Strategy Chapter 8

highway systems and the supply of debt capital

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

exporting

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 a. licensing.

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.

True

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.

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

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

lack of basic resources.

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

more standardization of products across country markets.

A global corporate-level strategy assumes

competitive strategy is dictated by the home office.

A global corporate-level strategy differs from a multidomestic corporate-level strategy in that in a global strategy,

economies of scale.

A global corporate-level strategy emphasizes

lacks responsiveness to local markets.

A global strategy

False

A global strategy is an international strategy through which the firm offers standardized products across country markets, with competitive strategy being dictated by offices within the host markets served.

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

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

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

A licensing agreement

True

A major advantage of multidomestic strategies is the ability to customize 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.

low; high

A multidomestic corporate-level strategy has ______ need for global integration and ______ need for local market responsiveness

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

A multidomestic corporate-level strategy is one in which

False

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

True

A multidomestic strategy is an international strategy in which strategic and operating decisions are decentralized to the strategic business units in individual or regions.

innovate

A nation's competitiveness depends on the capacity of its industries to _______ and thereby maintain its competitive advantage.

True

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

global efficiency and local responsiveness.

A transnational corporate-level strategy seeks to achieve

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.

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

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

universal

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

strategic alliances are easy to manage.

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

widespread multilingualism.

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

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.

False

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.

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.

expands into a potentially large number of geographic locations and markets.

An international diversification strategy is one in which a firm

concerned if the value of the dollar strengthened.

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

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.

regional strategies.

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

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.

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.

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

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

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.

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.

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.

the liability of foreignness.

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

transnational; multidomestic; global

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

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 multidomestic or global strategies.

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

Export, licensing, and the strategic alliance entry modes are also appropriate when firms want to establish a strong presence in an international market.

True

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

technology.

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

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

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

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

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

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.

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.

acquisition

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

a joint venture or wholly owned subsidiary

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.

transnational

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.

related and supporting industries

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 forth, all exist to supply the clothing industry. This is an example of the _________ in Porter's model.

workers with advanced engineering skills.

In Porter's model, a specialized factor of production would include

advanced; specialized

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.

government policy

In addition to the four basic dimensions of Porter's "diamond" model, failure of firms.

True

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

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

transnational

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

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.

the scope of operations through both product and geographic diversification.

International corporate-level strategy focuses on

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.

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

International strategy refers to a(n)

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

Internationally diversified firms

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.

factors of production

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?

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.

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.

largest and strongest lines of business

Most firms enter international markets sequentially, introducing their ________ first.

are limited in opportunities for growth.

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

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.

the incompatibility of the partners.

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

True

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

extend the product's life cycle.

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

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.

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.

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.

The firm is using a regional approach to international expansion.

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 twelve-nation region that includes its home country.

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.

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.

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

Terrorism creates an economic risk for firms, which

True

The "liability of foreignness" means that many firms need to focus more on local adaptation or risk problems such as the Walt Disney Company faced opening its theme park in France.

False

The "liability of foreignness" will have a greater negative impact on a firm using a multidomestic strategy than on a firm using a global strategy.

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 manager's abilities to deal with ambiguity and complexity.

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

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

False

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

leasing

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

the worldwide economic situation.

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

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.

political and economic institutions.

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

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.

increasing demand for similar products.

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

evasion of host country governmental regulations.

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

greenfield ventures.

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

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

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

high transportation costs and the expense of tariffs.

The problems associated with exporting include

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.

False

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

it is easy to use.

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

liability of foreignness; regionalization.

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

limited growth opportunities in their domestic market.

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

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

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

high; high; beneficial

Under industry structural analysis (Chapter 2), _________ rivalry is viewed as detrimental to profitability. Under the model of national advantage (Chapter 8), __________ rivalry is viewed as ________ as it results in competition and surviving firms are able to compete against global rivals.

decrease.

When a firm INITIALLY becomes internationally diversified, its returns

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.

False

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

potential loss of proprietary technologies

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

It is the slowest way to enter a new market.

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

availability of low labor costs

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

incompatibility of the licensing partners

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

to avoid high domestic taxation on corporate income

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

the level of control over the firm's operations

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

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.

new learning opportunities; research and development activities.

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

Liability of foreignness

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