12-14

Which of the following is a value creation activity that falls into the category of primary activities?

Customer service

In which of the following tasks will the learning effects be most significant?

Assembly process involving 1,000 complex steps

Which of the following modes of entry is suitable for service firms where the risk of losing control over the management skills or technological know-how is not much of a concern, and where the firms' valuable asset is their brand name?

Franchising

The value of a product to an average consumer is V, the average price that the firm can charge a consumer for that product is P, and the average unit cost of producing that product is C. For this scenario, which of the following is true?

The consumer surplus per unit is equal to V - P.

Which of the following is a disadvantage of small-scale entry for an international firm considering foreign expansion?

The difficulty of building market share and capturing first-mover advantages

Which of the following is an advantage of joint ventures as a mode of entry into foreign markets?

The foreign firm benefits from a local partner's knowledge of the host country.

Why do acquisitions fail sometimes?

There is a clash between the cultures of the acquiring and acquired firm.

Which of the following is true about learning effects?

They are important only during the start-up period of a new process.

A firm's ability to increase its profitability and profit growth by expanding globally is constrained:

by the imperative of localization.

A firm is most likely to pursue a global standardization strategy when:

there are strong pressures for cost reduction.

Which of the following is a reason why firms often overpay for the assets of an acquired firm?

Interest of more than one party in acquiring a particular firm

Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries?

It allows firms to use the profits generated in one market to improve its competitive position in another market.

How does possessing a core competence help a firm?

It enables a firm to reduce the costs of value creation.

Which of the following is a disadvantage of greenfield ventures?

It is slower to establish than acquisitions.

Which of the following is true of a localization strategy?

It makes sense if the value added by customization supports higher pricing.

Which of the following is true of a firm that pursues a global standardization strategy?

It reaps maximum benefits from economies of scale and learning effects.

Axiom International, an Australian company, wants to expand its operations to China, a country that is politically, culturally, and economically different. The firm needs to select a mode of entry that would give it access to local knowledge, allow sharing of development costs and risks, and also be politically acceptable. Which of the following modes of entry into foreign markets is most suitable for Axiom International?

Joint venture

Which of the following is a drawback of licensing as a mode of entry into foreign markets?

Licensing does not give a firm tight control over manufacturing, marketing, and strategy.

Which of the following is a reason why a relatively poor country may be an attractive target for inward investment?

Rapid economic growth

The risk of failure of an acquisition can be reduced by:

a detailed auditing of operations, financial position, and management culture.

A firm maximizes its profitability when it:

configures its internal operations to support the position selected by it on the efficiency frontier.

According to Michael Porter, superior profitability goes to a firm that:

drives down the cost structure of its business.

A firm's profitability is maximized when it:

ensures that it has the right organization structure in place to execute its strategy.

The liability associated with foreign expansion is greater for foreign firms that:

enter a national market early.

The probability of survival for an international business increases if it:

enters a national market after several other foreign firms have already done so.

To reduce the risks of failure of an acquisition, managers must:

move rapidly after an acquisition to put an integration plan in place.

Firms that compete in the global marketplace typically face two types of competitive pressure:

pressures for cost reductions and pressures to be locally responsive.

In exporting, problems with local marketing agents can be overcome by:

setting up wholly owned subsidiaries in foreign nations to handle local marketing.

The amount of value a firm creates is measured by:

the difference between its costs of production and the value that consumers perceive in its products.

As a result of consumer surplus, a firm typically charges a lower price for a good or service than the value placed on it by customers because:

the firm is competing with other firms for the customer's business.