MGT491 - Chapter 10 Practice Quiz

Communities of learning are metropolitan areas that have large numbers of high school graduates who are ready for a university education. True False

False

Administrative and political distances, such as the presence or absence of colonial ties, are part of the CAGE distance framework. True False

True

MacAdam Enterprises sells the same sparkplugs in more than 30 countries. MacAdam is an example that helps to support the globalization hypothesis. True False

True

When multinational enterprises enter host countries such as Saudi Arabia and Japan, the most logical option is usually to pursue a multidomestic strategy even though that strategy rarely leads to significant cost reductions. True False

True

Myriad Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in New Denistan, considered one of the less-developed nations in the world. How will this strategic move most likely affect Myriad Inc.? a. It will benefit from economic arbitrage. b. It will be able to easily sell products for which demand varies by income. c. Myriad will use its competitive advantage from economies of standardization. d. Myriad will replicate its existing business model easily.

a. It will benefit from economic arbitrage.

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved a. exporting goods. b. making foreign direct investments. c. licensing production and distribution. d. making foreign institutional investments.

a. exporting goods.

Because keeping cost low is critical to IKEA's value innovation, it switched from a(n) a. international strategy to a global-standardization strategy. b. transnational strategy to a multidomestic strategy. c. international strategy to a multidomestic strategy. d. transnational strategy to a global-standardization strategy

a. international strategy to a global-standardization strategy.

Esther is the CEO of a line of accessories and cosmetics, Starring Me! Inc., which has retail stores and production units in five countries. In this scenario, Starring Me! Inc. is most likely a a. multinational enterprise. b. nationalized firm. c. nonprofit organization. d. sole proprietorship.

a. multinational enterprise.

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? a. significant differences between its U.S. personnel policies and Germany's culture b. Metro's hostile takeover of Walmart in Germany c. Germany's unfamiliarity with retail discount powerhouses d. inability to implement its trademark focused-differentiation strategy in the German market

a. significant differences between its U.S. personnel policies and Germany's culture

The administrative and political distance between two trading countries decreases when a. there is a well-functioning capital market in the host country. b. the host country lacks an independent central bank. c. tariffs and trade quotas exist in the host country. d. there are Foreign Direct Investment (FDI) restrictions in the host country.

a. there is a well-functioning capital market in the host country.

Which of the following will most likely harm a multinational enterprise's (MNE's) reputation? a. Principal-agent problems cause an MNE to merge with another MNE. b. A sweatshop owned by an MNE has an explosion that kills hundreds of workers. c. Increased competition causes an MNE to close a factory in a developing country. d. Wages for workers in a factory owned by an MNE increase, causing profits to decline.

b. A sweatshop owned by an MNE has an explosion that kills hundreds of workers.

Fun Foods Inc. is a snack manufacturer that wants to expand globally. Few people abroad are familiar with Fun Foods snacks. The countries into which the company wants to expand require a high degree of local responsiveness when it comes to food, and the citizens of those countries already spend plenty of money on snacks. Which action should the leaders of Fun Foods take? a. Achieve economies of scale by using the global-standardization approach. b. Pursue a multidomestic strategy that includes new "local" brands. c. Appease pressures for cost reductions by following the transnational approach. d. Keep costs low with undifferentiated product in the international strategy.

b. Pursue a multidomestic strategy that includes new "local" brands.

(scroll down) Amber is a strategist for a furniture manufacturer that has a large presence in the United States and Canada. By checking economic and political reports, she knows that trade and investment barriers are falling among wealthy nations. She also knows that the price of oil has dropped 50 percent in the previous two years. Based on this information, what action should Amber and her company take? a. They should anticipate market corrections because investment barriers and the price of oil inevitably rise. b. They should seriously consider globalization because of the falling trade and investment barriers. c. Amber and her employer should wait out this period of uncertainty and take action when market forces are more stable. d. Amber and her employer need to prepare for the cost of doing business to increase.

b. They should seriously consider globalization because of the falling trade and investment barriers.

*Save On Everything Inc., a supermarket chain, is implementing a multidomestic strategy. Solar Future Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other? a. Save On Everything Inc. will focus more on cost-reduction than Solar Future Inc. b. Unlike Solar Future Inc., Save On Everything Inc. will be able to pursue a differentiation strategy at the business level. c. Save On Everything Inc. will have its business functions spread across the world; Solar Future Inc.'s business functions will be highly centralized. d. Unlike Solar Future Inc., Save On Everything Inc. will be able to reap significant economies of scale and location economies.

b. Unlike Solar Future Inc., Save On Everything Inc. will be able to pursue a differentiation strategy at the business level.

For which of the following companies will geographic distance be the most relevant factor in deciding whether to trade with a target country? a. a firm that sells wristwatches b. a firm that extracts and exports iron ore c. a firm that produces movies d. a firm that manufactures cell phone batteries

b. a firm that extracts and exports iron ore

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India? a. because NAFTA prohibits Walmart from investing in countries outside North America b. because of the large economic distance between the United States and India c. because Indian consumers have not accepted Walmart's low-cost strategy d. because of the political differences between India and the United States

b. because of the large economic distance between the United States and India

A firm pursuing a transnational strategy would believe that a. local-responsiveness is more important than cost-reductions for competitive advantage. b. best practices, ideas, and innovations should be diffused throughout the world. c. key business functions should be located in its home country headquarters. d. the majority of the value creation should take place in the home country.

b. best practices, ideas, and innovations should be diffused throughout the world.

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of a. economies of scope. b. location economies. c. network effects. d. learning races

b. location economies.

Carpatia and Novenica are neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of a. iron ore extracted in Novenica. b. luxury items manufactured in Carpatia. c. movies and TV shows produced in Carpatia. d. food processed in Novenica.

b. luxury items manufactured in Carpatia.

Which of the following is a feature of the Globalization 2.0 stage? a. Only sales and distribution operations took place overseas, while all the important business functions were located in the home country. b. Huge investments in fiber-optic cable networks around the world enabled companies to operate as global-collaboration networks. c. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries. d. Two-way knowledge flowed between the local subsidiaries and their U.S. headquarters.

c. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

Heaven Freezes Over (HFO) is a company that makes frozen lunch and dinner entrées. Based on what you know about companies like Nestlé, what action should HFO take as it strives to become multinational? a. Consider a transnational strategy by creating a blue ocean market. b. Try a global-standardization strategy, which creates standardized products and competes mainly on price. c. Pursue a multidomestic strategy, customizing product offerings to suit local preferences. d. Attempt an international strategy, controlling costs and taking advantage of economies of scale by selling the same (or very similar) products around the globe.

c. Pursue a multidomestic strategy, customizing product offerings to suit local preferences.

Janessa Inc., a reputed brand for fine art supplies, is implementing an international strategy. Slalom Corp., a maker of mini computer tablets, is pursuing a global-standardization strategy. Which of the following statements most likely holds true in this scenario? a. Slalom's business functions are highly centralized, whereas Janessa. organizes its activities worldwide. b. Slalom is exposed to greater risks of exchange rate fluctuations. c. Slalom Corp. focuses more on cost-reductions when compared to Janessa Inc. d. While Janessa Inc.'s competitive advantage lies in its high local responsiveness, Slalom Corp. will lack such capabilities.

c. Slalom Corp. focuses more on cost-reductions when compared to Janessa Inc.

Sky Pioneers Inc. manufactures airplane parts. It wants to globalize and is willing to spend a considerable amount to protect its intellectual property. Which of these business ventures makes the most sense for Sky Pioneers? a. licensing some of its newest designs to overseas competitors b. beginning a brownfield project in its home country c. acquiring an airplane-parts manufacturer in another country d. exporting airplane parts to many other countries

c. acquiring an airplane-parts manufacturer in another country

Maddox Bauxite Extraction Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will give it strong control over all its business activities. Which of these foreign entry modes will Maddox most likely choose? a. export b. joint venture c. greenfield operation d. acquisition

c. greenfield operation

(scroll down) Culinary Solutions Inc. manufactures cooking and baking equipment and has its base in the country of Vandevar. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself in the country of Balalaika, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Culinary Solutions Inc. incurs huge financial losses in Balalaika. In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because a. it overestimates the geographic and cultural distance between Vandevar and Balalaika. b. it underestimated its dwindling reputation before it enters the Balalaika market. c. it underestimated its liability of foreignness when entering the Balalaika market. d. it overestimated its need to protect its intellectual property.

c. it underestimated its liability of foreignness when entering the Balalaika market.

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of a. demand conditions. b. competitive intensity in a focal industry. c. related and supporting industries/complementors. d. factor conditions.

c. related and supporting industries/complementors.

Which of the following is a drawback of pursuing a transnational strategy? a. It involves locating all key business activities in the home country headquarters. b. It exposes a firm to diseconomies of scale and location. c. It creates bottlenecks for global learning. d. It requires a global matrix structure, which is difficult to implement.

d. It requires a global matrix structure, which is difficult to implement.

Which of the following statements is true with regard to international trade between countries? a. Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies. b. Political integrations decrease the expected trade intensity between two countries. c. Colony-colonizer relationships have a strong negative effect on bilateral trade between countries. d. Wealthy countries engage in relatively more cross-border trade than poorer ones.

d. Wealthy countries engage in relatively more cross-border trade than poorer ones.

Vassar Systems Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though that may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Vassar Systems? a. exporting b. franchise agreement c. licensing d. acquisition

d. acquisition

Which of the following entry modes was used extensively in Globalization 1.0 stage? a. strategic alliances b. greenfield operations c. acquisitions d. exports

d. exports

Downshift Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Downshift Autos Inc. is reaping the benefits of a. resource ambiguity. b. economies of scope. c. resource immobility. d. location economies.

d. location economies.

Which of the following is part of Geert Hofstede's cultural dimensions? a. embrace of risk taking b. short-term orientation c. groupthink d. power distance

d. power distance