BUS 498 Exam 4
What percentage of the world's customers live outside the United States?
95%
In international business, an advantage of being a late entrant in a foreign market is the ability to
ride on an early entrant's investments in learning and customer education.
Pressures for cost reduction are intense in firms
in which consumers face low switching costs.
The number of born globals has been
increasing.
A company can increase its growth rate by taking goods or services developed at home and selling them internationally. The returns from such a strategy are likely to be greater if
indigenous competitors in the nations that the company enters lack comparable products.
Which of the following is a reason why firms often overpay for the assets of an acquired firm?
interest of more than one party in acquiring a particular firm
Xerox had a monopoly on photocopiers for several years as the technology underlying the photocopier was protected by strong patents. As it served a universal need, this favorable position led Xerox to pursue a(n)
international strategy.
Small-scale entry into a foreign market makes it difficult to build market share because it
is associated with a lack of commitment demonstrated by the foreign firm.
experience curve
is for cumulative output over time
Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. One of the reasons why Omega typically charges for its wrist band less than the value placed on it by the customer is because
it is normally impossible to segment a market based on each customer's reservation price.
Which of the following is the most likely outcome of a foreign firm entering a developed nation on a small scale after other international businesses in the firm's industry?
limited future growth potential
Which of the following strategies focuses on increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets?
localization strategy
Which of the following is a reason why a relatively poor country may be an attractive target for inward investment?
rapid economic growth
According to Michael Porter, superior profitability goes to a firm that
drives down the cost structure of its business.
Which of the following statements is true about economies of scale?
Attaining economies of scale increases a firm's profitability.
_____ is an example of an industry in which cross-licensing agreements are increasingly becoming common.
Biotechnology
Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets?
It is a useful strategy to earn great returns from the know-how of a technologically complex process.
Which of the following is an observation made by researchers Bartlett and Ghoshal regarding modern multinational enterprises?
Core competencies and skills can develop in any of the firm's worldwide operations.
Which of the following supports the argument that customer demands for local customization are on the decline worldwide?
Customer tastes have converged worldwide.
Which of the following is not a factor facilitating the born global phenomenon?
Higher barriers on trade
Which of the following is true of international firms considering foreign expansion?
If the firm's core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology to the joint-venture partner.
Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries?
It allows firms to use the profits generated in one market to improve its competitive position in another market.
Which of the following is most likely to be the advantage of locating a value creation activity in the optimal location for that activity?
It enables a firm to differentiate its product offering from those of competitors.
How does possessing a core competence help a firm?
It enables a firm to reduce the costs of value creation.
Which of the following is a disadvantage of franchising?
It is difficult to maintain quality control across foreign franchisees that are distant from the franchiser.
Which of the following is a disadvantage of greenfield ventures?
It is slower to establish than acquisitions.
Which of the following is true of a transnational strategy?
It is used by firms that try to achieve low costs through location economies, economies of scale, and learning effects.
Which of the following is true of a localization strategy?
It makes sense if the value added by customization supports higher pricing.
Which of the following is true of a firm that pursues a global standardization strategy?
It reaps maximum benefits from economies of scale and learning effects.
Which of the following is a drawback of licensing as a mode of entry into foreign markets?
Licensing does not give a firm tight control over manufacturing, marketing, and strategy.
Which of the following is a disadvantage of a strategic alliance?
Strategic alliance gives competitors a low-cost route to new technology and markets.
Which of the following is an advantage of joint ventures as a mode of entry into foreign markets?
The foreign firm benefits from a local partner's knowledge of the host country.
organizational structure
The three-part structure of an organization, including its formal division into subunits such as product divisions, its location of decision-making responsibilities within that structure, and the establishment of integrating mechanisms to coordinate the activities of all subunits.
Which of the following is true about learning effects?
They are important only during the start-up period of a new process.
Which of the following is true of the costs and risks associated with doing business in a foreign country?
They are lower in economically advanced nations.
Which of the following is an advantage of acquisitions as a means of entering foreign markets?
They are quick to execute and help firms to rapidly build their presence in the target foreign market.
Which of the following statements is true about an international strategy?
When a firm pursues an international strategy, the head office of the firm retains fairly tight control over marketing and product strategy.
core competencies
a company's ability and skills that competitors cannot easily match or copy
Which of the following countries presents a favorable benefit-cost-risk trade-off scenario for foreign expansion?
a country with a free market system
The risk of failure of an acquisition can be reduced by
a detailed auditing of operations, financial position, and management culture.
One of the principal risks associated with a strategic alliance is that
a firm can give away more than it receives.
Learning effects tend to be more significant when
a technologically complex task is repeated.
Which of the following is an example of a first-mover advantage?
ability to create switching costs that tie customers into one's products or services
Which of the following is a risk of being the first to enter developing nations like India and China on a large scale?
absence of prior foreign entrants
The risks associated with learning to do business in a new culture are less if the firm
acquires an established host-country enterprise.
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.
The rise of the born global is associated with
an increase in entrepreneurship.
information system
any organized system for the collection, organization, storage, and communication of information
In which of the following tasks will learning effects be most significant?
assembly process involving 1,000 complex steps
Which of the following is a disadvantage of large-scale entry into a foreign market?
availability of fewer resources to support expansion in other desirable markets
Which of the following is a course of action suggested by Christopher Bartlett and Sumantra Ghoshal for companies based in developing nations?
benchmark one's operations and performance against foreign multinationals
An organization that is global within two years of its inception with a major focus on foreign markets rather than its domestic market can best be described as a
born global.
An advantage of choosing exporting as a mode of entry into foreign markets is that a firm
can avoid the cost of establishing manufacturing operations in the host country.
location economies
can lower costs of value creation and help the firm achieve a low cost position, and/or enable a firm to differentiate its product offering from those of competitors
experience curve
commodity's production costs tend to decline over time
A firm maximizes its profitability when it
configures its internal operations to support the position selected by it on the efficiency frontier.
A firm should configure its value chain to maximize value at each stage when
cost pressures are intense.
Cost reduction pressures tend to be particularly intense in industries that
create products that serve universal needs.
FedEx's revamped global strategy is designed to
create value for the customer.
A number of studies have observed that a product's production costs decline by some quantity about each time
cumulative output doubles.
Which of the following is a value creation activity that falls into the category of primary activities?
customer service
Which of the following is most likely to necessitate the delegation of marketing functions to national subsidiaries?
differences in distribution channels
Which of the following is a disadvantage of small-scale entry for an international firm considering foreign expansion?
difficulty of building market share and capturing first-mover advantages
location economies
economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be
A firm's profitability is maximized when it
ensures that it has the right organization structure in place to execute its strategy.
Superior value creation relative to rivals requires that the firm
ensures that the gap between value and cost of production is greater than the gap attained by competitors.
The liability associated with foreign expansion is greater for foreign firms that
enter a national market early.
Licensing is NOT attractive to which of the following firms?
firms requiring tight control of operations for realizing experience curve and location economies
Which of the following modes of entry is suitable for service firms where the risk of losing control over the management skills or technological know-how is not much of a concern, and where the firms' valuable asset is their brand name?
franchising
Which of the following strategies is most likely to be pursued by a firm when there are strong pressures for cost reductions and demands for local responsiveness are minimal?
global standardization strategy
If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, what would be the preferable mode of entry?
greenfield venture
Which of the following conditions is most favorable to reap gains from global scale economies?
low demand for local responsiveness
Born global companies
make a significant commitment to foreign markets within two years of their inception.
business process
manner in which decisions are made in a company
How can firms avoid incurring high transport costs when exporting bulk products?
manufacturing bulk products regionally
controls
metrics used to measure performance of subunits
To reduce the risks of failure of an acquisition, managers must
move rapidly after an acquisition to put an integration plan in place.
Serving a global market from a single location is consistent with
moving down the experience curve.
FedEx is trying to increase its profitability by
offering a range of services to its customers.
For a firm to maximize its profitability, it is necessary that it
picks a position on the efficiency frontier that is viable.
For an international business, which of the following is most likely to be an outcome of protectionism and nationalism in a host-country?
pressure for localization of production
Firms that compete in the global marketplace typically face which two types of competitive pressure?
pressures for cost reductions and pressures to be locally responsive
Why should a high-tech firm avoid selecting licensing as a mode of entry?
risk of losing control over technology
Franchising as a mode of entry into foreign markets is employed primarily by
service firms.
What gives a firm tight control for coordinating a globally dispersed value chain?
setting up wholly owned marketing subsidiaries
In exporting, problems with local marketing agents can be overcome by
setting up wholly owned subsidiaries in foreign nations to handle local marketing.
What triggers the conflict of interest over strategy and goals in joint ventures?
shifts in relative bargaining power of venture partners
Which of the following allows two or more firms to share the fixed costs (and associated risks) of developing new products or processes?
strategic alliance
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.
logistics
the company function that controls the transmission of materials from raw goods to the distribution of finished product
people
the employees of the organization, the strategy used to recruit, compensate, and retain those individuals and the type of people that they are in terms of their skills, values, and orientation
In general, the more value customers place on a firm's products
the higher the price the firm can charge for those products.
Profit growth is measured by
the percentage increase in net profits over time.
In which of the following situations can an international business command higher prices for a particular product in a foreign market?
the product offers greater value to customers in the foreign market
Organization Architecture
the totality of a firm's organization, including formal organizational structure, control systems and incentives, organizational culture, processes, and people
A firm is most likely to pursue a global standardization strategy when
there are strong pressures for cost reduction.
Which of the following caveats is most likely to discourage global expansion of businesses?
trade barriers
transnational strategy
transfers skills between different subsidiaries lowers costs differentiates products
Which of the following strategies is a firm most likely to pursue when it simultaneously faces both strong cost pressures and strong pressures for local responsiveness?
transnational strategy
Performing activities that increase the value of goods or services to consumers refers to
value creation.
The main focus of FedEx's strategy is
value creation.
The value of Omega's top selling fitness product to an average consumer is $150 and the average unit cost of producing that product is $65. In this scenario, $85 ($150-$65) represents
value creation.
global web of value creation
when different stages of value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized
Which of the following entry modes into a foreign market best serves a high-tech firm?
wholly owned subsidiaries
