Chapter 7 - BUS 195 Exam 2

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

A. customer needs, interests, and tastes becoming increasingly homogenized

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 __________ 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

A. global strategy; transnational strategy

__________ entail the creation of a third-party legal entity, whereas __________ do not. A. Licensing agreements; joint ventures B. Joint ventures; strategic alliances C. Strategic alliances; joint ventures D. Franchising agreements; strategic alliances

B. Joint ventures; strategic alliances

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

B. multidomestic strategy

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

B. the creation of a worldwide network to achieve consistent service regardless of location

Units coordinate their activities with headquarters and with one another. Units adapt to special circumstances only they face. The entire organization draws upon relevant corporate resources. These are all attributes of which type of strategy? A. global strategy B. transnational strategy C. international strategy D. multidomestic strategy

B. transnational strategy

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

B. upstream

A domestic corporation considering international expansion for the first time typically will follow which of these paths? A. It will start off by implementing a wholly owned foreign subsidiary in order to maintain standards identical to those at home. B. It will license or franchise its operations. C. It will implement a low risk-low control strategy such as exporting. D. It will form a joint venture with a reputable foreign producer.

C. It will implement a low risk-low control strategy such as exporting.

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.

C. MNCs can successfully compete globally by aggressively pricing products at the sacrifice of product features.

__________ 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

C. Outsourcing

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.

C. The conditions in the nation governing the nature of foreign rivalry.

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

C. economies of scale

In order to realize the strongest competitive advantage, firms engaged in worldwide competition must ___________. A. require that all of their various business units follow the same strategy regardless of location B. ensure that all business units follow a strategy strictly tailored to their respective locations C. pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy in order to achieve optimal results D. attempt to use the strategy that was most successful in their home country

C. pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy in order to achieve optimal results

Fees that a multinational receives from a foreign licensee in return for its use of intellectual property (trademark, patent, trade secret, technology) are usually called _____________. A. transfer prices B. dividends C. royalties D. intra-corporate inflows

C. royalties

Which of the following is not a limitation of a multidomestic strategy? A. less ability to realize cost savings through scale economies B. greater difficulty in transferring knowledge across countries C. single locations may lead to higher tariffs and transportation costs D. may lead to overadaptation as conditions change

C. single locations may lead to higher tariffs and transportation costs

Which one of the following explains why so few firms are global? A. Culture, language, and religion are similar between countries. B. Legal and political systems are similar between countries. C. Governments are increasing trade restrictions in general. D. Geographic distance is multiplied by distance in culture, language, religion, and legal and political systems.

D. Geographic distance is multiplied by distance in culture, language, religion, and legal and political systems.

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.

D. It wishes to increase foreign market penetration by developing products for the home market.

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.

D. New products may be perceived as exploiting the privileged customer with substandard products.

__________ are most appropriate when a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations in many countries. A. Joint ventures B. Strategic alliances C. Licensing agreements D. Wholly owned subsidiaries

D. Wholly owned subsidiaries

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

D. more likely to design strategies and structures that allow them to successfully compete abroad

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

D. single locations may lead to higher tariffs and transportation costs

A multidomestic strategy is the most appropriate strategy for international operations, because it drives economies of scale as far as possible and provides a middle-of-the-road product that appeals to the largest number of consumers in every market.

False

Among Theodore Levitt's assumptions that would favor a global strategy is that consumers around the world are becoming less price-sensitive.

False

Because many countries are investing in countries other than their own, each country is becoming more autonomous and independent.

False

By 2015, it is predicted that trade within nations will exceed trade across nations.

False

Emerging markets are growing slower than developed markets, thus shifting the structure of the global economy.

False

Exporting is an expensive way to enter foreign markets.

False

The factor endowments of a country are inherited and cannot be created.

False

The laws and the enforcement of laws associated with the protection of intellectual property rights, represent a significant currency and management risk to multinational firms.

False

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

False

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

False

When U.S. currency appreciates against other currencies, U. S. goods can be less expensive to consumers in foreign countries.

False

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

False

A key tenet of a transnational strategy is improved adaptation to all competitive situations as well as flexibility by capitalizing on communication and knowledge flows throughout the organization.

True

A limitation of a multidomestic strategy is that it may lead to overadaptation as conditions change.

True

Arbitrage opportunities are more than simple trading opportunities and account for a large part of the success Walmart experiences.

True

Corporations with multiple foreign operations that act very independently of one another are following a multidomestic strategy.

True

Countries with a strong supplier base benefit by adding efficiency to downstream activities.

True

Demanding domestic consumers tend to push firms to move ahead of companies in other countries where consumers are less demanding and more complacent.

True

Differences in foreign markets such as culture, language, and customs can represent significant management risks when firms enter foreign markets.

True

Industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy than those in which more value is added downstream (closer to the customer).

True

International expansion can extend the life cycle of a product that is in its maturity stage in the company home country.

True

Many international firms are increasing their efforts to market their products and services to countries such as India and China as the ranks of their middle class continue to increase.

True

The World Bank publishes the Euromoney magazine Country Risk Rating semiannual report. In the text, the January 2013 sampling of these ratings indicates that Norway is the best country in which to invest in terms of its expected level of risk based on the evaluation of its political, economic and structural risks and debt indicators and access to capital.

True

Two opposing pressures that managers face when they compete in foreign markets are cost reduction and adaptation to local markets.

True