Ch 10 - Global Strategy

How has China been affected by its one-child-per-family policy and appreciation of its currency?

The country's advantage in low-cost manufacturing is now reduced.

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved

exporting goods.

Which of the following entry modes was used extensively in Globalization 1.0 stage?

exports

) In Michael Porter's diamond framework, ________ conditions describe a country's endowments in terms of natural, human, and other resources. A) market

factor

Frederica, the chief financial officer at a moped manufacturer in Canada, wants to build new plants in Canada rather than overseas. Which of these points should she make as she argues her case to the board of directors?

"It will be much more difficult to protect our intellectual property if we build factories overseas."

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another?

) exporting

Which of the following will most likely harm a multinational enterprise's (MNE's) reputation?

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

Which of the following describes a firm in the Globalization 1.0 stage?

Asha Inc. had a base office in New York and distributed some of its products overseas

Which of the following countries has a high geographic distance but a low cultural distance from the United States?

Australia

Which of the following is an observable feature in the Globalization 3.0 stage?

Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.

Milk Benefits Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. Andrew Products Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario?

Both Milk Benefits Inc. and Andrew Products Inc. will have to duplicate key business functions in multiple host countries.

Midas Touch, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Coolco, an air-conditioner manufacturer, faces intense pressure from its home market. Barker, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Midas Touch invest?

Coolco, because firms that face stiff competition at home tend to do better abroad

Businesses located in countries that have relatively weak domestic demand rarely make the leap to multinational enterprises because they must focus their attention on shoring up their economic positions in their home countries

FALSE

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

FALSE

The term demand conditions refers to how high the volume of demand is for a particular product in a particular country

FALSE

Foreign-entry modes such as acquisitions and greenfield projects are usually disadvantageous because they require a high level of capital and resource investment but allow for a low level of control.

False

Most businesses around the world are more than 50 percent globalized, meaning that more than half their revenues are from outside the home country.

False

The cultural distance between Australia and the United States is relatively high because of the physical distance between the two nations.

False

Atangadi is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should he consider while choosing his strategy?

He must be aware of the fact that despite globalization and the emergence of the internet, firm geographic location has actually maintained its importance.

Which of the following is a drawback of pursuing a transnational strategy?

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

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.?

It will benefit from economic arbitrage.

Makes Scents Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. PriceSmasher Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?

Makes Scents Inc. will sell the same products in both domestic and foreign markets, whereas PriceSmasher Inc. will customize its product offerings to suit local requirements.

Which of the following is a feature of the Globalization 2.0 stage?

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

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?

Pursue a multidomestic strategy that includes new "local" brands

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?

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

Sven is a senior vice president at a textile manufacturer that wants to move from being 20 percent globalized to 70 percent globalized in the next 10 years. What are some possible drawbacks that Sven's company must anticipate?

Rising wages may cancel out cost savings of access to low-cost input factors

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?

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

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

TRUE

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

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

Which of the following is most likely an accurate statement?

The multinational enterprise Starship benefited from advances in communications technology

How will an increase in coordinated economic and political integration between countries affect the world economy?

There will be gains in social welfare and living standards across the globe.

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode?

They reduce a firm's exposure to loss of reputation.

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?

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

Which of the following statements is true with regard to international trade between countries?

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

In recent years as economic forces have changed, many governments and multinational enterprises have been more interested in negotiating bilateral trade agreements between countries rather than multinational agreements through international agencies.

True

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?

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

New Zoya is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to New Zoya in terms of cultural distance?

Valyria, where people speak English and have a low standard of living

For which of the following companies will geographic distance be the most relevant factor in deciding whether to trade with a target country?

a firm that extracts and exports iron ore

Fierce domestic competition in New Schuyler makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, New Schuyler's motorcycles have a competitive advantage in the global market. According to Porter's diamond framework, this scenario shows the influence of competitive intensity in

a focal industry.

To keep track of the latest developments in computing, Lenovo's research centers are located in China, the United States, and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Lenovo's products are the same for its domestic and foreign markets. Which strategy does Lenovo follow?

a global-standardization strategy

Blush Bashful Cosmetics Inc. operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Blush Bashful most likely implement?

a multidomestic strategy

Devonshire Ventures is a large snack-food conglomerate that operates in more than 50 countries and employs more than 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Devonshire most likely use?

a transnational strategy

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?

acquiring an airplane-parts manufacturer in another country

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?

acquisition

Managers at Durkmunder, a firm in West Feenistan, want to make their company a global leader in business process outsourcing (BPO). What should the Durkmunder managers look for as they decide where to locate their BPO facilities?

an abundance of well-educated English speakers

Screaming Eagle, a luxury motorcycle company, sells the same motorcycles and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Screaming Eagle most likely pursue?

an international strategy

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India?

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

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?

benefits from lower labor costs in manufacturing and services

A firm pursuing a transnational strategy would believe that

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

The transnational strategy is similar to a(n) ________ strategy because they both focus on product differentiation and low costs

blue ocean

How did Canada, Mexico, and the United States reduce the administrative and political distance between them?

by establishing the North American Free Trade Agreement (NAFTA)

Which of the following modes of entering a foreign market allows for the lowest level of control?

exporting

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.

cultural

Which of the following types of organizations comparatively requires the lowest levels of investment and control?

franchising

Vermilion Inc., a manufacturer of high-technology medical devices, has its product development centers located in the United States and South Korea. The manufacturing units are located in China and the Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its devices. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Vermilion most likely pursue?

global-standardization strategy

The process of closer integration and exchange between different countries and peoples worldwide is

globalization.

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?

greenfield operation

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer

higher quality for lower costs for international routes.

A greater cultural distance between two trading countries

increases the liability of foreignness.

Because keeping cost low is critical to IKEA's value innovation, it switched from a(n)

international strategy to a global-standardization strategy.

Bejukistan Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country

is a world leader in the pharmaceutical industry

A firm is said to be pursuing a polycentric innovation strategy when

it draws from multiple, equally important research facilities located throughout the world

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

it underestimated its liability of foreignness when entering the Balalaika market

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

multinational enterprise

Worldwide Minerals Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Worldwide Minerals wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm?

joint ventures

WackyPop Inc. produces an inexpensive microwave popcorn that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has WackyPop performed poorly in?

local responsiveness

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

location economies.

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

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

luxury items manufactured in Carpatia.

A trend observed during the Globalization 3.0 stage involves

multinational companies organizing as global-collaboration networks

Michael Porter's diamond framework explains

national competitive advantage.

Badlands Corp., a tool and die maker, is considering where to locate its new factories and offices. According to the CAGE distance model, which of these countries is statistically most attractive to Badlands?

one that is in the same trading bloc as Badlands' home country

A payroll company in the nation of Antono is seeking to expand beyond its borders while limiting administrative and political distance in the new country. Which potential site is the best one for this type of expansion?

one that used to have a colonizer or colonized relationship with Antono

Calabash Inc. is located in the nation of West Fenwick near the nation of East Fenwick. Calabash is considering expanding into East Fenwick. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, West Fenwick rules this land. Which of the following would most likely prevent Calabash from expanding into East Fenwick?

political distance

Which of the following is part of Geert Hofstede's cultural dimensions?

power distance

Planet Resource Inc. is a global internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries it serves. Planet Resource is most likely doing this to

reduce its cultural distance from the other countries.

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

related and supporting industries/complementors.

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany?

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

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with

the absence of a trading bloc

Which of the following factors is the most important determinant of economic distance?

the wealth and per capita income of consumers

The administrative and political distance between two trading countries decreases when

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

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because

they offer the same products or services in all their stores throughout the world.

European aircraft maker Airbus invested $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it used this strategy?

to take advantage of lower taxes in the southern United States

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers, but it attempts to share best practices across units. Global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is following a(n)

transnational strategy.