MGMT 475: Chapter 8

A company, Pluto Inc., employs the franchising strategy to enter a new national market. Which of the following statements is more likely to be true of Pluto? a. It is more likely to be a service company. b. It is more likely to have a greater control over the quality the products manufactured in the foreign country. c. It is less likely to impose strict rules regarding how a franchisee does business. d. It is less likely to receive royalty payment from the franchisee. e. It is more likely to bear the development costs associated with opening a foreign market on its own.

a. It is more likely to be a service company.

Which of the following is disadvantage of strategic alliances? a. They give competitors a low-cost route to new technology and markets. b. They do not facilitate entry into a foreign market. c. They do not allow for sharing of risks and fixed costs. d. They mandate that the companies do not share complementary skills and assets. e. They cause problems when it comes to establishing technological standards for the industry.

a. They give competitors a low-cost route to new technology and markets.

A company can increase its growth rate by taking goods or services developed at home and selling them internationally. a. True b. False

a. True

A company may create value if it can leverage the skills created within subsidiaries and apply them to other operations within the firm's global network. a. True b. False

a. True

A localization strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences and when cost pressures are not too intense. a. True b. False

a. True

Alliances can be designed to make it difficult (if not impossible) to transfer technology not meant to be transferred. a. True b. False

a. True

An international strategy may not be viable in the long term and to survive, companies that can pursue it need to shift toward a global standardization strategy. a. True b. False

a. True

Despite the globalization of production and markets, many of the most successful companies in certain industries are still clustered in a small number of countries. a. True b. False

a. True

Factor endowments, the cost and quality of factors of production, are a prime determinant of the competitive advantage that certain countries have in certain industries. a. True b. False

a. True

Local responsiveness may be driven by economic and political demands placed on companies by host country governments. a. True b. False

a. True

Location economies refer to the economic benefits that arise from performing a value creation activity at an optimal location. a. True b. False

a. True

Most manufacturing companies begin their global expansion by exporting. a. True b. False

a. True

One advantage of a joint venture is that a company may benefit from a local partner's knowledge of the many dimensions of a host country. a. True b. False

a. True

Southwest Airlines, Sony, and Costco conduct business in two or more countries. These companies can be referred to as multinational companies. a. True b. False

a. True

When a company licenses its technology it can quickly lose control over it. a. True b. False

a. True

Cost reduction pressures can be particularly intense in industries producing: a. commodity-type products. b. highly differential products. c. highly customized services. d. goods that have no close substitutes. e. goods that need minimal advertising.

a. commodity-type products.

Host government demands generally: a. increase pressures for local responsiveness. b. decrease pressures for cost reductions. c. do not encompass local content rules. d. compel companies to abandon localization strategies. e. impede a company's ability to differentiate its product offering across national borders.

a. increase pressures for local responsiveness.

Companies that pursue a strategy are trying to develop a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company's global network of operations. a. transnational b. downsizing c. centralization d. localization e. global standardization

a. transnational

By offering a standardized product to the global marketplace and manufacturing that product in each nation in which it does business irrespective of production costs, a multinational company can realize substantial scale economies. a. True b. False

b. False

Swedish strength in fabricated steel products (such as ball bearings and cutting tools) has drawn on strengths in Sweden's specialty steel industry. This is an example of which of the following attributes that impact national competitive advantage? a. Local demand conditions b. Competitiveness of related and supporting industries c. Intensity of rivalry in an industry d. Factor endowments e. Differences in distribution channels

b. Competitiveness of related and supporting industries

A transnational strategy makes the most sense when demand for local responsiveness is minimal. a. True b. False

b. False

Companies should form strategic alliances with firms that have a reputation for being opportunistic. a. True b. False

b. False

Companies that pursue a global standardization strategy are trying to develop a business model that simultaneously achieves low costs and differentiates the product offering across geographic markets. a. True b. False

b. False

Global standardization strategy emphasizes customization and product differentiation. a. True b. False

b. False

If a company's competitive advantage derives from its control of proprietary technological know-how, it should either license its technology to others or pursue a joint venture. a. True b. False

b. False

The globalization of production has been decreasing as companies have been facing lower barriers to international trade and location economies. a. True b. False

b. False

Dietizza is a fast food network that makes low-calorie pizzas. As the firm wishes to expand its operations in different locations, it has licensed a few entrepreneurs to open Dietizza outlets under the company's trademark. The entrepreneurs will take up the responsibility of costs while Dietizza will assist them in running operations. The company will receive royalty payments and a percentage of profits from the entrepreneurs. Which of the following concepts is illustrated here? a. Exporting b. Franchising c. Setting up of a wholly owned subsidiary d. Strategic alliance e. Joint venture

b. Franchising

Which of the following has occurred in international trade over the past half-century? a. There has been a dramatic increase in the barriers to international trade. b. Tariff rates on manufactured goods traded by advanced nations have fallen. c. Regulations prohibiting foreign companies from entering domestic markets and establishing production facilities have increased. d. The volume of world trade has decreased dramatically. e. There has been a decline in the value of foreign direct investment.

b. Tariff rates on manufactured goods traded by advanced nations have fallen.

Global expansion: a. is feasible only for non-technology based companies. b. can enable companies to increase their profitability and grow their profits more rapidly. c. has significantly decreased in the recent years as the industry barriers are now higher. d. does not involve selling existing products to new markets in different countries. e. is not feasible for service-based firms.

b. can enable companies to increase their profitability and grow their profits more rapidly.

Nutrimax, a sports foods manufacturer, has recently expanded its operations to different countries. The company has realized that customers in different countries have different tastes and preferences. So, the company customizes its products based on the country where it's selling. In this scenario, Nutrimax is most likely to be using strategy. a. global standardization b. localization c. Achilles heel d. centralization e. transnational

b. localization

The globalization of production has caused firms to: a. lower their market share. b. lower their cost structure. c. centralize their production process. d. curb international competition. e. limit the number of market segments.

b. lower their cost structure.

Relish is a large fast food chain that operates in many countries. As there are several competitors in the fast food sector, the company has been facing intense pressures for achieving low cost structures. The company also faces the task of customizing its product line as there are significant differences in tastes and preferences among customers in different geographic locations. In order to achieve both low costs and product differentiation, the company should aim to pursue a strategy. a. global standardization b. transnational c. localization d. downsizing e. divestment

b. transnational

Which of the following statements is true in the context of local demand conditions? a. Companies are typically least sensitive to the needs of their closest customers. b. Home demand plays little role in helping companies upgrade their national competitive advantage. c. A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding. d. The characteristics of international demand alone shape the attributes of a company's products; not local demand. e. Local demand characteristics have little role to play in creating pressure for innovation and quality.

c. A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding.

Which of the following is not a necessity for leveraging the skills of global subsidiaries? a. Incentives for local managers to share knowledge and ideas b. Awareness among managers that competencies can develop anywhere c. Assertion of monopoly of the corporate center over subsidiaries d. Transfer of competencies around the company e. Incentives that encourage employees to take necessary risks

c. Assertion of monopoly of the corporate center over subsidiaries

Which of the following ideas is a localization strategy is based on? a. There is a convergence in the tastes of consumers in different nations of the world. b. There are substantial economies of scale to be realized from centralizing global production. c. Consumer tastes and preferences differ among national markets. d. There are cost advantages associated with manufacturing a standard product for global consumption. e. Competitive strategy should be centralized at the world head office.

c. Consumer tastes and preferences differ among national markets.

Which of the following factors increases pressures for local responsiveness? a. Powerful buyers b. Uniformity in distribution channels c. Host government demands d. Similarities in customer tastes and preferences e. Competitors that are based in high-cost locations

c. Host government demands

Which of the following is an advantage of franchising? a. It ensures tight control over quality. b. It enables companies to engage in global strategic coordination. c. It involves low development costs and risks. d. It enables the company to collect all the profits made by the franchisees. e. It frees companies from the task of monitoring and assisting operations at franchisees.

c. It involves low development costs and risks.

Which of the following statements is true about global standardization strategy? a. It emphasizes product customization to specifically meet customer needs. b. It involves the spreading of production, marketing, and research and development activities of companies to all the location it operates in. c. It makes most sense when there are strong pressures for cost reductions. d. It makes most sense when the pressures for local responsiveness are maximum. . It fails to focus on achieving location and scale economies.

c. It makes most sense when there are strong pressures for cost reductions.

Which of the following statements is true about international strategy? a. It is usually adopted by companies that face intense cost pressures due to competition. b. It makes most sense when the pressures for local responsiveness are very intense. c. It often involves the head office retaining tight control over marketing and product strategy. d. It often involves decentralizing product development functions such as R&D to different subsidiaries. e. It involves extensive scope for localization and product differentiation.

c. It often involves the head office retaining tight control over marketing and product strategy.

KL Entertainment Inc. is a service-based firm with very few competitors. The company is looking to sell its services in different nations with substantial differences in consumer preferences and where cost pressures are not too intense. Which of the following strategies should WKL Entertainment lnc. managers pursue? a. Global standardization b. Transnational c. Localization d. International e. Multinational

c. Localization

The Achilles heel of international strategy is that: a. economies of scale cannot be achieved. b. customization of products makes the company lose its credibility. c. competitors inevitably emerge. d. non-price differences among products hold little importance. e. customer preferences eventually become identical.

c. competitors inevitably emerge.

Most manufacturing companies begin their global expansion by: a. licensing. b. franchising. c. exporting. d. forming a joint venture. e. setting up a wholly owned subsidiary in the host country.

c. exporting.

Differences in tastes and preferences: a. increase pressures for cost reductions. b. do not affect service-based firms. c. increase pressures for local responsiveness. d. reduce pressures from the host government. e. significantly decrease R&D costs of a company.

c. increase pressures for local responsiveness.

Aries Travels is a company that offers holiday and travel packages. The company realizes that customer preferences vary and thus extensively customizes its packages. As there are not many competitors in the market in which Aries Travels operates, there are minimal pressures to reduce costs. Aries Travels is most likely to have adopted a strategy. a. global standardization b. international c. localization d. transnational e. harvest

c. localization

For a strategic alliance, firms should seek partners that are: a. different in terms of vision and agendas. b. known for being opportunistic. c. willing to share costs and risks of product development. d. radically different when it comes to strategic goals. e. similar when it comes to capabilities.

c. willing to share costs and risks of product development.

Which of the following is not a factor of production? a. Land b. Labor c. Raw materials d. Competitive forces e. Managerial sophistication

d. Competitive forces

Which of the following is not a risk of exporting? a. Tariff barriers b. Transportation costs c. Location diseconomies d. High manufacturing costs e. Delegation of marketing activities to a local agent

d. High manufacturing costs

Which of the following statements is true about transnational strategy? a. It gives little emphasis to cost reduction and achieving scale economies. b. It makes little sense when the pressures for local responsiveness are intense. c. It is an easy one to pursue because it places minimal demands on the company. d. It fosters a flow of skills between different subsidiaries in the company's global network of operations. e. It is adopted by companies that produce standardized goods that do not require product differentiation.

d. It fosters a flow of skills between different subsidiaries in the company's global network of operations.

Which of the following statements is true about localization strategy? a. It focuses on marketing a standardized product worldwide to achieve cost reductions. b. It makes most sense when cost pressures are extremely intense. c. It is most appropriate when there are similarities across nations with regard to consumer tastes and preferences. d. It involves some duplication of functions and smaller production runs. e. It usually relieves companies of the task of closely monitoring their costs.

d. It involves some duplication of functions and smaller production runs.

Which of the following entry modes allows a company to engage in global strategic coordination? a. Exporting b. Licensing c. Joint ventures d. Wholly owned subsidiaries e. Franchising

d. Wholly owned subsidiaries

When a company performs a value creation activity in a region that is optimal for that activity, wherever in the world that might be, it is trying to capitalize on: a. negative feedback loops. b. economies of scope. c. the transnational strategy. d. location economies. e. its localization strategy.

d. location economies.

Black and Decker, Capitol One, Gillette, and Unilever are all companies that conduct business in two or more national markets. These companies are known as a. bi market companies. b. national companies. c. domestic companies. d. multinational companies. e. localized companies.

d. multinational companies.

Which of the following is not an attribute of a national or country-specific environment that has an impact on global competitiveness of companies located in that nation? a. Factor endowments b. Local demand conditions c. Related and supporting industries d. Strategy, structure, and rivalry of firms within the nation e. Advertising expenses

e. Advertising expenses

In the wireless telecommunications industry, different technical standards are found in different parts of the world. A technical standard known as GSM is common in Europe, and an alternative standard, CDMA, is more common in the United States and parts of Asia. Equipment designed for GSM will not work on a CDMA network and vice versa. Which of the following pressures for local responsiveness does this represent? a. Global environmental demands b. Host government demands c. Differences in distribution channels d. Differences in customer tastes and preferences e. Differences in infrastructure

e. Differences in infrastructure

Which of the following statements is true in the context of globalization of production and markets? a. Globalization of production has significantly increased the costs for many industries. b. The globalization of markets and production has failed to threaten companies' home markets. c. Consolidated oligopolies continue to be dominated by a small number of companies despite globalization. d. The shift from national to global markets has curbed competitive rivalry in many industries. e. Globalization has significantly increased the threat of entry.

e. Globalization has significantly increased the threat of entry.

Which of the following is an advantage of international licensing? a. It enables the company realize scale economies and location economies through manufacturing products in a centralized location. b. It allows the company to collect profits from one licensee and use it to support others. c. It eliminates the risk of losing control over a technology that the company owns. d. It enables the company to coordinate its strategy efficiently to achieve competitive advantage. e. It takes away the pressure of development costs and risks associated with opening up a foreign market from the company.

e. It takes away the pressure of development costs and risks associated with opening up a foreign market from the company.

Which of the following factors increases pressures for cost reductions? a. Meaningful differentiation between products b. Reduced international competition c. Competitors that are based in high-cost locations d. High switching costs e. Persistent excess capacity

e. Persistent excess capacity

Which entry mode gives a multinational the tightest control over foreign operations? a. Exporting from the home country and letting a foreign agent organize local marketing b. Licensing c. Franchising d. Entering into a joint venture with a foreign company to set up overseas operations e. Setting up a wholly owned subsidiary

e. Setting up a wholly owned subsidiary

Which of the following statements is true in the context of attributes of national competitive advantage? a. Factor endowments do not encompass aspects such as managerial sophistication. b. Companies are typically least sensitive to the needs of their closest customers. c. The benefits of investments in advanced factors of production by related and supporting industries are confined to those industries. d. Domestic rivalry creates pressures to increase costs and avoid investing in upgrading advanced factors. e. The nature of home demand shapes the attributes of domestically made products.

e. The nature of home demand shapes the attributes of domestically made products.

When a company expands its sales volume through international expansion, it can realize cost savings from economies of scale through all of the following except: a. spreading fixed costs over its global sales volume. b. utilizing its production facilities more intensely. c. increased bargaining power with its suppliers. d. learning effects associated with higher volume. e. adopting high cost structures.

e. adopting high cost structures.

Global economies of scale can be realized by: a. restricting the expansion of overseas sales. b. limiting the utilization of production facilities. c. curbing bargaining power with suppliers. d. decreasing cost savings through learning effects. e. spreading the fixed costs associated with developing.

e. spreading the fixed costs associated with developing.