MGT 6890 Chapter 8

Which of the following statements regarding locating a value creation activity in the optimal location for that activity is true?

A company's efforts to realize location economies can help a company achieve a low-cost position.

One key to making a strategic alliance work is selecting the right partner. Which of the following statements describes a characteristic of a good partner?

A good partner helps the company achieve strategic goals, such as gaining access to critical core competencies.

Which of the following is an example of responding to differences in distribution channels?

A pharmaceutical company devises different marketing strategies for Britain versus the United States.

Which of the following is the most costly method of serving a foreign market?

A wholly-owned subsidiary

Which of the following is an advantage of strategic alliances with competitors?

An alliance brings together complementary skills and assets that neither company could easily develop on its own.

Which of the following statements regarding companies that follow an international strategy is true?

Any local customization of an international company's product offering and marketing strategy tends to be rather limited in scope.

Which of the following statements regarding alliance structure is accurate?

Both parties in an alliance can agree in advance to exchange skill and technologies that the other party covets.

In addition to growing profits more rapidly, expanding sales volume through international expansion can allow a company to realize cost savings from economies of scale, thereby boosting profitability. Such scale economies come from several sources. Which of the following statements about those sources is true?

By spreading the fixed costs associated with developing a product and setting up production facilities over its global sales volume, a company can lower its average unit cost.

Which of the following statements regarding local demand conditions is NOT true?

Companies are most sensitive to the needs of their biggest customers.

Regarding the globalization of production and markets, which of the following statements is true?

Companies around the globe are finding their home markets under attack from foreign competitors.

Which of the following statements regarding a global standardization strategy is true?

Companies using this strategy prefer to market a standardized product worldwide so that they can reap the maximum benefits from economies of scale.

Which of the following statements regarding the trend toward the globalization of production and markets is true?

Competitive rivalries have threatened to drive down a company's profitability.

Which of the following statements regarding cost-reduction pressures is not true?

Cost-reduction pressures are intense in industries where there is little excess capacity.

Which of the following is a primary contributor to global expansion?

Declining barriers to cross-border trade and investment

Michael Porter identified four attributes of a national or country-specific environment that have an important impact on the global competitiveness of companies located within that nation. He refers to these attributes as the:

Diamond

When sales of Stature, an international fashion and lifestyle magazine, dipped below a certain threshold in the United States, it was dropped from the U.S. bookstores and newsstands where it had been sold. The publisher has decided to produce an online-only edition sold directly to U.S. consumers. However, it will continue to sell print magazines in other countries. To which of the following is Stature responding?

Differences in distribution channels

In Britain, people drive on the left-hand side of the road, creating a need for right-hand-drive cars. To which of the following must a car manufacturer respond?

Differences in infrastructure and traditional practices

Which of the following statements regarding a broad attribute of national competitive advantage—intensity of rivalry—is not true?

Different nations are characterized by similar management ideologies, which help them to build national competitive advantage.

Firms that expand internationally can do which of the following?

Expand the market for their domestic product offerings by selling those products in international markets.

Which of the following entry modes has the advantages of (1) avoiding the costs of establishing manufacturing operations in the host country and (2) possibly being consistent with scale economies and location economies?

Exporting

Which of the following products is NOT an example of increasing homogeneity of the global marketplace?

Ford trucks

Ellington, a service company, wants to build up a global presence quickly and at a low cost. Ellington should choose which entry mode?

Franchising

Which of the following statements regarding franchising is true?

Franchising is basically a specialized form of licensing in which the franchisee abides by strict rules governing how it does business.

Which of the following is NOT an example of the rise in regionalism?

Germany's registration procedures for a new drug

Which global strategy is most appropriate when pressures for local responsiveness are low and pressures for cost reductions are high?

Global standardization strategy

_____ are cooperative agreements between companies from different countries that are actual or potential competitors.

Global strategic alliances

As part of choosing exporting to enter a different national market, Nottingham Co. has decided to manufacture bulk products on a regional basis. Which of the following risks has Nottingham avoided?

High transport costs

n order to break into the South American market, U.S.-based Ace Inc. must respond to manufacturing regulations in Brazil. To which of the following is Ace responding?

Host government demands

Which of the following is an accurate example of location economies?

If the best marketers are in the United States, a firm's marketing strategy should be formulated there.

Japan has different management ideologies from those of Germany. Japan excels in technology, while Germany is known for its automotive engineering. Which piece of Michael Porter's framework does this describe?

Intensity of rivalry

Companies in a given country gain competitive advantage because their domestic customers are sophisticated and demanding, pressuring local companies to meet high standards of product quality and produce innovative products. Which piece of Michael Porter's framework does this describe?

Local demand conditions

_____ refer to the nature of home demand for the industry's product or service.

Local demand conditions

In the past, Ford favored a _____ strategy for entering foreign markets.

Localization

_____ are the economic benefits that arise from performing a value creation activity in an optimal location.

Location economies

By using a global standardization strategy, a company can reasonably expect to experience all of the following EXCEPT:

Lower profit margins

Which of the following statements most accurately conveys the situation regarding globalization?

Managers need to consider how globalization affects the environment in which their companies compete.

Leveraging valuable resources created within subsidiaries and applying them to other operations within the firm's global network may create value. Which of the following statements regarding this process is NOT true?

Managers should designate other employees to act as facilitators, helping to transfer valuable resources and competencies within the firm.

Which of the following statements regarding managing an alliance is true ?

Maximizing benefits from an alliance seems to involve building trust between partners and learning from partners.

Once a company transacts business in two or more countries, it is considered a(n):

Multinational company

Which of the following statements regarding the globalization of markets is true?

National markets are merging into one, huge global marketplace.

Which of the following is NOT one of the five primary choices of entry mode for entering a different national market?

Organizing the company as a transnational organization

Expanding globally allows firms to increase their _____ and rate of profit growth in ways not available to purely domestic enterprises.

Profitability

Which of the following industries would be considered a consolidated, global oligopoly?

Smartphones

A wholly-owned subsidiary is one in which the parent company owns 100% of the subsidiary's:

Stock

Which of the following statements regarding pressures for local responsiveness is true?

Strong preferences for local responsiveness emerge when customer tastes and preferences differ significantly between countries.

A broad attribute of national advantage in an industry is the presence of internationally competitive suppliers or related industries. Regarding this attribute, which of the following statements is true?

Swedish strength in fabricated steel products has drawn on strengths in Sweden's specialty-steel industry, a prime example of the presence of internationally competitive suppliers or related industries creating a national advantage.

Which of the following statements regarding the globalization of production and markets is true?

Tariff rates have approached zero for information technology.

Which of the following statements regarding the rise of regionalism is true?

The ability to standardize a product offering within a region allows for the attainment of greater scale economies than if each nation in the region required its own offering.

Which of the following is an advantage of licensing?

The company does not have to bear the development costs and risks associated with opening up a foreign market.

Which of the following describes factor endowments, the first broad attribute in Michael Porter's model of national competitive advantage?

They are a prime determinant of the competitive advantage that certain countries might have in certain industries.

How can the failure rate for international strategic alliances be described?

Two-thirds of international strategic alliances run into serious managerial and financial troubles within two years of their formation.

Which of the following statements is the best example of a way to reduce costs?

Wal-Mart pushes its suppliers, which are manufacturers, to lower their prices.

Which of the following is an advantage of joint ventures?

When the development costs and risks of opening up a foreign market are high, a company might benefit by sharing these costs and risks with a local partner.

Where are competencies most likely to be created within a multinational's global network of operations?

Wherever people have the opportunity and incentive to try new ways of doing things

One advantage of _____ is that it reduces a company's risk of losing control of a technological competency.

a wholly-owned subsidiary

In a company selling to a global marketplace, cost savings that come from economies of scale:

are evident in a cumulative output from its plants.

When it comes to competitive pressures, most companies that compete in the global marketplace experience two types: pressures for _____ and pressures for _____.

cost reductions; local responsiveness

The globalization of production has been increasing as companies take advantage of lower barriers to international trade and investment to:

disperse important functions of their production processes around the globe.

When it comes to both international and localization strategies, managers:

employ them most successfully when faced with the emergence of competitors.

Most manufacturing companies begin their global expansion as:

exporters.

The competitive advantage a given country enjoys in producing custom furniture might be explained by _____, the cost and quality of factors of production.

factor endowments

All of the following were identified by Michael Porter as attributes of a national or country-specific environment that have an important impact on the global competitiveness of companies located within that nation EXCEPT:

global demand conditions.

Companies that pursue a(n) _____ focus on increasing profitability by reaping the cost reductions that come from economies of scale and location economies. In other words, they pursue a low-cost strategy on a global scale.

global standardization strategy

Michael Porter's framework of national competitive advantage can do all of the following except:

help a company assess its capacity for production.

One of the strongest factors that kept many companies from pursuing a global standardization strategy was:

high barriers to cross-border trade and investment.

Pressures for local responsiveness arise from:

infrastructure and traditional practices.

In choosing a(n) _____, Broadview Inc. understands that it needs to be efficient and, whenever possible, capture scale economies from its global reach.

localization strategy

The possibility for leveraging skills and products associated with a firm's distinctive competencies wholesale from one nation to another depends on:

pressures for local responsiveness.

Almost all multinationals:

start out by taking goods or services developed at home and selling them internationally.

Western European, Japanese, and U.S. companies have accelerated their investment in Eastern Europe, Latin America, and Southeast Asia in order to:

take advantage of growth opportunities in those areas.

Successful foreign retailers such as Britain's Tesco and Sweden's IKEA have found it difficult to compete in the United States because:

the U.S. retailing industry is so competitive.

Influenced by reduced barriers to cross-border trade and investment, one of the most striking developments of the past 40 years has been:

the globalization of markets.

One of Boeing's primary reasons for outsourcing a significant amount of its production to foreign suppliers is that:

these suppliers are the best in the world at what they do.

Companies that pursue a(n) _____ are trying to develop a strategy that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of resources, such as process knowledge between different subsidiaries in the company's global network of operations.

transnational strategy

Companies pursuing global or transnational strategies prefer to establish:

wholly-owned subsidiaries.