Chapter 7 COMPETING IN INTERNATIONAL MARKETS

True

17. The concept of related and supporting industries refers to the extent to which firms' domestic suppliers and other complementary industries are developed and helpful.

a. Exporting

64. Which of the following involves creating goods within a firm's home country and then shipping them to another country? a. Exporting b. Greenfield venture c. Franchising d. Licensing e. Strategic alliance

False

1. The most obvious advantage of competing in international markets is nationalization.

True

6. Business risk refers to the potential that an operation might fail.

True

10. Economic risk refers to the potential for a country's economic conditions and policies, property rights protections, and currency exchange rates to harm a firm's operations within a country.

False

11. As economies are predictable, economic risk presents executives with very few challenges.

True

12. Cultural risk refers to the potential for a company's operations in a country to struggle due to differences in language, customs, norms and customer preferences.

False

13. Within the diamond model, demand conditions refer to the inputs that firms need in order to create goods and services.

False

14. Firms benefit when their domestic customers are perfectly willing to purchase inferior products.

True

15. Land, labor, capital markets, and infrastructure are some of the examples of factor conditions.

True

16. Just-in-time inventory management conserves space and lowers costs by requiring inputs to a production process to arrive at the moment they are needed.

False

18. The concept of related and supporting industries explains how challenging it is to survive domestic competition.

True

19. If domestic competition is fairly light, a company may enjoy admirable profits within its home market.

True

2. When businesses purchase supplies in greater numbers, they will have stronger leverage while negotiating prices with suppliers.

True

20. Lack of creativity and innovation undermines a firm's ability to compete overseas and makes it vulnerable to foreign entry into its home market.

True

21. A firm that has operations in more than one country is known as a multinational corporation.

False

22. A multidomestic strategy sacrifices responsiveness to local requirements within each of its markets in favor of placing heavy emphasis on being efficient.

False

23. A firm using a transnational strategy sacrifices responsiveness to local requirements within each of its markets in favor of placing heavy emphasis on being efficient.

True

24. A global strategy stresses the need to gain economies of scale by offering essentially the same products or services in each market.

True

25. Global strategies can be very effective for firms whose product or service is largely hidden from the customer's view.

True

26. A firm using a transnational strategy tries to balance the desire for efficiency with the need to adjust to local preferences within various countries.

True

27. Exporting involves creating goods within a firm's home country and then shipping them to another country.

False

28. Under exporting, the exporter's role is not over after the goods reach foreign shores.

True

29. A wholly-owned subsidiary is a business operation in a foreign country that a firm fully owns.

True

3. Offshoring involves relocating a business activity to another country.

False

30. Franchising is not a very attractive way to enter foreign markets because it requires a substantial financial investment by the franchisor.

c. It results in economies of scale that lower a firm's production costs.

31. Which of the following is true of overseas expansion in businesses? a. It leads businesses to purchase supplies in lesser numbers. b. It gives a firm a weaker leverage when negotiating prices with its suppliers. c. It results in economies of scale that lower a firm's production costs. d. It restricts access to more customers. e. It restricts the diversification of a political risk.

a. Offshoring

32. Which of the following involves relocating a business activity to another country? a. Offshoring b. Decentralization c. Nationalization d. Repatriation e. Municipalization

c. Offshoring

33. Montoya Group Inc. is an American firm based in Utah that manufactures and distributes mountaineering equipment such as carabiners, pulleys, harnesses, helmets, ice axes, crampons, etc. In an attempt to lower its production costs, the firm relocates some of its manufacturing facilities to China, which has much lower labor cost. Montoya Group Inc. uses which of the following strategies? a. Diversification b. Exporting c. Offshoring d. Licensing e. Franchising

a. Factor conditions

48. _____ refer to the nature of raw materials and other inputs that firms need in order to create goods and services. a. Factor conditions b. Demand conditions c. Supporting conditions d. Financial factors e. Fixed factors

d. It reduces a firm's costs of doing businesses.

34. Which of the following is true of offshoring? a. It refers to the return of jobs that are sent overseas. b. It refers to the seizure of a firm's assets in a foreign country by the national government. c. It inhibits diversification of business risks. d. It reduces a firm's costs of doing businesses. e. It refers to the potential for a company's operations in a country to struggle due to differences in language and customer preferences.

e. jobs that are sent overseas return home.

35. Reshoring is a phenomenon that occurs when: a. business activity that been sent overseas is relocated to a firm's neighboring country. b. a firm is completely dependent on one country. c. a firm's assets in a foreign country are seized by the national government. d. a government imposes taxes on firms that relocate a business activity to another country. e. jobs that are sent overseas return home.

b. reshoring.

36. Amtech Corporation, an American firm that manufactures wireless routers, has its headquarters in California. The firm relocates its call centers to Malaysia to lower its costs. However, the firm notices that its call center in California receives much higher customer ratings when compared to the call centers in Malaysia. Amtech Corporation decides to shift 350 call center jobs back to USA over a period of two years. This move is termed as: a. nearshoring. b. reshoring. c. franchising . d. licensing. e. importing.

c. Business risk

37. Which of the following risks refers to the potential that an operation might fail? a. Political risk b. Cultural risk c. Business risk d. Default risk e. Lifetime risk

d. business risk

38. Hawthorne Corporation, a leading watch manufacturer based in California, had operations across various countries. When a massive flood broke in California and its surrounding areas, many people lost their lives in the flood. However, this event did not affect Hawthorne Corporation substantially, as it functioned across many nations. This implies that the organization had diversified its _____ by not being completely dependent on its operations in California. a. political risk b. cultural risk c. default risk d. business risk e. lifetime risk

a. The potential for government upheaval or interference with business to harm an operation within a country

39. Which of the following refers to a political risk? a. The potential for government upheaval or interference with business to harm an operation within a country b. The potential that an operation might fail due to power struggles and politics within an organization c. The potential for a country's economic policies to harm a firm's operations within a country d. The potential for a company's operations in a country to struggle due to differences in language, customs, norms and customer preferences e. The potential for a nation's property rights protections and currency exchange rates to harm a firm's operations within a country

False

4. Offshoring helps in reducing a firm's costs of doing business and the job losses in the firm's home country.

d. political risk.

40. L&W Ltd. is a company headquartered in London that manufactures sports shoes. The firm operates across different countries. In Libya, the decisions regarding the products and services of the firm's production unit such as the prices, promotional methods, etc. are constantly controlled by the government. This implies that the firm is encountering a(n): a. cultural risk. b. default risk. c. legal risk. d. political risk. e. lifetime risk.

e. Seizure of a firm's assets in a country by the national government

41. Which of the following describes nationalization? a. The relocation to a firm's home country of business activity that been sent to foreign nations b. Transfer of ownership of a business from the public sector to the private sector c. Transfer of ownership of a business from the public sector to private non-profit organizations d. Transfer of state-owned enterprises to federal ownership e. Seizure of a firm's assets in a country by the national government

a. political risk.

42. Macro Pvt. Ltd. is a software development firm that provides software in accounting, customer relationship management, HR and payroll management, and enterprise resource planning. The firm is based in Virginia and has operations across different continents. The firm had a unit in Syria, where there were severe disturbances by anti-government groups. The instability in Syria made it difficult for Macro Pvt. Ltd. to run its business operations in that country. This implies that the firm was experiencing a(n) _____ in Syria. a. political risk. b. cultural risk. c. default risk. d. legal risk. e. lifetime risk.

d. Economic risk

43. Copper Inc., an electronic gadget firm, had its headquarters in California. It also had branches across various nations, including Egypt. The inadequate property rights protections and unfavorable currency exchange rates of Egypt had damaged the firm's operations in that nation. Which of the following risks was faced by Copper Inc. in Egypt? a. Default risk b. Cultural risk c. Legal risk d. Economic risk e. Lifetime risk

c. Cultural risk

44. _____ refers to the potential for a company's operations in a country to struggle due to differences in language, customs, norms and customer preferences. a. Business risk b. Lifetime risk c. Cultural risk d. Political risk e. Economic risk

d. Cultural risk

45. Roses and Posies, a British-based apparel store, launched an official website to enable people in the United States to order products online. The website expressed the prices of the products in British English such as pound, quid, pence, and so on. Online buyers in the United States found it difficult to understand these monetary amounts, leading to lowered sales. Which of the following risks was encountered by Roses and Posies? a. Default risk b. Lifetime risk c. Political risk d. Cultural risk e. Legal risk

b. demand conditions

46. According to the diamond model of Porter, _____ refer to the nature of domestic customers. a. factor conditions b. demand conditions c. related and supporting industries d. firm strategies e. firm structures

a. demand conditions.

47. Auro Inc. is an American cell phone manufacturer. The firm's market analysis reveals that American customers are very particular about the appearance, and uniqueness of products. Thus the firm ensures that its products are innovative and visually appealing. This also helps the firm to offer high quality products when competing in international markets. According to the diamond model, Auro Inc. benefits from: a. demand conditions. b. related and supporting industries. c. factor conditions. d. financial factors. e. fixed factors.

c. They include infrastructure and capital markets.

49. Which of the following is true about factor conditions? a. They include the nature of domestic customers. b. They include the nature of international customers. c. They include infrastructure and capital markets. d. They refer to the extent to which firms' complementary industries are developed and helpful. e. They refer to the structure of the firm.

True

5. Reshoring occurs when jobs that are sent overseas return home.

c. factor conditions.

50. Brother Bean is a Brazilian company that manufactures and exports coffee beans. Brother Bean is one of the most successful international coffee brands due to the abundant availability of coffee seeds in Brazil, as well as the suitable climatic conditions and soil for cultivation of coffee plants in the nation. According to the diamond model, Brother Bean benefits from: a. demand conditions. b. supporting conditions. c. factor conditions. d. fixed factors. e. firm structures.

e. JIT management

51. Which of the following systems requires inputs for a production process to arrive at the moment they are needed? a. MBO b. Portfolio planning c. SIPOC tool d. Concentration strategy e. JIT management

e. Just-in-time inventory management

52. Atlas Pvt. Ltd. is an automobile manufacturing organization based in Detroit. The firm's operations manager avoids storing a large amount of auto parts and other raw materials, by ordering inputs such that they are supplied when required for production. The firm works on improving the flow of goods from warehouses to stores. It also stresses that production should not take place when there is no demand for a particular car model. Which of the following management systems is being implemented by the automobile manufacturer? a. Total quality management b. Just-in-case manufacturing c. Management by objectives d. Quality function deployment e. Just-in-time inventory management

c. related and supporting industries.

53. N.S. Manufacturing Group is a leading manufacturer and exporter of women's fashion apparel based in China. The firm does not depend on imported textiles as its home country has an abundant supply of good quality textiles. According to Michael Porter's model, N.S. Manufacturing Group benefits from: a. legal structures. b. demand conditions. c. related and supporting industries. d. political conditions. e. firm structures.

b. related and supporting industries

54. According to the diamond model, the concept of _____ refers to the extent to which firms' domestic suppliers are developed and helpful. a. demand conditions b. related and supporting industries c. factor conditions d. firm strategies e. firm structures

d. A multinational corporation has operations in more than one country.

55. Which of the following is true of a multinational corporation? a. A multinational corporation operates exclusively in its home country and hires employees from multiple nations. b. A multinational corporation is a private company that sells its stock to the public. c. A multinational corporation refers to a firm that exports products to one or more countries. d. A multinational corporation has operations in more than one country. e. A multinational corporation operates in multiple locations within a single nation.

e. A global strategy stresses the need to gain economies of scale by offering essentially the same products or services in each market.

56. Which of the following is true of the international strategies used by multinationals? a. A firm using a multidomestic strategy sacrifices responsiveness. b. A firm using a global strategy sacrifices efficiency. c. A global strategy places high emphasis on being responsive to local requirements within each of its markets. d. A multidomestic strategy tries to balance the desire for efficiency with the need to adjust to local preferences within various countries. e. A global strategy stresses the need to gain economies of scale by offering essentially the same products or services in each market.

b. multidomestic

57. A firm using a _____ strategy sacrifices efficiency in favor of placing heavy emphasis on being responsive to local requirements within each of its markets. a. global b. multidomestic c. transnational d. responsiveness e. balanced

c. A multidomestic strategy

58. Big Bite Ltd., a multinational fast food chain, offers hamburgers, hot dogs, sandwiches, shakes, and deserts. The restaurant uses different ingredients in each country it operates, based on the central elements of that nation's diet. The managers at Big Bite Ltd. prefer to sacrifice efficiency in order to remain responsive to local requirements. Big Bite Ltd. uses which of the following strategies? a. A global strategy b. A transnational strategy c. A multidomestic strategy d. A disintermediation strategy e. A balanced strategy

b. Multidomestic strategy

59. Which of the following strategies sacrifices responsiveness to local requirements within each of its markets in favor of placing heavy emphasis on being efficient? a. Global strategy b. Multidomestic strategy c. Transnational strategy d. Disintermediation strategy e. Vertical integration strategy

e. global

60. Chestnut Inc., an international cosmetics manufacturer offers a wide range of cosmetic products. It offers the same products across all nations. The managers at Chestnut Inc. avoid customizing their products within each of its markets in order to remain efficient. This implies that Chestnut Inc. uses a _____ strategy. a. multidomestic b. transnational c. responsiveness d. disintermediation e. global

d. global

61. A _____ strategy stresses the need to gain economies of scale by offering essentially the same products or services in each market. a. multidomestic b. transnational c. vertical integration d. global e. disintermediation

b. transnational

62. A firm using a _____ strategy tries to balance the desire for efficiency with the need to adjust to local preferences within various countries. a. multidomestic b. transnational c. vertical integration d. disintermediation e. global

a. multidomestic

63. Kramer Inc., an American snack food manufacturing corporation, exports a line of potato chips under the brand name, Chirp. The firm customizes the flavors of its potato chips according to the preferences of customers in each market. For example, in India, Chirp chips are available in pickle flavors with the tangy taste of red chili in order to cater to the needs of local residents of India. The managers at Kramer Inc. emphasize the need to adjust to local preferences within various countries, even though it increases costs. In this example, Kramer Inc. uses a _____ strategy. a. multidomestic b. vertical integration c. transnational d. disintermediation e. global

d. Exporting

65. SK Inc. is an Italian firm that manufactures and sells pasta and pasta sauces under the brand name Tomato and Basil. The firm manufactures in products in Italy, and ships them to distributors in the United States and Canada. SK Inc. uses which of the following strategies? a. Greenfield venture b. Franchising c. Licensing d. Exporting e. Strategic alliance

c. Greenfield venture

66. Which of the following would help a firm develop a wholly-owned subsidiary? a. Licensing b. Franchising c. Greenfield venture d. Special economic zone e. Exporting

d. Franchising

67. _____ involves an organization granting the right to use its brand name, products, and processes to other organizations in exchange for an upfront payment and a percentage of the other organizations' revenues. a. Joint venture b. Strategic alliance c. A wholly-owned subsidiary d. Franchising e. Exporting

a. It requires little financial investment by the franchisor.

68. Which of the following is true of franchising? a. It requires little financial investment by the franchisor. b. It is a business operation in a foreign country that a firm fully owns. c. It involves creating goods within a firm's home country and then shipping them to another country. d. It refers to a firm purchasing an existing business from a foreign operator. e. It is most frequently used in manufacturing industries.

b. franchisin

69. Grid Inc. is an American firm based in Cleveland that designs and manufactures tractors and agricultural equipment. Grid Inc. granted the right to an Italian firm, Neos Ltd. to use its brand name, and patented technology to manufacture tractors in Italy. In return, Neos Ltd. made an upfront payment and agreed to give a percentage of the revenues that it would gain to Grid Inc. In this example, Grid Inc. uses _____. a. licensing b. franchising c. exporting d. offshoring e. reshoring

False

7. Business risk increases when firms operate in multiple countries.

a. Licensing

70. Which of the following involves granting a foreign company the right to create a company's product within a foreign country in exchange for a fee? a. Licensing b. Franchising c. Exporting d. A joint venture e. A strategic alliance

e. Under licensing, the profits of a firm that grants a license are limited to the fees that it collects from the local firm.

71. Which of the following is true of licensing? a. Licensing is most frequently used in service industries. b. Licensing refers to a business operation in a foreign country that a firm fully owns. c. Under licensing, a firm that grants a license absorbs a lot of costs. d. Under licensing, a firm gains complete control over how its technology is used. e. Under licensing, the profits of a firm that grants a license are limited to the fees that it collects from the local firm.

c. joint venture

72. In a(n) _____, two or more organizations each contribute to the creation of a new entity. a. strategic alliance b. sole proprietorship c. joint venture d. wholly owned subsidiary e. partly owned subsidiary

e. Joint venture

73. Bell Pvt. Ltd., an American glassworks manufacturer, aims to expand its business to France. After considering its alternatives, Bell Pvt. Ltd. worked closely with a French glassworks manufacturer, Blue Stripes Inc. to create a new entity called Blue Stripes and Bell Corporation, by contributing their assets. Both the firms believed that this move would provide them with maximum benefits. Which of the following market entry options had the two firms used? a. Strategic alliance b. Partnership c. Wholly owned subsidiary d. Partly owned subsidiary e. Joint venture

a. does not involve the formation of a new organization.

74. A strategic alliance strategy differs from a joint venture in that a strategic alliance: a. does not involve the formation of a new organization. b. involves granting a foreign company the right to create a company's product. c. is widely prevalent in service industries. d. allows a firm to have complete control over its products. e. involves creating goods within a firm's home country and then shipping them to another country.

a. strategic alliance

75. In a(n) _____, firms work together cooperatively, but no new organization is formed. a. strategic alliance b. partnership c. joint venture d. wholly owned subsidiary e. partly owned subsidiary

True

8. Political risk refers to the potential for government upheaval or interference with business to harm an operation within a country.

False

9. The process of seizing a firm's assets in a country by the national government is known as centralization.