) strong; strong; low
C) weak; weak; low
D) strong; strong; high

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 18

Which of the factors below has not made the software services industry in India extremely competitive on a global scale?
A) large pool of skilled workers
B) large network of public and private educational institutions
C) tax and antitrust legislation that protects the dominant players in the industry
D) large, growing market and sophisticated customers

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 19

Which of the following is not a motivation for a company to pursue international expansion?
A) It wishes to increase the size of the potential markets for its products and services.
B) It wishes to take advantage of arbitrage opportunities in order to increase profit.
C) It wishes to optimize value-chain activities to enhance performance, reduce costs, and reduce risk.
D) It wishes to increase foreign market penetration by developing products for the home market.

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 20

Exporting is an expensive way to enter foreign markets.

Accepted Answer

Exporting is a relatively inexpensive way to enter foreign markets, but it is not without significant downsides.

Quiz 7: International Strategy: Creating Valuein Global Markets

Trading blocs and free trade zones promote the rise of international expansion.

Typically,joint ventures involve less control and risk than franchising.

Multinational firms are constantly faced with the dilemma of choosing between _ and ____.

PepsiCo successfully captured the Indian market by using a joint venture strategy.

When considering the exporting decision,companies should consider that the ability to tailor their products to meet local market needs typically is very limited.

When considering the export decision,firms should not partner with local distributors because many foreign markets are nationally regulated.

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

Which of the following is not a risk normally associated with Bottom of the Pyramid strategies?

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

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

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

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

A franchise generally expires after a few years,whereas a license is designed to last into perpetuity.

Typically,the least risky method of entry into a foreign market is through the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control.

According to studies by Rugman and Verbeke,most of the 500 largest companies in the world are global.

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?

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

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

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

Exporting is an expensive way to enter foreign markets.