Chapter 8

A global corporate-level strategy differs from a multi-domestic corporate-level strategy in that in a global strategy:

(A) competitive strategy is dictated by the home office

Arkadelphia Polymers, Inc., earns 60 percent of its revenue from exports to Europe and Asia. The CEO of the company would be:

(A) concerned if the value of the dollar strengthened

Firms able to standardize the processes used to produce, sell, distribute, and service their products across country borders enhance their ability to:

(A) learn how to continuously reduce costs while increase the value of their products.

U.S. cola companies entered the global market because of:

(A) limited growth opportunities in their domestic market.

Terrorism creates an economic risk for firms, which:

(A) reduces the amount of investment foreign companies will make in a country perceived to be terror-prone.

International corporate-level strategy focuses on:

(A) the scope of operations through both product and geographic diversification.

Firms with core competencies that can be exploited across international markets are able to:

A) achieve synergies and produce high-quality goods at lower costs.

A large domestic market can provide the country's industries a chance at dominating the world market because:

A) they have been able to develop economies of scale at home.

Which of the following is NOT a typical disadvantage of licensing?

Incompatibility of the licensing partners

Which of the following is NOT a disadvantage associated with exporting?

Potential loss of proprietary technologies

Bunyan Heavy Equipment, a U.S. firm, is investigating expanding into Russia using a greenfield venture. The committee researching this project has delivered a negative report. The MAIN concern of the committee is probably:

Russia's recent actions to gain state control of private firms' assets.

Skaredykat Inc. is considering initial expansion beyond its home market. The firm has decided not to enter markets that differ greatly from its home market, instead expanding within the twelvenation region that includes its home country. Which one of these is true?

The firm is using a regional approach to international expansion

Which of the following is an advantage associated with greenfield ventures?

The level of control over the firm's operations

In place of relatively stable and predictable domestic markets, firms across the globe find that they are competing in relatively unstable and unpredictable global markets.

True

If intellectual property rights in an emerging economy are not well-protected, the number of firms in the industry is rapidly growing, and the need for global integration is high, ____ is the preferred entry mode.

a joint venture or wholly owned subsidiary

If conflict in a strategic alliance or joint venture is not manageable, a(n) _______may be a better option.

acquisition

In Porter's model, if a country has both ________ and __________ production factors, it is likely to serve an industry well by spawning strong home-country competitors that can also be successful global competitors

advanced, specialized

A licensing agreement:

allows a foreign firm to purchase the rights to manufacture and sell a firm's products within a host country

Moving into international markets is a particularly attractive strategy to firms whose domestic markets:

are limited in opportunities for growth

Which of the following is NOT a factor pressuring companies for local responsiveness?

availability of low labor cost

U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness because of:

consumer needs, political and legal structures, and social norms vary by country

When a firm INITIALLY becomes internationally diversified, its returns:

decrease

Internationally diversified firms:

earn greater returns on their innovations through larger or more numerous markets.

A global corporate-level strategy emphasizes:

economies of scale

The location advantages associated with locating facilities in other countries can include all of the following EXCEPT:

evasion of host country governmental regulations.

An international diversification strategy is one in which a firm:

expands into a potentially large number of geographic locations and markets

A U.S. manufacturer of adaptive devices for persons with disabilities is considering expanding internationally. It is a fairly small company, but it is looking for growth opportunities. This company should primarily consider the option of:

exporting

Raymond Vernon states that the classic rationale for international diversification is to:

extend the products life cycle

Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national advantage?

factors of production

. Although licensing is the least costly method to enter a foreign market, its disadvantages include high costs of transportation and low control over the marketing and distribution of goods.

false

. While there are multiple means of entering new international markets, firms should use one method consistently with all of its various products and across its different markets in order to reduce administrative complexity.

false

A U.S. manufacturer of pigments for household paint that exports about 40 percent of its production to European markets will find its sales will be harmed by a weak dollar.

false

A multi-domestic strategy is an international strategy in which a firm's home office determines the strategies business units are to use in each region.

false

Because of the lack of protection of intellectual property in some foreign countries, licensing arrangements are one of the best ways for a firm to protect its technology from being appropriated by potential competitors.

false

Because there are still several industrial and consumer markets in which only domestic firms compete, many firms do not have to be able to compete internationally.

false

Coca Cola and PepsiCo are examples of firms that have found it unnecessary to aggressively pursue international strategies because of extensive growth opportunities available in the U.S. market.

false

Establishing a wholly-owned subsidiary provides the quickest access to a new market.

false

Even if effectively implemented, the transnational strategy often produces lower performance than does the implementation of either the multi-domestic or global strategies.

false

Having substantial supplies of critical basic natural resources is a necessary condition for a country to support businesses that can successfully compete in international markets.

false

Location advantages are influenced by costs of production, access to natural resources and critical supplies, as well as the needs of customers, but not culture.

false

Research suggests that wholly owned subsidiaries and expatriate staff are inappropriate for service industries because those industries require close contact with customers, high levels of professional skills, specialized know-how, and customization.

false

South Korea's success in international markets is primarily a result of its abundant natural resources.

false

Strategic alliances tend to increase the risk associated with international expansion for the U.S. partner because of the greater dependence on the foreign firm.

false

The chief risks in the international environment are political and cultural.

false

The three corporate-level international strategies are cost leadership, differentiation, and focus.

false

When the country risk is high, firms prefer to enter with a greenfield investment rather than a joint venture

false

The benefits of expanding into international markets include each of the following opportunities EXCEPT:

favorable tax concessions and economic incentives by home-country governments.

In addition to the four basic dimensions of Porter's "diamond" model, ____ may also contribute to the success or failure of firms.

government policy

The means of entry into international markets that offers the greatest control is:

greenfield ventures

The problems associated with exporting include:

high transportation costs and the expense of tariffs.

Which pair of industries would NOT be considered as "related and supporting" under Porter's diamond model?

highway systems and the supply of debt capital

The increased pressures for global integration of operations have been driven mostly by:

increasing demand for similar products

The transnational strategy is becoming increasingly necessary to compete in international markets for all the following reasons EXCEPT:

it is easy to use

Which of the following is NOT a disadvantage of international acquisitions?

it is the slowest way to enter a new market

A fundamental reason for a country's development of advanced and specialized factors of production is often its:

lack of basic resources

A global strategy:

lacks responsiveness to local markets.

Most firms enter international markets sequentially, introducing their ____ first

largest and strongest line of business

The choices that a firm has for entering the international market include all of the following EXCEPT:

leasing

The positive results associated with increasing international diversification have been shown to:

level off and become negative as diversification increases past some point.

_________ is the set of costs associated with unfamiliar operating environments; economic, administrative and cultural differences; and the challenges of coordination over distances.

liability of foreginness

The two important environmental trends that influence a firm's choice and use of international corporate-level strategies are _________ and __________.

liability of foreignness; regionalization

A multi-domestic corporate-level strategy has ____ need for global integration and ____ need for local market responsiveness

low; high

A global corporate-level strategy assumes:

more standardization of products across country markets.

Working in multiple international markets can provide firms with __________ perhaps even in terms of __________.

new learning opportunities; research and development activities

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT:

political and economic institutions

Associations such as the European Union, Organization of American States, and the North American Free Trade Association, encourage:

regional strategies

In France, fine dressmaking and tailoring have been a tradition predating Queen Marie Antoinette. Cloth manufacturers, design schools, craft apprenticeship programs, modeling agencies, and so fo

related and supporting industries

A firm may narrow its focus to a specific region of the world:

so that it can better understand the cultures, legal and social norms, and other factors that are important for effective competition in those markets.

All of the following are reasons why firms use international strategic alliances EXCEPT:

strategic alliances are easy to manage

International strategy refers to a(n):

strategy through which the firm sells products in markets outside the firm's domestic market.

All of the following are correct about what managers should know about firms based in a country with a national competitive advantage EXCEPT:

success is guaranteed as the firm implements its chosen international business-level strategy.

Factors of production in Porter's model of international competitive advantage include all of the following EXCEPT:

technology

A multi-domestic corporate-level strategy is one in which:

the firm customizes the product for each country in which it competes.

One of the primary reasons for failure of cross-border strategic alliances is:

the incompatibility of the partners

Disney suffered lawsuits in France at Disneyland Paris as a result of the lack of fit between its transferred personnel policies and the French employees charged to enact them. This is an example of:

the liability of foreignness

The decision of what entry mode to use is primarily based on all of the following factors EXCEPT:

the worldwide economic situation

Which of the following is NOT an incentive for firms to become multinational?

to avoid high domestic taxation on corporate income

In China, Starbucks is standardizing its operations while simultaneously decentralizing some decision-making responsibility to local levels to meet customers' tastes. Starbucks is following the __________ international corporate-level strategy.

transnational

Increasingly, customers worldwide are demanding emphasis on local requirements and companies require efficiency as global competition increases. This has triggered an increase in the number of firms using the ____ strategy.

transnational

Effectively implementing the ________ international corporate-level strategy often produces higher performance than does implementing either the _______ or _________ strategies.

transnational; multi-domestic; global

A company that chooses a truly global corporate-level strategy assumes that the liability of foreignness will be minimal.

true

A firm based in a country with a national competitive advantage is not guaranteed success as it implements its chosen international business-level strategy. Instead, the actual strategic choices managers make may be the most compelling reasons for success or failure.

true

A major advantage of multi-domestic strategies is the ability to customize products and services for the specific market, although this sacrifices economies of scale

true

A major incentive for the use of international strategy by French-based Carrefour Group is the potential for large demand for goods and services from emerging markets such as China and India.

true

A reason that firms use international strategies is to secure needed resources, especially minerals and energy

true

A transnational strategy is an international strategy in which the firm seeks to achieve both global efficiency and local responsiveness.

true

A transnational strategy is difficult to use because of its conflicting goals

true

Acquisitions, greenfield ventures, and sometimes joint ventures are appropriate when firms want to establish a strong presence in an international market.

true

After a firm decides to compete internationally, it must select its strategy and choose a mode of entry into international markets.

true

Although leaders in Russia have tried to reassure potential investors about their property rights, political risks in the form of weak laws and commonplace government corruption make firms leery of investing in Russia.

true

An increase in the value of the U.S. dollar is an example of an economic risk in that it can reduce the value of U.S. multinational firms' international assets and earnings in other countries.

true

As an indication of the importance of economies of scale, Ford Motor Company runs a single global business developing cars and trucks that can be built and sold through the world.

true

Both the size and the nature of a country's domestic demand for a particular industry's good or service are important in Porter's determinants of national advantage.

true

By choosing a region where markets are more similar, the firm may be able to better understand those markets and cater to their needs, but also achieve economies through sharing of resources

true

Cultural differences affect location advantages in that business transactions are less difficult for a firm to complete when there is a strong match among the cultures with which the firm is involved.

true

Evidence suggests that, in general, using an international cost leadership strategy when exporting to developed countries has the most positive effect on firm performance while using an international differentiation strategy with larger scale when exporting to emerging economies leads to the greatest amounts of success.

true

Export, licensing, and the strategic alliance entry modes are all appropriate for early market development.

true

Exporting and licensing are the most appropriate ways for smaller firms to first enter international markets.

true

Fluctuation in the value of different currencies is a major economic risk associated with international diversification.

true

Four types of distances are associated with the liability of foreignness: cultural, administrative, geographic, and economic.

true

In some industries, technology drives globalization because the economies of scale necessary to reduce costs cannot be met by competing in domestic markets alone.

true

International associations such as the European Union, the Organization of American States, and the North American Free Trade Association encourage regionalization of competition rather than globalization.

true

International diversification can help to reduce a firm's overall risk through the stabilization of returns.

true

International diversification is a strategy through which a firm expands the sale of its goods and services across borders of global regions and countries into a potentially large number of geographic locations of markets. Instead of entering one or a few markets, international diversification means that the firm enters multiple markets.

true

Italy has become the leader in the shoe industry because of related and supporting industries such as a well-established leather-processing industry that provides the leather needed to construct shoes and related products.

true

Michael Porter's Determinants of National Advantage describe factors associated with the firm's domestic environment that contribute to its dominance in a particular global industry

true

Multinational firms have many opportunities to learn from their experiences in international markets, but they must have a strong R&D system to absorb the knowledge

true

One reason why firms pursue international opportunities is to extend the product's life cycle.

true

Research has shown that, as international diversification increases, firms' returns decrease initially but then increase quickly as firms learn to manage international expansion.

true

Research suggests that the performance of the global strategy is enhanced if it deploys in areas where regional integration across countries is occurring.

true

Rivals Airbus and Boeing have multiple manufacturing facilities and outsource activities partly for the purpose of developing economies of scale as a source of being able to create value for customers.

true

Some of the costs incurred by firms pursuing international diversification may derive from higher coordination expenses, trade barriers, and lack of familiarity with local cultures.

true

The "regionalization" environmental trend means that firms can focus on a region (customization) but also have some standardization or sharing within the region

true

The amount of diversification in a firm's international operations that can be managed varies from company to company and is affected by managers' abilities to deal with ambiguity and complexity.

true

The firm using a global strategy seeks to develop economies of scale as it produces the same or virtually the same products for distribution to customers throughout the world who are assumed to have similar needs.

true

The global strategy offers greater opportunities to take innovations developed at the corporate level or in one market and apply them to other markets.

true

The greenfield venture option is useful when control of proprietary technology is important in an international expansion.

true

The growing number of global competitors heightens the requirements to keep costs down and there is the desire for more specialized products to meet customer needs. These two pressures make transnational strategies increasingly necessary.

true

The high cost of transportation, expense of tariffs, and loss of control are three disadvantages of exporting.

true

The three basic benefits of international strategies are 1) increased market size; 2) increased economies of scale and learning; and 3) development of competitive advantages through location.

true

When a firm initially pursues an international business-level strategy, the resources and capabilities established in the home country frequently allow the firm to pursue the strategy into markets located in other countries.

true

All of the following are international corporate-level strategies EXCEPT the ____ strategy.

universal

All of the following complicate the implementation of an international diversification strategy EXCEPT:

widespread multilingualism