Chapter 8 strategic mgmt byles TRUE/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.

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

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.

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.

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.

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.

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.

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

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.

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.

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

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.

False

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

False

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

False

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

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

False

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.

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.

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

True

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

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.

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.

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

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

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

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.

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.

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

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.

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

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.

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.

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.

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

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

True

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

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.

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.

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.

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

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.

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.

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

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

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.

True