Econ 136: Ch. 7

True or false: Cross-market subsidization can be a powerful competitive weapon for companies operating in numerous markets.

True

______ ________ or the decision on the part of two companies to refrain from launching aggressive actions against each other, may occur when the companies compete against one another in multiple geographic markets.

mutual restraint

What are policies that governments adopt to stimulate business investment?

offering low-cost business loans providing government-sponsored job training

In terms of a country's business climate, the instability or weakness of a national government is a type of

political risk.

To discourage foreign companies from locating manufacturing facilities in a country, the country's government can do which of the following?

provide government financial assistance to domestic companies require partial ownership of the facilities by local companies or investors make a new facility's compliance with local environmental regulations very costly

A domestic company can defend against expanding international companies through which methods?

pursuing mergers and acquisitions employing a rapid-growth strategy

A weak domestic currency can result in a favorable exchange rate shift for domestic companies by

reducing the cost advantage for foreign companies.

____ ______ subsidization refers to supporting competitive offensives in one market with resources and profits diverted from operations in another market.

CROSS MARKET

What are reasons why domestic companies often have an advantage over global companies?

Domestic companies are familiar with local culture and consumer needs. Domestic companies are familiar with the local labor force.

True or false: Strategic alliances are more frequently used by firms from North America than from Asia or Latin America.

False

Building production facilities in which countries presents a competitive advantage because of low-wage labor?

India China

Producing goods in domestic plants and exporting them is considered

a conservative way to enter a foreign market.

Joint ventures are likely to fail when what occurs?

a local partner's expertise is less valuable than expected

A company may find cross-border resource sharing or transfers of capabilities fail to translate into a competitive advantage because

a rival firm in a foreign-country market has superior resources and technology.

Natural-resource companies move into foreign markets to

access supplies of raw material more cost effectively.

Companies that implement a transnational strategy often employ mass-customization techniques designed to

accommodate local preferences in a semi-standardized way.

If significant economies of scale exist, a company that concentrates on a limited number of locations can do what?

achieve major cost savings

If it is impractical for a company to adapt to the situation in a developing-country market, the company should

avoid that market.

limit its involvement in foreign markets minimize its direct investment in foreign countries

can maintain its cost competitiveness at home.

To be successful, a think-global, act-global approach generally requires which of the following?

centralized production and distribution a global brand name

What is way a company can successfully compete in a developing-country market, as shown by Japan's Suzuki when it entered India?

change the local market to match the company's core operations.

Countries with which characteristics present advantages for becoming principal production sites?

close proximity to suppliers relaxed government regulations lower labor costs

The transfer of which of the following can be inhibited by a multidomestic strategy?

company resources company knowledge company technological know-how

Car manufacturers often employ a multidomestic approach and allow local managers to market the vehicles according to which of the following?

competitive conditions buyer tastes cultural preferences

Companies that practice cross-border coordination often gain which benefits?

coordinated production schedules adaptation to tariff and quota changes better workload distribution

A company trying to gain advantages over domestic rivals by shifting production from a plant in one country to a plant in another to profit from exchange rate fluctuations is using cross-border

coordination.

What are elements of factor conditions for production?

cost of labor availability of raw materials

A company seeking to establish a subsidiary in a foreign country may choose to establish a greenfield venture if an internal startup

costs less than an acquisition. can gain good distribution access. can successfully compete with local rivals.

An international strategy is a company's strategy for competing in two or more ______ simultaneously.

countries

One strategy associated with limiting the number of locations is to open a customer service center in a specific country in order to

cultivate close relationships with important clients.

A country's desirability as a low-cost manufacturing location can vary frequently depending on shifts in the country's

currency exchange rate.

To compete in an international market, a basic decision companies must make is whether to ______ to accommodate cross-country differences in buyer tastes and preferences.

customize products and services

What can help a company compete successfully in developing-country markets?

customizing its business model to suit local circumstances offering lower-priced, better products

What are drawbacks of global strategies?

difficulty addressing local needs higher transportation costs

A strong domestic currency can create an unfavorable exchange rate shift for domestic companies because

domestic manufacturing becomes less competitive with foreign plants.

In terms of a country's business climate, a country's inflation rate and level of deficit spending are types of

economic risk.

What are among the five primary strategic options for a company wishing to enter international markets?

establishing a subsidiary in a foreign market licensing foreign firms to produce and distribute the company's products abroad relying on joint ventures with foreign companies

Companies typically move into foreign markets to

exploit their core competencies.

McDonald's, 7-Eleven, and Hilton Hotels have all entered the international market by using

franchising strategies.

An internal startup or a(n) __________ franchise, Incorrect Unavailable venture is a subsidiary business that is established by setting up the entire operation from the ground up.

greenfield

What are examples of demand conditions?

growth potential relative size of the market domestic buyers' needs and wants

Spurring market growth in a domestic market can translate into an international competitive advantage owing to which of the following?

increasing innovation and quality improvements

The biggest risk a company assumes with a licensing strategy is that

it will lose control over the use of its technological know-how.

A transnational strategy can enable a company to do which of the following?

leverage subsidiary skills and capabilities

The strategic option of home-based production and export allows a company to do what?

limit its involvement in foreign markets minimize its direct investment in foreign countries

A company's products may have little value in certain foreign-market locations because

local brands may remain very popular no matter how well a competing brand is regarded internationally. buyer preferences and lifestyles vary from country to country.

One of the five primary strategic options a company can use to expand into a foreign market is to

maintain a domestic production base while exporting goods.

Focusing on a limited number of locations can increase a company's competitive advantage when

manufacturing costs are lower in a certain area. a large learning curve is associated with a particular task.

What is the term used to describe rivals competing against one another in many of the same markets?

multimarket competition

Companies that employ a multidomestic strategy attempt to meet buyer needs by

offering different products and services in different countries.

The primary problem that franchisors face over foreign-market expansion is the lack of ______ control.

quality

For domestic manufacturers, positive aspects of a weak domestic currency include

reduced domestic demand for foreign-made goods. lower prices for domestic products.

A company that distributes its activities across multiple locations can seek which advantages?

reducing the risks of fluctuating exchange rates providing customers with timely service and technical support lowering distribution costs

Governments wishing to create a favorable business climate for foreign companies will typically

seek advice from business leaders.

Governments can discourage imports of specific items by

setting up import quotas. imposing a ban on importation. making custom inspections burdensome.

Different country environments require companies to customize their approaches to which of the following?

strategy management organization

A company may find it easier to operate in one country than in others because of the country's

strong economic conditions. favorable political conditions. advantages for specific value chain activities.

Companies that focus on a certain locations can benefit from which of the following?

superior resources well-trained personnel better activities coordination

One of the ways companies can compete profitably in a developing-country market is to

tailor the packaging and product quantity to local preferences.

Companies are often motivated to enter foreign markets to

take advantage of new resources and capabilities.

Which two issues do companies commonly encounter when undergoing international expansion?

the demand to customize products to suit local preferences the cost-effectiveness of providing a standardized product globally

A transnational strategy is a ______ approach.

think-global, act-local

Another way to define the concept of multidomestic strategy is as a

think-local, act-local approach.

What are reasons that companies expand into foreign markets?

to gain access to low-cost production to gain access to new customers to achieve lower costs

What are reasons a company would share a valuable competitive asset with its international locations?

to increase its global market share to attract customers

A joint venture can hamper a company's goals for global market leadership by fostering

too much dependence on a foreign partner.

Which factors make dispersing a company's activities competitively important?

trade barriers to importing manufactured goods the threat of supply interruptions major customers in areas without low-cost production

By transferring company expertise to cross-border markets, a domestic company can successfully do what?

transform into a global company in its own right

A strong domestic currency tends to

weaken the cost competitiveness of domestic companies.

A company's export strategy may fail in which situations?

when foreign countries impose tariffs on imports when shipping costs are exorbitant when domestic manufacturing costs are higher than those of foreign competitors

A company that wishes to control all aspects of its operation when it expands into foreign markets should establish a

wholly owned subsidiary.

What are drawbacks of a multidomestic strategy?

It can raise production and distribution costs. It won't help a company build a single international competitive advantage.

Which of the following are drawbacks of a transnational strategy?

It is a difficult strategy to implement. It involves pursuing conflicting goals. It can create a costly and time-consuming operation.

True or false: Cultural differences are a major source of the cross-country variations that affect buyer preferences.

T

A domestic company wishing to enter the international market may choose to license its products or services to a foreign company for which reason?

The company has no resources to enter a foreign market directly.

A think-local, act-local strategy gives local managers the decision-making capability to do which of the following?

address market needs focus competitive efforts

Elements of a country's infrastructure that can contribute to factor conditions include

banking systems. transportation. communication.

A company that employs a global strategy will do which of the following?

build a global brand create a strong headquarters to oversee its global activities coordinate efforts across country boundaries sell a standardized global product

Acquiring a foreign company as a means of entering a foreign market can allow a business to do which of the following?

build supplier relationships avoid the risks of a greenfield venture gain access to local distribution channels

A global strategy is an appropriate choice in which situation?

buyer needs for a particular product or service are relatively the same in many countries

Creating a strategy for entering an international market can be more difficult than entering a domestic market because

buyer preferences in foreign markets force companies to customize their products.

Currency exchange rates can pose a risk for businesses because they

can change by more than 20% a year. affect a company's profit. vary unpredictability.

The strategic option of acquiring a foreign partner gives a company expanding into a foreign market the advantage of

intimate knowledge of local buying habits and consumer preferences. familiarity with local government regulations. already-established relationships with distributors.

A company that expands into a foreign market by pursuing the option of entering into a strategic alliance with a foreign partner can

share technological know-how. achieve cost savings. share distribution facilities.

Sharing resources with its international operations allows a company to

spread the development costs over a larger volume of unit sales. reduce the cost of creating them at each location.