International Business Exam 3

Cons of Acquisitions

-Attractive firms may not be available for purchase -Attractive firms may only be available at inflated prices

disadvantages of turnkey projects

-Creation of efficient competitors -Lack of long-term market presence

fixed costs

Costs that do not vary with the quantity of output produced

When a firms competiitive advantage is based on technological competence, a joint venture is the preferred mode of entry into a foreign market because it reduces the risk of losing control over that competence.

False

Which of the following is true of the barriers to international communication?

Fewer firms vie for the attention of prospective customers in developing countries, thus the noise level is lower

Flexible Machine Cells

Flexible manufacturing technology in which a grouping of various machine types, a common materials handler, and a centralized cell controller produce a family of products.

____ refers to the extra pay an expatriate receives for working outside his or her country of origin.

Foreign service premium

Pros of Greenfield Ventures

Gives the firm a much greater ability to build the kind of subsidiary company that it wants

The CFO of At Home Products is unhappy with the firms choice of wholly owned subsidiareies as the mode of foreign entry. He has pointed out as a number of disadvantages to this mode. Which of the following is a disadvantage of wholly owned subsidaries as a mode of entry into foreign markets?

High costs and risks

Global Inventory Management

The decision-making process regarding the raw materials, work-in-process (component parts), and finished goods inventory for a multinational corporation.

Which of the following is necessary for a firm to ensure profitable price discrimination?

The firm must be able to keep its national markets separate

What must occur for a firm to ensure profitable price discrimination?

The firm must be able to keep its national markets separate.

Which of the following is an advantage of franchising as a mode of entry into foreign markets?

The franchiser is relieved of many of the costs and risks of opening a foreign market on its own

Supply Chain Management

The integration and coordination of logistics, purchasing, operations, and market channels activities from raw material to the end-customer

Channel Length

The number of intermediaries that a product has to go through before it reaches the final consumer.

Expatriate Failure

The premature return of an expatriate manager to the home country.

reverse logistics

The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.

When a reciprocal tax treaty is in place, how does an expatriate benefit?

They may not have to pay income tax to both host and home governments.

When determining the location decision for industrial products like steel, what should a company keep in mind?

They serve needs that are the same all over the world.

Firms pursing global standardization or transnational strategies tend to prefer setting up wholly owned marketing subsidiaries

True

Other things being equal, when fixed costs are substantial and minimum effcient scale of production is high, the arguments for concentrating production at a few choice locations are strong

True

With the advent of flexible manufacturing technologies and mass customization, estabilishing manufacturing facilities in each major market in which the firm is active is becoming less attractive.

True

staffing policy

Strategy concerned with selecting employees for particular jobs

A company might not want to consider _____ as a means of entry into a foreign market because it is generally the most costly method from a capital investment standpoint.

a wholly owned subsidiary

In terms of channel length, the more fragmented the retail system, the less expensive it is from a firm of make contact with each individual retailers.

false

The probability of survival decreases if an international business enters a national market after several other foreign firms have already done so. Group starts

false

When a firm's competitive advantage is based on technological competence, a joint venture is the preferred mode of entry into a foreign market because it reduces the risk of losing control over that competence

false

Which industry is often thought of as one in which global standardization of the marketing mix is the norm?

financial services

According to Christopher Bartlett and Sumantra Ghoshal, how can local companies differentiate themselves from foreign multinationals?

focusing on market niches

______ refers to the fact that a firms pricing strategy in one market may have an impact on its rivals pricing strategy in another market.

multipoint pricing

What is an example of a product with a low value-to-weight ratio?

paint

Harris was promoted to the international post because he had the ability to "put himself in another person's shoes" and understand why people in other countries behave the way they do. Which of Mendenhall and Oddou's dimensions does Harris display?

perceptual ability

Six sigma is statistically based on

philosphy that aims to reduce defects, boots, productivity, eliminate waste, and cut costs throughout the company

international market research

the systematic collection, recording, analysis, and interpretation of data to provide knowledge that is useful for decision making in a global company

decentralization of production is appropriate when

trade barriers are high, location externalities are not important, products value to weight ratio is low

Wholly Owned Subsidiaries

a subsidiary in which the firm owns 100% of the stock

Inelastic

when a large change in price produces only a small change in demand

experience curve pricing

Aggressive pricing designed to increase volume and help the firm realize experience curve economies.

improved quality control reduces costs by

-Increasing productivity because time is not wasted producing poor-quality products that cannot be sold, leading to a direct reduction in unit costs -Lowering rework and scrap costs associated with defective products -Reducing the warranty costs and time associated with fixing defective products

Advantages of Franchising

-Low development costs and risks -Possible circumvention of import barriers, and strong sales potential

Pros of Acquisitions

-Quick to execute -May help preempt competitors -May be less risky than greenfield ventures -Acquisitions often produce disappointing results

Why do acquisitions fail?

-The firm overpays for the assets of the acquired firm -There is a clash between the cultures of the acquiring and acquired firm -Attempts to realize synergies by integrating the operations of the acquired and acquiring entities run into roadblocks and take much longer than forecast -There is inadequate pre-acquisition screening

Disadvantages of Franchising

-lack of control over quality -inability to engage in global strategic coordination

Cons of Greenfield Ventures

-slower to establish -risky

joint venture

A cooperative undertaking between two or more firms

Exclusive Distribution Channel

A distribution channel that outsiders find difficult to access.

global distribution center

A facility that positions and allows customization of products for delivery to worldwide wholesalers or retailers, or directly to consumers anywhere in the world; also called a global distribution warehouse

pull strategy

A marketing strategy emphasizing mass media advertising as opposed to personal selling.

push strategy

A marketing strategy emphasizing personal selling rather than mass media advertising

price elasticity of demand

A measure of how responsive demand for a product is to changes in price.

value-to-weight ratio

A measure of the monetary value a product has per kilogram or pound

expatriate manager

A national of one country appointed to a management position in another country.

turnkey project

A project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational.

franchising

A specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business

ethnocentric staffing policy

A staffing approach within the MNE in which all key management positions are filled by parent-country nationals.

Polycentric Staffing Policy

A staffing policy in an MNE in which host-country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters.

geocentric staffing policy

A staffing policy where the best people are sought for key jobs throughout an MNE, regardless of nationality

country of origin effects

A subset of source effects, or the extent to which the place of manufacturing influences product evaluations

advantages of turnkey projects

Ability to earn returns from process technology skills in countries where FDI is restricted

Advantages of Joint Ventures

Access to local partner's knowledge Sharing development costs and risks Politically acceptable typically no ownership restricitons

What trend contradicts Theodore Levitt's arguments for the globalization of world markets?

Consumers in most developed countries do not sacrifice preferred attributes for lower prices.

Marketing Mix

Choices about product attributes, distribution strategy, communication strategy, and pricing strategy that a firm offers its targeted market

source effects

Effects that occur when the receiver of the message (i.e., a potential consumer) evaluates the message on the basis of status or image of the sender.

Dalian Pharma, a Chinese company, prides itself on its corporate culture that it has developed over a twenty-year period. Dalian believes that its corporate culture is a key to its competitive advantage. What is the staffing policy likely to be followed by Dalian Pharma if it expands to Germany?

Ethnocentric

Multipoint Pricing

Occurs when a pricing strategy in one market may have an impact on a rival's pricing strategy in another market.

How is a geocentric staffing policy beneficial to a firm?

It enables the firm to make the best use of its human resources

What is an accurate depiction of Six Sigma?

It is almost impossible for a company to achieve Six Sigma perfection.

Geodyne, a United States-based player in the energy business is clear-cut in its human resources policy with regard to international expansion. While U.S. nationals staff key positions at its Orlando, Florida headquarters, it recruits locals to manage subsidiaries in each country that it goes into. Which of the following is an advantage of Geodyne polycentric staffing approach?

It is less expensive to implement as compared to other staffing approaches

What is an advantage of a polycentric staffing approach?

It is less expensive to implement as compared to other staffing approaches.

In terms of expatriate pay, what is a characteristic of a foreign service premium?

It is paid as a percentage of base salary, with 16 percent being the average premium.

In terms of expatriate pay, which of the following is true of a foreign service premium?

It is paid as a perentage of base salary, with 16 percent being the average premium

In the context of international labor relations, what is true of organized labor?

It limits a firm's ability to integrate and consolidate its global operations.

Which country pioneered the concept of just-in-time inventory?

Japan

Axiom International, an Australian company, wants to expand its operations to China, a country that is politically, culturally, and economically different. The firm needs to select a mode of entry that would give it access to local knowledge, allow sharing of development costs and risks, and also be politically acceptable. Which of the following modes of entry into foreign markets is most suitable for Axiom International?

Joint Venture

What is an acquisition?

One company's purchase of the property and obligations of another company.

social media

a technology that facilitates the sharing of infomation and the building of virtual global networks and communities

Advantages of Licensing

Low development costs and risks Moderate involvement and commitment

Ronen Argo, the head of manufacturing of Rinker Audio Products wants the company to centralize its manufacturing in one location in a single country. In contrast, Neha Patel, the company's CFO wants the company to operate several manufacturing facilities in various countries. Which of the following statements is true about performing a manufacturing activity in several locations at once?

Many firms disperse their manufacuring plants to different locations as a "real hedge" against potentially adverse moves in currencies

According to Mendenhall and Oddou, ______ provides an expatriate the ability to understand why people of other countries behave the way they do.

Perceptual ability

What is a characteristic associated with the price elasticity of demand?

Price elasticity tends to be greater in countries with low income levels.

predatory pricing

Reducing prices below fair market value as a competitive weapon to drive weaker competitors out of the market ("fair" being cost plus some reasonable profit margin).

ISO 9000

Set of international standards on quality management and quality assurance, critical to international business

What triggers the conflict of interest over strategy and goals in joint ventures?

Shifts in relative bargaining power of venture partners

country of origin effect

a subset of source effects, the extent to which the place of manufacturing influences product evaluations

Uvicon Inc. and Bionor Inc. are firms that compete against each other in the global market. Uvicon has a high level of fixed costs and high minimum efficient scale, whereas Bionor has a low level of fixed costs and low minimum efficient scale. In this scenario, which of the following is true?

Uvicon will benefit from centralizing its production activities and Bionor from decentralizing

When is decentralization of manufacturing facilities most appropriate?

When the production technology has low minimum effcient scale

Which of the following entry modes into a foreign market best serves a high-tech firm?

Wholly owned subsidiaries

make or buy decision

a decision concerning whether an item should be produced internally or purchased from an outside supplier

Server Factory

a factory linked into the global supply chain for a global firm to supply specific country or regional markets around the globe

Outpost Factory

a factory that can be viewed as an intelligence-gathering unit

off shore factory

a factory that is developed and set up mainly for producing component parts or finished goods at a lower cost than producing them at home

lead factory

a factory that is intended to create new processes, products, and technologies that can be used throughout the global firm in all parts of the world

Contributor Factory

a factory that serves a specific country or world region

source factory

a factory whose primary purpose is also to drive down costs in the global supply chain

greenfield venture

a foreign subsidiary that the owning organization has built from scratch

When making a decision on opening a new production facility outside the home market, managers should think of the strategic role of the foreign factory. Which of the following role of foreign factory would serve for creating new processes, products and technologies for the MNE's global production network?

a lead factory

Total Quality Management (TQM)

a management philosophy that focuses on satisfying customers through empowering employees to be an active part of continuous quality improvement

Big Data

a massive volume of structured and/or unstructured data that are so large they may be difficult to process using traditional database and software techniques.

concentrated retail system

a retail system in which a few retailers supply most of the market

fragmented retail system

a retail system in which there are many retailers, no one of which has a major share of the market

Intermarket Segment

a segment of customers that spans multiple countries, transcending national borders

elastic

a small change in price produces a large change in demand

Which of the following is an example of a first mover advantage?

ability to create switching costs that tie customers into ones products or services

Advantages of Exporting

ability to realize location and scale based economies Increased speed and felxability of engaging target markets

If a firm is seeking to enter a market via a wholly owned subsidiary where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, a suitable mode of entry is a(n)

acquisition.

Human Resource Management (HRM)

activities an organization conducts to use its human resources effectively

licensing agreement

arrangement in which a licensor grants the rights to intangible property to the licensee for a specified period and receives a royalty fee in return

When Yum Brands (which owns KFC, Taco Bell, and Pizza Hut) entered China, it had to spend heavily to establish itself in that market. What would be a disadvantage of Yum Brands' large-scale entry into China?

availibility of fewer resources to support expansion in other desirbale markets

SuspendHers Inc., a maker of fashionable belts and accessories for women, plans to expand in the EU marketplace. To do so, the EU requires the company to

certify its products under ISO 9000.

Lots-of-Light Lanterns manufactures emergency lighting systems and markets them in underdeveloped countries that often lack easy access to electrical power. As the owner, LaTisha Reynolds knows that to successfully enter a foreign market, the retailers will have to be educated on how these products work. What factor is she considering?

channel quality

The expatriate managers of Je Parle, a French leader in specialty perfumes, followed the same domestic marketing and management practices in foreign markets as their colleagues did in France. As a result, Je Parle's international expansion failed because the company suffers from

cultural myopia.

Mallory, an American manager working in the Middle East, is successfully adjusting to a new country where the culture is extremely male-dominated. According to Mendenhall and Oddou, what dimension that predicts success in foreign postings does Mallory demonstrate?

cultural toughness

Rinker Audio Products wants to enter the European market but realizes that European consumer tastes are not uniform across countries. To be able to accommodate demands for local responsiveness, Rinker should

decentralize production activities to the major national or regional markets

Sound-Rite Audio wants to enter the European market but realizes that consumer tastes are not uniform across countries. To be able to accommodate demands for local responsiveness, Sound-Rite Audio should

decentralize production activities to the major national or regional markets.

Cassidy Boeheim, the international sales manager for Knoll Home Products is trying to determine the channel length for Brazil, a market that the company hopes to enter. Which of the following is the most important determinant of channel length?

degree to which the retail system is fragmented

What is the most important determinant of channel length?

degree to which the retail system is fragmented

Jeremy created a simple bar graph to show the most popular times of day customers come into the store. Which application of business analytics does the bar graph represent?

descriptive

As the inventory control manager for a group of retail stores, Henry calls the DoubleBlue Jeans warehouse when he needs to restock this product because the manufacturer stores all of its products there. Another name for this warehouse would be a

distribution center.

Rinker Audio Products stores its finished goods in various warehouses around the United States and in international locations. The company's sales function coordinates with 47 wholesalers who, in turn, ensure that Rinker's products are available in 750 retail outlets worldwide. When taken together, what portion of Rinker's global supply chain do its distributors and retailers constitute?

downward

Ride Inc., a manufacturer of car components, wants to set up a system that will send invoices to its customers once orders for input supply are placed. What should the company use to perform this function?

electronic data interchange

A business would incorporate the Six Sigma philosophy as a way to

eliminate waste.

The sales manager for Smith Exports is deciding on the firms distribution strategy in several markets. He wants to know which factor is likely to shorten channel length in particular country. Which of the following factors help a firm shorten channel length?

entry of large discount superstores

In the Swiss watch firm PrimeTime Inc., all the top management positions in its international operations are held by Swiss nationals. What is the staffing policy followed by PrimeTime Inc.?

ethnocentric

Which of the following staffing approaches is compatible with an international strategy?

ethnocentric

A pull strategy refers to a marketing strategy that emphasizes personal selling rather than mass media advertising in the promotional mix.

false

Algonquin Cosmetics noticed that while India had a population of more than 1.2 billion people, the retail market was such that more than 95 percent of retail was through stand-alone stores that were not part of a chain. In other words, if Algonquin were to enter India, they would have to sell through thousands of independent retail stores. What kind of a retail system does India have for the products that Algonquin Cosmetics is trying to sell?

fragmented

a firm entering a country where there are no incumbent competitors to be required, use

greenfield venture

disadvantages of wholly owned subsidaries

high costs and risks, need for more human and nonhuman resources, interaction and integration with local employees

Disadvantages of Exporting

high transport costs, trade barriers, problems with local marketing agents

What is a drawback of longer distribution channels?

higher prices charged to consumers

Within an international business, _____ is typically responsible for international labor relations.

human resource management

Market Segmentation

identifying groups of consumers whose purchasing behavior differs from others in important ways

An international firm considering foreign expansion should take into account that

if the firm's core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology.

According to R.L. Tung's study, Which of the following is the most important reason for expatriate failures for U.S. Multinationals?

inability of spouse to adjust

If a firm favors a push strategy, using direct selling to educate potential consumers, which of these products would it most likely sell?

industrial products

Yuriko, a citizen of Japan, was working as a manager in the Japanese branch of an American firm. Due to her efficiency, she was assigned a temporary posting at the headquarters of the firm in America. In this situation, she is known as a(n)

inpatriate

International businesses differ in terms of their approaches to international labor relations, mainly in the degree to which

labor relations activities are centralized or decentralized.

disadvantages of joint ventures

lack of control over technology, inability to engage in global strategic coordination, inability to realize location and experience economies

Disadvantages of Licensing

lack of control over technology, inability to realize location and experience curve economies, inability to engage in global strategic coordination

Calvin Manufacturing purchased new equipment that reduces setup times when employees change templates between production runs. This equipment has also improved quality control measures throughout the entire manufacturing process. What type of technology is Calvin Manufacturing using?

lean production

A likely outcome of a foreign firm entering a developed nation on a small scale after other international businesses in the industry is

limited future growth potential.

Mass customization reconciles the two goals of

low cost and product customization

Reducing risk of acquision failure

make sure the firm doesnt pay too much for acquired unit, does not uncover any nasty surprises after the acquisition, acquires a firm whose organization culture is not antagonstic to that of the acquiring enterprise

Marble Counters Inc. prides itself on quality control and advertises that "we won't ship a product unless we make it the way you want." Based on this, Marble Counters Inc. most likely

makes all of the products it ships.

Lean production/ flexible manufacturing technology

manufacturing technology designed to improve job scheduling, reduce setup time, and improve quality control

Milly, the marketing manager for Nuance Cosmetics, believes that for the company to succeed in international markets, it has to address the choices surrounding product attributes, distribution strategy, communication strategy, and pricing strategy in its targeted markets. What is Milly specifically referring to?

marketing mix

Supple SkinCare Inc. is spending significant money educating customers on the value of its mineral-based skincare line as it moves into several new international markets. The money to educate customers is a form of

pioneering costs.

A(n) _____ staffing policy is pursued by firms where the lack of managers' mobility among national operations implies that the pay for expatriates should be kept country-specific.

polycentric

When considering foreign direct investment in a country, what is one situation that will benefit a company?

presence of supporting industries

____ is/are an element of a firm's marketing mix.

product attributes

advtantages of wholly owned subsidaries

protection of technology, ability to engaged in global strategic coordination, ability to realize location and experience ecnonomies

A_________ strategy relies primarily on mass media advertising as opposed to personal selling.

pull

Which communication strategy relies primarily on personal selling rather than mass media advertising?

push strategy

Viceroy Pharmaceutical decides to conduct a clinical trial on its tattoo removal cream. This trial is a _________ method for collecting data.

quantitative

According to Mendenhall and Oddou, what dimension that predicts success in a foreign posting strengthens an expatriate's self-esteem, self-confidence, and mental well-being?

self-orientation

Six Sigma

statistically based methodology for improving product quality

Turnkey projects, being short-term propositions, can be disadvantageous for a firm if a country subsequently proves to be a major market for the output of the process that has been exported. The firm can get around this problem by

taking a minority equity interest in the operation.

Strategic Pricing

the concept containing the three aspects: predatory pricing, multipoint pricing, and experience curve pricing

Channel Quality

the expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses

One advantage of joint ventures is that

the foreign firm benefits from a local partner's knowledge of the host country.

Business Analytics

the knowledge, skills, and technology that allow for the exploration as well as deeper investigation of a company's international business strategies and activities to gain insight and drive future strategy development and implementation

minimum efficient scale

the level of output at which all economies of scale are exhausted

noise

the number of other messages competing for a potential consumer's attention

corporate culture

the organization's norms and value systems

Upstream Supply Chain

the portion of the supply chain from raw materials to the production facility

downstream supply chain

the portion of the supply chain from the production facility to the end-customer

concentration of production makes sense when

the product serves universal needs, trade barriers are low

mass customization

the production of a variety of end products at a unit cost that could once be achieved only through mass production of a standardized output

An expatriate manager is a citizen of one country who is working abroad in one of the firm's subsidiaries.

true

Establishing a wholly owned subsidiary provides a company with tight control over the operations in another country.

true

If transportation costs are high for bulky products, exporting as a mode of entry into foreign markets may not be economical.

true

In terms of expatriate pay, the income statement (going rate) approach equalizes purchasing power across countries so employees can the same living standard in their foreign posting that they enjoyed at home

true

In terms of the various modes of entry into a market, franchising is employed primarily by service firms, whereas licensing is pursued by manufacuring firms.

true

Service-based companies typically favor a combination of franchising and master subsidiaries to control the franchises within a region.

true