Chapter 7
Companies that compete internationally can pursue competitive advantage in world markets (or offset domestic disadvantages) by: A. using a differentiation-based competitive strategy in those country markets with superior resources. B. choosing not to compete in countries with high tariffs and high taxes (which then have to be passed along to buyers in the form of higher prices), thus keeping costs and prices lower than rivals. C. using an export strategy to circumvent the risks of adverse exchange rate fluctuations. D. locating value chain activities in whatever nations prove most advantageous in a manner that uses location to lower costs or achieve greater product differentiation, allow for the transfer of competitively valuable competencies and capabilities from one country to another, and allow for cross-border coordination. E. employing a multidomestic strategy instead of a global strategy.
D
What can happen when international rivals compete against one another in multiple-country markets? A. It could create attractive industries that would have otherwise badly deteriorated. B. It could produce a business lineup consisting of too many slow-growth, declining, low-margin, or competitively weak businesses. C. It could create a greater diversity in the types of value chain activities between each business. D. It could initiate a deterrence effect that encourages mutual restraint in taking aggressive action against one another due to the fear of a retaliatory response that might escalate the battle into a cross-border competitive war. E. It could increase shareholder interests by concentrating corporate resources on foreign business activities to contend for market leadership.
D
Which of the following is a condition that makes an internal startup strategy appealing over an acquisition? A. when an internal startup is more costly B. when an internal startup affects the supply-demand balance by increasing production capacity C. when an internal startup is unable to gain distribution access advantages D. when an internal startup has the necessary scale and resource strengths to compete with rivals E. when an internal startup lacks the experience in establishing new subsidiaries
D
What is it called when a company sells its goods in foreign markets at prices that are below the prices at which it normally sells in its home market or well below its full costs per unit? A. dumping practices B. price-clearing system C. clearance sale D. discounting practices E. competitive advantage
A
The advantages of using an acquisition strategy to pursue opportunities in foreign markets include: A. having a high level of control and speed as an entry strategy to overcome trade barriers. B. allowing a company to achieve scalable economies. C. eliminating the costs and risks associated with establishing a foreign business location. D. achieving variable product quality and competitive product performance. E. exporting goods at higher costs than rivals in those locations.
A
Sharing and transferring resources and capabilities across borders may also contribute to the development of broader or deeper competencies and capabilities, thereby helping a company achieve: A. control over its resource capabilities. B. a dominating depth in some competitively valuable area. C. an intensity of resource diversification. D. precision and compliance in resource agility and responsiveness. E. direct investments in foreign countries.
B
The big issue an acquisition-minded firm must consider is whether: A. to acquire the firm at a price that cannot recapture the investment. B. to require the acquired firm's resources and management capability to sustain the ongoing struggling operation. C. to pay a premium price for a successful local company or to buy a struggling firm at a discount price. D. to pay a price that builds in all the synergistic advantages to the acquired firm. E. to pay a very high premium price that sends a signal to the market that the new firm has arrived.
C
One of the biggest strategic challenges to competing in the international arena includes: A. how to leverage the opportunities arising from shifting exchange rates. B. how to charge the same price in all country markets. C. how to identify foreign firms licensed to produce and distribute the company's products. D. whether to offer a standardized product worldwide or a customized product offering in each different country market. E. whether to pursue a franchising strategy or a joint venture strategy.
D
A greenfield venture in a foreign market is one: A. where the company creates a wholly owned subsidiary business by setting up all aspects of the operation upon entering the market from the ground up. B. where foreign facilities and marketing strategies are shared with local businesses. C. where the company learns through training by the foreign entity on how to compete. D. that supports exports into a foreign market by marketing indirectly thru local rivals. E. that offers lower risk and a faster path to financial returns.
A
A key approach for a company to grow sales and profits in several country markets is to: A. transfer its valuable competencies and resource strengths among these markets to aid in the development of broader competencies and capabilities. B. employ a multidomestic strategy rather than a global strategy. C. locate technical after-sale services close to buyers. D. minimize transportation costs among these markets. E. take advantage of less restrictive restrictions and requirements of host governments.
A
A weaker U.S. dollar is an economically favorable exchange-rate shift for manufacturing plants based in the United States. A. This is a true statement. B. No, the U.S. dollar must be stronger. C. Yes, because it provides for a weakened foreign demand for U.S.-made goods. D. Yes, because it makes such plants less cost competitive with foreign plants. E. Yes, because it provides incentives of foreign companies to locate manufacturing facilities in the U.S. to make goods for U.S. consumers.
A
Companies racing for global market leadership: A. generally have to consider establishing competitive positions in the markets of emerging countries. B. are well-advised to avoid all the risks and problems of competing in emerging country markets. C. seldom have the resource capabilities it takes to be effective in competing in emerging country markets and usually are at a strong competitive disadvantage to the domestic market leaders. D. can usually be expected to earn sizable profits quickly in emerging country markets. E. usually encounter very low barriers in entering the markets of emerging countries.
A
In which of the following situations is employing a "think-local, act-local" multidomestic strategy highly questionable? A. when a company desires to transfer competencies and resources across country boundaries and is striving to build a single, uniform competitive advantage worldwide B. when there are significant country-to-country differences in customer preferences and buying habits industry is characterized by big economies of scale and strong experience curve effects C. when the trade restrictions of host governments are diverse and complicated D. when there are significant country-to-country differences in distribution channels and marketing methods E. when host governments enact regulations requiring that products sold locally meet strictly defined manufacturing specifications or performance standards
A
The advantages of manufacturing goods in a particular country and exporting them to foreign markets: A. are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. B. are greatest when local consumers prefer products manufactured inside the country's borders. C. are largely unaffected by fluctuating exchange rates. D. can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. E. are largely unaffected by tariffs or quotas.
A
The advantages of using a franchising strategy to pursue opportunities in foreign markets include: A. having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchisor to expend only the resources to recruit, train, and support and monitor franchisees. B. being particularly well-suited to the global expansion efforts of companies with multidomestic strategies. C. allowing a company to achieve scale economies. D. being well suited to companies who employ cross-border transfer strategies. E. being well suited to the global expansion efforts of manufacturers.
A
The difference between political risks and economic risks is that: A. political risks stem from instability or weakness in national governments, while economic risks stem from the stability of a country's monetary system, and its economic and regulatory policies. B. political risks stem from stability in foreign business, while economic risks stem from an excess of property right protections. C. political risks stem from hostility to foreign currencies, while economic risks stem from the instability of the monetary system. D. political risks stem from exchange rate fluctuations, while economic risks stem from hostility to foreign business. E. political risks stem from the stability of a country's monetary system, while economic risks stem from instability in national business.
A
The strategic options for expansion into foreign markets do not include: A. relying on home country governments to restrict imports via raising tariffs and local content requirements. B. establishing a subsidiary in a foreign market. C. maintaining a national (one-country) production base and exporting goods to foreign markets. D. licensing foreign firms to produce and distribute one's products. E. employing a franchising strategy using local ownership.
A
Transferring core competencies and resource strengths from one country market to another is: A. a good way for companies to develop broader or deeper competencies and competitive capabilities that can become a strong basis for sustainable competitive advantage. B. best accomplished with a multidomestic strategy as opposed to a global strategy. C. feasible only with a global strategy; it can't be done with a multidomestic strategy. D. unlikely to result in a competitive advantage. E. nearly always the easiest and most sure-fire way to build competitive advantage in trying to compete successfully in foreign markets.
A
Using domestic plants as a production base for exporting goods to selected foreign country markets: A. can be an excellent initial strategy to test the international waters and learn if attractive market positions can be established in foreign markets. B. can be a competitively successful strategy when a company is focusing on vacant market niches in each foreign country and does not have to compete head-to-head against strong host country competitors. C. can be a powerful strategy since a company can maintain a one-country production base allowing it to capitalize on company competencies and capabilities. D. can be a weak strategy when competitors are pursuing multi-country strategies. E. can be a powerful strategy because a company is not vulnerable to fluctuating exchange rates.
A
What is the foremost strategic issue that must be addressed by firms when operating in two or more foreign markets? A. deciding on the degree to vary its competitive approach to fit the specific market conditions and buyer preferences in each host country B. deciding on the appropriate level of sustainable profitability C. deciding on the relative cost competitiveness of the home country D. deciding on the degree of globalization to maintain expansion capabilities E. deciding on the resources and capabilities of allies
A
What strategy is considered more conducive to transferring and leveraging subsidiary skills and capabilities across borders? A. a transnational strategy B. an international strategy C. a think-local, act-global strategy D. a cross-border integrated strategy E. a standardized integrated strategy
A
What supports competitive offensives in one market with resources and profits diverted from operations in another market? A. cross-market subsidization B. a foreign market strategy C. a domestic-only company D. a home market offensive E. a multidomestic company
A
Why do companies decide to enter a foreign market? A. to capture economies of scale in product development, manufacturing, or marketing B. to raise input costs through greater pooled purchasing power C. to decrease the rate at which they accumulate experience and move up the learning curve D. to concentrate risk within a broader base of countries, especially when sales are down in one area and the company can undermine sales elsewhere E. to exploit the natural resources found within its home market
A
A "think-global, act-global" approach to strategy making is preferable to a "think-local, act-local" approach when: A. a big majority of the company's rivals are pursuing localized multidomestic strategies. B. country-by-country differences are small enough to be accommodated within the framework of a mostly uniform global strategy. C. host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards. D. plants need to be scattered across many countries to avoid high shipping costs. E. market growth rates vary considerably from country to country.
B
A "think-local, act-local" multidomestic strategy entails: A. offering a narrow product line aimed at serving buyers in the same segments of country markets worldwide. B. giving local managers considerable strategy-making latitude and often producing different product versions for different countries. C. adopting aggressive efforts to locate facilities in those country markets that have superior resources. D. pursuing strong product differentiation and competing in many buyer segments. E. extensive efforts to transfer a company's competencies and resource strengths from one country to another so as to keep entry costs into new country markets low.
B
A global strategy allows for: A. the leading companies to compete for the biggest share of the world market, but only occasionally compete head-to-head in different countries. B. the markets in various countries to be part of the world market and competitive conditions across country markets to be strongly linked. C. a company's overall market strength to be the sum of its market shares in each country market where it has a presence. D. the industry leaders to be foreign companies, while domestic companies are relegated to runner-up status. E. a firm's overall competitive advantage to be determined by the size of the competitive advantage it has in each of its profit sanctuaries.
B
A localized or multidomestic strategy: A. is generally inferior to a global strategy when it comes to pursuing product differentiation. B. has two big drawbacks: (1) it hinders transfer of a company's competencies and resources across country boundaries because the strategies in different host countries can be grounded in varying competencies and capabilities; and (2) it does not promote building a single, unified competitive advantage, especially one based on low cost. C. is generally preferable to a global strategy in situations where buyers are price sensitive because a "think-local, act-local" type of multidomestic strategy is better suited to achieving low unit costs than a global strategy. D. is generally best suited for globally standardized industries, in which small country-by-country differences can be accommodated. E. involves much less adherence to using the same basic competitive strategy theme (low-cost, differentiation, best-cost, or focused) in all country markets.
B
Companies that compete on an international basis have a competitive advantage over their purely domestic rivals: A. to achieve a larger domestic interest by developing sufficient resource strengths and competitive capabilities for success. B. to benefit from coordinating activities across different countries' domains. C. solely for the benefit of their shareholders. D. that guarantees the generation of big profits, big returns on investment, and big cash surpluses after dividends are paid. E. to give full access to the proprietary technological expertise or other competitively valuable capabilities.
B
The big problem a franchisor faces is: A. allowing franchisees to achieve scale economies. B. maintaining quality control due to a lack of commitment to consistency and standardization. C. eliminating the costs and risks associated with establishing a foreign business location. D. sharing foreign facilities and marketing strategies with local businesses. E. achieving higher product quality and better product performance than with an export strategy.
B
The strength of a "think-local, act-local" multidomestic strategy is that: A. it matches a company's competitive approach to prevailing market and competitive conditions in each country market, country by country. B. it employs strategies that are almost totally different from and also unrelated to its strategies in other countries. C. it operates independent plants, located in different countries, thus promoting greater achievement of scale economies. D. it avoids host country ownership requirements and import quotas. E. it eliminates the costs and burdens of trying to coordinate the strategic moves undertaken in one country with the moves undertaken in the other countries.
B
What is the best way to achieve the efficiency potential of a global strategy? A. It demands managerial attention to be focused on objective-setting specifically oriented toward production practices. B. It requires that resources and best practices be shared, value chain activities be integrated, and capabilities be transferred from one location to another as they are developed. C. It requires that the best identified resources and capabilities be centralized at headquarters. D. It requires value chain activities to be dispersed across many countries to elevate cost control management as a primary focus in all countries. E. It requires giving local managers considerable latitude for executing strategies for the country markets they are responsible for.
B
When a company operates in the markets of two or more different countries, its foremost strategic decision is: A. whether to test the waters with an export strategy before committing to some other competitive approach. B. whether to vary the company's competitive approach to fit specific market conditions and buyer preferences in each host country or whether to employ essentially the same strategy in all countries. C. whether to maintain a national (one-country) manufacturing base and export goods to the other countries. D. which foreign companies to team up with via strategic alliances or joint ventures. E. whether to use strategic alliances to help defeat its rivals.
B
When concentrating production in a few locations, which of the following can allow a manufacturer to lower unit costs, boost quality, or master a new technology more quickly? A. significant scale economies B. learning-curve effects C. superior resources D. profit sanctuaries E. supporting industries
B
A "think-local, act-local" multidomestic type of strategy: A. is very risky, given fluctuating exchange rates and the propensity of foreign governments to impose tariffs on imported goods. B. is usually defeated by a "think-global, act-global" type of strategy. C. is more appealing when the country-to-country differences in buyer tastes, cultural traditions, and market conditions are diverse. D. is generally an inferior strategy when one or more foreign competitors are pursuing a global low-cost strategy. E. can defeat a global strategy if the "think-local, act-local" multicountry strategist concentrates its efforts exclusively in those foreign markets which have superior resources.
C
A think-global, act-global strategic theme puts emphasis on: A. executing a global domination strategy that focuses the company's resource strengths on entry strategies across all country boundaries. B. ensuring that value chain activities are defined by country-specific attributes to capitalize on economies of scale. C. building a global brand name and aggressively pursuing opportunities to transfer ideas, products, and capabilities from one country to another. D. elevating resources and capabilities developed on a country-by-country basis so as to capitalize on a country's uniqueness. E. implementing mass-customization techniques that can address local preferences efficiently.
C
The approach of a firm using a "think-global, act-local" version of a transnational strategy entails: A. producing and marketing a variety of product versions under the same brand name, with each different version being designed specifically to accommodate the needs and preferences of buyers in a particular country. B. having little or no strategy coordination across countries. C. pursuing the same basic competitive strategy theme (low cost, differentiation, best cost, focused) in all countries where the firm does business but giving local managers some latitude to adjust product attributes to better satisfy local buyers and to adjust production, distribution, and marketing to be responsive to local market conditions. D. selling the company's products under a wide variety of brand names (often one brand for each country or group of neighboring countries) so buyers in each country market will think they are buying a locally made brand. E. selling numerous product versions (each customized to buyer tastes in one or more countries and sometimes branded for each country), but opting to only sell direct to buyers at the company's website so as to bypass the costs of establishing networks of wholesale/retail dealers in each country market.
C
The basic strategy options for local companies in competing against global challengers include: A. best-cost provider and focused low-cost provider and low-cost leadership strategies. B. export strategies, licensing strategies, and cross-border transfer strategies. C. utilizing understanding of local customer needs and preferences to create customized products or services, developing business models to exploit shortcoming in local infrastructure, and using acquisitions and rapid growth to defend against expansion-minded multinationals. D. franchising strategies, multidomestic strategies keyed to product superiority, global low-cost leadership strategies, and cross-border coordination strategies. E. focused differentiation and broad differentiation strategies.
C
The essential difference between a "think-global, act-global" and a "think-global, act-local" approach to strategy-making is that: A. a "think-global, act-global" approach entails extensive strategy coordination across countries and a "think-global, act-local" approach entails little or no strategy coordination across countries. B. the former aims at implementing the same business model worldwide, whereas the latter aims at implementing customized business models to better match local market circumstances. C. the "think-global, act-global" approach gives local managers more latitude to make minor strategy variations where necessary to better satisfy local buyers and to better match local market conditions. D. a "think-global, act-global" approach involves selling a mostly standardized product worldwide, whereas a "think-global, act-global" approach entails selling products that are highly differentiated from country to country. E. a "think-global, act-global" approach involves selling under a single brand name worldwide, whereas a "think-global, act-local" approach entails utilizing multiple brands (typically one for each different country or group of neighboring countries).
C
To use location to build competitive advantage, a company that operates transnationally or globally must: A. employ either an export strategy or a franchising strategy. B. scatter its production plants across many countries in different parts of the world so as to minimize transportation costs. C. consider whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations and consider in which countries to locate particular activities. D. locate production plants in those countries having suppliers that can supply all the necessary raw materials and components so as to avoid inbound shipping costs. E. concentrate all of its value chain activities in the one country that has the best combination of low wage rates, low shipping costs, and low tax rates on profits.
C
A primary drawback of a global strategy is that it: A. allows firms to address local needs as precisely as locally based rivals can. B. permits firms to be more responsive to changes in local market conditions, either in the form of new opportunities or competitive threats. C. provides for lower transportation costs and also may involve higher tariffs. D. involves higher coordination costs due to more complex tasks of managing a globally integrated enterprise. E. raises production costs due to the greater variety of designs and components.
D
In expanding into foreign markets, a company can strive to gain competitive advantage (or offset domestic disadvantages) by: A. building a state-of-the-art facility to fully capture scale economies via an export strategy. B. using export, licensing, or franchising strategies so as to minimize risk and capital investment. C. locating buyer-related activities in all countries where it sells its product. D. dispersing its activities among various countries in a manner that lowers costs or else helps achieve greater product differentiation and transferring competitively valuable competencies and capabilities from its domestic operations to its operations in foreign markets. E. avoiding the use of strategies that entail coordinating its domestic strategic moves with its strategic moves in the various foreign markets it enters.
D
Market size and growth rates in different countries can be influenced positively or negatively by: A. the ability of management to tailor a strategy to take into consideration differences among country markets. B. which countries have the weakest foreign rivals. C. competitive rivalry that is only moderate in some countries. D. differing population sizes, cultures, income levels, infrastructure, and distribution networks among countries. E. the large size of emerging markets such as Brazil, Russia, China, and India.
D
The advantages of manufacturing goods in a particular country and exporting them to foreign markets: A. are largely unaffected by fluctuating exchange rates. B. are greatest when local distributors and dealers in that country can be convinced not to carry products that are made outside the country's borders. C. can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. D. are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. E. are multiplied by the potential for local government officials to raise tariffs on the imports of foreign-made goods into their country.
D
The advantages of using a licensing strategy to participate in foreign markets include: A. being especially well-suited to achieve scale economies. B. being able to charge lower prices than rivals. C. being able to achieve first-mover advantages quickly and easily. D. being able to leverage the company's technical know-how, appealing brand, or patents without committing their resources or capabilities to foreign markets. E. being able to achieve higher product quality and better product performance than with an export strategy.
D
What is a primary drawback of a localized multidomestic strategy? A. It hinders the use of cross-border coordination of a company's activities and increases a company's vulnerability to adverse shifts in currency exchange rates. B. It makes it very difficult to take into account significant country-to-country differences in distribution channels and marketing methods. C. It makes it difficult and costly to be responsive to country-to-country differences in customer needs, buying habits, cultural traditions, and market conditions. D. It hinders the transfer of a company's competencies and resources across country boundaries and hinders the pursuit of a single, uniform competitive advantage in all country markets where a company operates. E. It is unsuitable for competing in the markets of emerging countries and posing added difficulty in modifying a company's business model to compete on the basis of low price.
D
When is a think-local, act-local approach to strategy making appropriate? A. when the need for local responsiveness is minimal and when potential efficiency gains from standardization is unrestricted by cross-country opportunities B. when the local manager is intellectually savvy C. when the local market provides strong opportunity for growth and profitability D. when the need for local responsiveness is high due to significant cross-country differences in demographic, cultural, and market conditions and where benefits from standardization is limited E. when the need for centralized decision making is relevant due to various macroeconomic and market conditions
D
Which of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true? A. Fluctuating exchange rates do not pose significant risks to a company's competitiveness in foreign markets. B. The advantages of manufacturing goods in a particular country are largely unaffected by fluctuating exchange rates. C. Companies that are manufacturing goods in a particular country and are exporting much of what they produce are disadvantaged when that country's currency grows weaker relative to the currencies of the countries that the goods are being exported to. D. Companies that are manufacturing goods in a particular country and are exporting much of what they produce are benefited when that country's currency grows weaker relative to the currencies of the countries that the goods are being exported to. E. Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.
D
Acquisition of an existing firm rather than via internal development may be the least risky and cost-efficient means of overcoming entry barriers such as: A. putting its own strategy into place. B. accelerating efforts to build a strong market presence. C. moving directly to the task of transferring resources and personnel, integrating and redirecting activities into its own operation. D. fast-tracking exports into a foreign market by marketing indirectly thru local rivals. E. gaining access to local distribution networks, building supplier networks, and establishing working relationships with key government officials.
E
The primary reasons that companies opt to expand into foreign markets are to: A. raise the entry barriers for industry newcomers, neutralize the bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers. B. avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of a global strategy instead of a multidomestic strategy. C. grow sales faster than the industry average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances. D. boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape dealing with strong labor unions. E. gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base.
E
The reasons why a company opts to expand outside its home market include all of the following EXCEPT: A. gaining access to new customers for the company's products/services. B. spreading its business risk across a wider market base. C. achieving lower costs through economies of scale, experience, and increased purchasing power. D. exploiting its core competencies and capabilities. E. identifying resources and capabilities in the company's home market.
E