Chapter 13

_____ enable a firm to reduce the costs of value creation and/or to create perceived value in such a way that premium pricing is possible. A. Core competencies B. Global standardization strategies C. Operations D. Location economies

A. Core competencies

_____ refer(s) to systematic reductions in production costs that have been observed to occur over the life of a product. A. Experience curve B. Economies of scale C. Location economies D. Production possibility

A. Experience curve

_____ strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense. A. Localization B. Transnational C. Global standardization D. International

A. Localization

_____ allows a firm to reduce its cost of creating value and increase its profitability. A. Moving down the experience curve B. Moving up the experience curve C. Moving down the learning effect curve D. Moving up the learning effect curve

A. Moving down the experience curve

_____ include the design, creation, and delivery of a product. A. Primary activities B. Core competencies C. Support activities D. Universal needs

A. Primary activities

_____ is measured by the percentage increase in net profits over time. A. Profit growth B. Value C. Profitability D. Operational economy

A. Profit growth

_____ can be defined as the rate of return that the firm makes on its invested capital, which is calculated by dividing the net profits of the firm by total invested capital. A. Profitability B. Performance C. Cash flow D. Efficiency

A. Profitability

_____ exists when the tastes and preferences of consumers in different nations are similar if not identical. A. Universal needs B. Homogenous needs C. Basic needs D. Bundled needs

A. Universal needs

The value of a product to an average consumer is V; and the average price that the firm can charge a consumer for that product is P. Here, V - P can be termed as: A. consumer surplus per unit. B. producer surplus per unit. C. profit growth. D. profit per unit sold.

A. consumer surplus per unit.

A strategy that focuses on increasing the attractiveness of a product is referred to as a(n) _____. A. differentiation strategy B. low cost strategy C. effectiveness strategy D. efficiency strategy

A. differentiation strategy

When a firm has a strategic goal of pursuing a low-cost strategy on a worldwide scale, the firm should follow a(n) _____ strategy. A. global standardization B. localization C. international D. customization

A. global standardization

The distinguishing feature of many firms that pursue a(n) _____ strategy is that they are selling a product that serves universal needs, but they do not face significant competitors. A. international B. localization C. transnational D. global standardization

A. internationale

Pressures for _____ imply that it may not be possible for a firm to realize the full benefits from economies of scale, learning effects, and location economies. A. local responsiveness B. profitability C. value creation D. global standardization

A. local responsiveness

Firms usually respond to pressures for cost reduction by trying to: A. lower the costs of value creation. B. be locally responsive. C. undertaking product differentiation. D. diversifying product lines.

A. lower the costs of value creation.

The consumer surplus per unit is determined by: A. the experience curve. B. economies of scale. C. market diversification. D. competitive pressure in the marketplace.

A. the experience curve.

Universal needs exist when: A. the tastes and preferences of consumers in different nations are similar if not identical. B. conventional commodity products requested in one country are different than those requested in another country. C. the tastes and preferences of consumers in the same nation are similar if not identical. D. consumers are willing to pay a high price for a product regardless of what country they reside in.

A. the tastes and preferences of consumers in different nations are similar if not identical.

Michael Porter argues that: A. those firms that create superior value will achieve superior profitability. B. standardization of product is a basic strategy for attaining a competitive advantage in an industry. C. it is necessary for a firm to have the lowest cost structure or create the most valuable product. D. it is important that the gap between value and the cost of production be smaller than that of competitors.

A. those firms that create superior value will achieve superior profitability.

Which of the following is true of firms that compete in the global marketplace? A. They must employ a transnational policy in order to have a competitive edge. B. Because differentiation across countries can involve significant duplication and a lack of product standardization, it may raise costs. C. They must employ a domestic policy in order to have a competitive edge. D. Because differentiation across countries can involve significant duplication and a lack of product standardization, it may reduce costs.

B. Because differentiation across countries can involve significant duplication and a lack of product standardization, it may raise costs.

Skills within the firm that competitors cannot easily match or imitate and that may exist in the firm's value creation activities. A. Experience curves B. Core competencies C. Economies of scale D. Learning effects

B. Core competencies

_____ imply that when a firm already has significant value built into its product offering, increasing value by a relatively small amount requires significant additional costs. A. Efficiency matrixes B. Diminishing returns C. Cost plus curves D. Strategy convex curves

B. Diminishing returns

Which of the following is a disadvantage of the localization strategy? A. Decrease in the value of the product in the local market B. Duplication of functions C. Inability to accommodate varying tastes and preferences in different markets D. Reduced customization

B. Duplication of functions

Which of the following is one of the two types of competitive pressure that affect the ability of multinational enterprises to compete in the global marketplace? A. Pressure for cost increases B. Pressure for local responsiveness C. Pressure for value creation D. Pressure for increased profitability

B. Pressure for local responsiveness

Which of the following is an example of a primary activity in a firm's value chain? A. Information systems B. Research and development C. Logistics D. Human relations

B. Research and development

Economies of scale arise from which of the following sources? A. Increasing fixed costs by limiting them to small volumes. B. Serving domestic and international markets from the same production facilities. C. Serving only domestic markets. D. Bargaining with distributors to drive up the product costs.

B. Serving domestic and international markets from the same production facilities.

Which of the following statements is true? A. The way to increase the profitability of a firm is to create a greater number of products. B. 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. C. The more value customers place on a firm's products, the lower the price the firm is able to charge for those products. D. The price a firm charges for a good or service is typically more than the value the customer places on that good or service.

B. 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.

Which of the following is associated with firms following the global standardization strategy? A. High pressures for local responsiveness B. Use cost advantage to support aggressive pricing in world markets C. Low pressures for cost reductions D. Customize product offering and marketing strategy to local conditions

B. Use cost advantage to support aggressive pricing in world markets

Lenovo's ThinkPad laptop computers are designed in the United States, the case, keyboard, and hard drive are made in Thailand; the display screen and memory in South Korea; the built-in wireless card in Malaysia; and the microprocessor in the United States. In each case, these components are manufactured and sourced from the optimal location given current factor costs. In this example, Lenovo has: A. vertical integration advantages. B. a global web of value creation activities. C. learning effects. D. high local responsiveness.

B. a global web of value creation activities.

Moving down the experience curve: A. increases the cost of a firm's raw material. B. allows a firm to reduce its cost of creating value. C. decreases a firm's profitability. D. increases the research and development expenditure of a firm.

B. allows a firm to reduce its cost of creating value.

The amount of value a firm creates is measured by the: A. economies of scale they are able to achieve. B. difference between its costs of production and the value that consumers perceive in its products. C. profitability the firm achieves. D. difference between its costs of production and the price that it charges for its products.

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

The efficiency frontier has a convex shape because of _____. A. consumer surplus B. diminishing returns C. profitability D. differentiation strategy

B. diminishing returns

For firms that are selling a product that serves universal needs, and that do not face significant competition, a(n) _____ strategy makes sense. A. localization B. international C. transnational D. global standardization

B. international

According to researchers Bartlett and Ghoshal, for transnational enterprises to be successful, they must focus on: A. selling a product that serves universal needs. B. leveraging the skills found at their subsidiaries around the world. C. increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets. D. ensuring that the flow of skills from the home country to the foreign subsidiaries is one way and uninterrupted.

B. leveraging the skills found at their subsidiaries around the world.

When a firm focuses on increasing profitability by customizing the product or service so that they provide a good match to tastes and preferences in different national markets, the firm is following a(n) _____ strategy. A. transnational B. localization C. international D. global standardization

B. localization

A firm benefits by basing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity. Firms that pursue such a strategy can realize _____. A. differentiation B. location economies C. vertical integration D. horizontal integration

B. location economies

Economies that arise from performing a value creation activity in the optimal location are known as _____. B. location economies C. localization strategies D. economies of scale

B. location economies

Research and development, production, marketing and sales, and customer service are all examples of _____. A. core competencies B. primary activities C. value creation D. secondary activities

B. primary activities

The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because: A. the customer's disposable income is significantly higher than what the market demands. B. the customer captures some of that value in the form of a consumer surplus. C. regulatory mechanisms ensure that the customer is not overcharged for products/services. D. marketers implement psychological pricing tactics to ensure that customers perceive the prices to be low.

B. the customer captures some of that value in the form of a consumer surplus.

Which of the following is an example of a support activity in a firm's value chain? A. Research and development B. Customer service C. Human resources D. Marketing and sales

C. Human resources

Which strategy focuses on increasing profitability by customizing the firm's goods or services so they provide a good match to tastes and preferences in different national markets? A. Global standardization strategy B. Transnational strategy C. Localization strategy D. International strategy

C. Localization strategy

Which of the following is less likely to add to the pressure for a firm to be locally responsive? A. National differences in consumer tastes and preferences B. Differences in infrastructure and traditional practices C. Switching costs for consumers D. Host-government demands

C. Switching costs for consumers

It has been observed that a product's production costs decline by some quantity about each time cumulative output _____. A. increases by twenty five percent B. quadruples C. doubles D. triples

C. doubles

It has been suggested that learning effects are important only during the start-up period of a new process and that they cease after two or three years. Any decline in the experience curve after such a point is due to: A. reduction in fixed costs. B. higher depreciation costs. C. economies of scale. D. obsolescence.

C. economies of scale.

The _____ all of the different positions that a firm can adopt with regard to adding value to the product and low cost assuming that its internal operations are configured efficiently to support a particular position. A. economies of scale are B. diminishing returns are C. efficiency frontier shows D. value creation scale shows

C. efficiency frontier shows

Top management should be viewed as part of the firm's _____. A. primary activities B. experience curve C. infrastructure D. universal strategy

C. infrastructure

A firm facing low pressures for cost reductions and low pressures for local responsiveness, is most likely to follow a(n) _____ strategy. A. global standardization B. localization C. international D. transnational

C. international

Cost savings that come from learning by doing are known as _____. A. learning curves B. economies of scale C. learning effects D. experience curves

C. learning effects

Economies that arise from performing a value creation activity in the optimal place for that activity are referred to as _____. A. factor economies B. production economies C. location economies D. value creation economies

C. location economies

Primary activities have to do with: A. the logistics function. B. the human resource function. C. the design, creation, and delivery of the product. D. company infrastructure.

C. the design, creation, and delivery of the product.

Pressures for cost reduction are intense in industries where: A. major competitors are based in high-cost locations. B. consumers are weak and face high switching costs. C. there is persistent excess capacity. D. the company is located in a low-cost location.

C. there is persistent excess capacity.

When the firm simultaneously faces both strong cost pressures and strong pressures for local responsiveness, the ideal strategy to follow is the _____ strategy. A. global standardization B. localization C. transnational D. international

C. transnational

Learning effects: A. tend to be less significant when a technologically complex task is repeated. B. will be less significant in an assembly process involving 1,000 complex steps than in one of only 100 simple steps. C. typically disappear after a while, in spite of the complexity of the task. D. are more significant after two or three years of the introduction of a new process.

C. typically disappear after a while, in spite of the complexity of the task.

Location economies are the economies that arise from performing a _____ activity in the optimal location for that activity. A. universal need B. core competence C. value creation D. localization strategy

C. value creation

A consumer surplus can be best described as: A. what the consumer has "left-over" after a purchase. B. how much extra a consumer has to pay for a product. C. value for the money. D. the premium charged for a quality product.

C. value for the money.

The basic strategy paradigm suggests that to maximize its profitability, a firm should do which of the following? A. Choose, according to strategy, any position on the efficiency frontier as all positions are viable. B. Pick a position on the efficiency frontier that is viable in the sense that there is a low product demand anticipated. C. Configure its external operations so that they support the position of diminishing returns. D. Make sure that the right organization structure is in place to execute the strategy.

D. Make sure that the right organization structure is in place to execute the strategy.

_____ activities are basically concerned with creating the product, marketing and delivering the product to buyers, and providing support and after-sales service. A. Support B. Subordinate C. Ancillary D. Primary

D. Primary

_____ activities of the value chain provide inputs that allow the primary activities to occur. A. Complementary B. Basic C. Core D. Support

D. Support

Which of the following is true of the international strategy? A. Product development tends to be highly decentralized. B. Manufacturing and marketing are typically located in the headquarters location. C. Extensive production customization is common. D. The strategy is not viable in the long-run.

D. The strategy is not viable in the long-run.

When companies disperse different stages of the value chain to those locations around the world where perceived value is maximized or where the costs of value creation are minimized, companies create: A. a differentiated organization. B. a location economy curve. C. economies of scale. D. a global web of value creation activities.

D. a global web of value creation activities.

The strategy, operations, and organization of a firm must all be consistent with each other if the firm is to _____ and achieve superior profitability. A. exploit core competencies B. attain a comparative advantage C. experience a learning curve D. attain a competitive advantage

D. attain a competitive advantage

A multinational firm may need to delegate marketing functions to national subsidiaries to: A. fully implement the firm's localization strategy. B. employ economies of scale. C. meet the requirements for a global standardization strategy. D. be responsive to local differences in distribution channels.

D. be responsive to local differences in distribution channels.

Responding to pressure for _____ requires that a firm differentiate its product offering and marketing strategy from country to country. A. cost reductions B. experience effects C. lowering the costs of value creation D. being locally responsive

D. being locally responsive

It has been observed in the aircraft industry that, each time cumulative output of airframes was doubled, unit costs typically declined to 80 percent of their previous level. This is an example of the _____ curve. A. core performance B. location C. strategic D. experience

D. experience

The _____ refers to systematic reductions in production costs that have been observed to occur over the life of a product. A. economies of scale B. value creation C. location economies D. experience curve

D. experience curve

When individuals gain knowledge of the most efficient ways to perform particular tasks, they are saving costs through _____. A. location economies B. value creation effects C. experience curve effects D. learning effects

D. learning effects

A(n) _____ strategy makes most sense when demands for local responsiveness are high, but cost pressures are moderate or low. A. global standardization B. transnational C. international D. localization

D. localization

A(n) _____ customizes the product offering to local demands and increases the value of that product in the local market. A. transnational strategy B. global standardization strategy C. international strategy D. localization strategy

D. localization strategy

Learning effects tend to be: A. the same regardless of whether a task is simple or complex. B. more significant when a technologically simple task is repeated. C. less significant when a technologically complex task is repeated. D. more significant when a technologically complex task is repeated.

D. more significant when a technologically complex task is repeated.

The percentage increase in net profits over time measures _____. A. capital return B. profitability C. market growth D. profit growth

D. profit growth

Global expansion offers companies the opportunity to generate greater profits than companies that focus strictly on _____. A. value creation B. economies of scale C. location economies D. the domestic market

D. the domestic market

A firm that is facing both strong cost pressures and strong pressures for local responsiveness should follow a(n) _____ strategy. A. localization B. global standardization C. international D. transnational

D. transnational

A firm that is pursuing a(n) _____ strategy is simultaneously trying to achieve low costs through location economies, economies of scale, and learning effects, and trying to differentiate its product offering across geographic markets. A. global customization B. international C. localization D. transnational

D. transnational