International Business - Chapter 12
True or false: Companies that operate internationally can increase their profitability and rate of profit growth in ways not available to just domestic businesses.
True
True or false: If no other factors had to be considered, a company would place a higher price on products that are highly valued by customers.
True
True or false: One way a company might create value is by leveraging the skills of its subsidiaries.
True
In-Touch Corp. develops cell phones. The case is made in the US, the processor in Japan, and the adapter in Cambodia. In-Touch Corp. disperses its value chain to locations around the world which is an example of the
global web.
International firms that strive to be locally responsive will most likely incur _____ costs.
higher
The decision by Bombardier to decentralize manufacturing of its rail cars in Europe is a result of
host-government demands.
Parva receives a quarterly bonus if her store's sales exceed expectations. This bonus is considered a(n) ______.
incentive
To motivate managerial performance, an organization might use
incentives
As firms move down the experience curve, they will ______ profitability.
increase
A company that elects to use a differentiation strategy would focus on
increasing the attractiveness of a product.
A(n) ______ system is any organized electronic system for the collection, organization, storage and communication of information.
information
Tri-Lar Engineerings develops electronic systems for managing inventory and tracking sales. Which type of support activity do these systems provide?
information systems
In order to differentiate itself from the competition, IKEA focuses on increasing the attractiveness of products by lowering costs. This demonstrates IKEA's ______ strategy.
low-cost
In what two ways can location economies create value for a firm?
lowering the cost of value creation and helping firms achieve a low-cost position enabling the firm to differentiate its product
What two types of competitive pressures do companies typically face when entering global markets which affect their ability to realize location economies and leverage products?
pressure to reduce costs pressure to be locally responsive
A company's _____ include(s) the design, creation, delivery of a product, and after-sale support and service.
primary activities
What are the two categories of operations within a company?
primary activities support activities
A business ______ is the manner in which decisions are made in a company.
process
When discussing value creation, a low-cost strategy focuses primarily on lowering ______ costs.
production
The rate of return that a business makes on its invested capital determines its ______.
profitability
Information systems, a(n) ______ activity, can track sales and price products, thereby helping the firm to gain a more competitive advantage.
support
The worldwide acceptance of McDonald's hamburgers, Coca-Cola, and Apple iPhones ______ claims of increasing homogeneity in the global marketplace.
supports
Production of physical products, such as refrigerators or trucks, is called
Manufacturing
Which three sales and marketing functions can help a firm create value?
Advertising Brand positioning Consumer assessments
What three activities are examples of processes within a company?
Budgeting Developing a marketing plan Yearly employee review
Universal needs exist with which two categories of products?
Bulk chemicals, petroleum and steel Personal computers and hand held calculators
______ are the metrics used to measure the performance of subunits.
Controls
What three things are included in a company's infrastructure?
Culture Organization structure Control systems
The experience curve relationship is for ______ output over time.
Cumulative
According to the basic strategy paradigm, what three things must a firm do to maximize profitability?
Make sure the firm has the right organization structure in place to execute its strategy. Configure internal operations so they support the position selected on the efficiency frontier. Pick a position on the efficiency frontier where there is enough demand to support the choice.
True or False: Distribution channels are consistent across the world and do NOT affect local responsiveness.
False
True or False: Organizational culture has little or no impact on a company's performance.
False
True or false: Based on the basic strategy paradigm, In order to maximize its profitability, a firm can invest in any of the positions found on the efficiency frontier.
False
Select two ways a firm can create more value.
Make product more attractive to consumer Lower production costs
Which support function of a company adds value by identifying and recruiting skilled managers, regardless of nationality?
Human resources
The difference between the 110-volt electrical system used in North America and the 240-volt system used in some European countries is an example of how ______ differences create pressure for local responsiveness.
Infrastructure
What are three examples of information systems used to support the value chain?
Inventory management Product pricing Sales tracking
What are three ways the human resource function helps create value for a firm?
It ensures the company has the right mix of skilled people. It ensures that people are adequately trained, motivated, and compensated. It can boost the competitive position of the firm.
McDonald's local franchises in France have begun to offer more elegant seating areas and an upscale menu. This was done in response to slow growth rates in the area. Impressed with the increased sales at these stores, McDonald's executives are considering making these changes elsewhere. In this instance, what aspect of creating value is BEST demonstrated?
Leveraging subsidiary skills
Organizational structure incorporates what three things?
Location of decision-making responsibilities within the structure Integrating mechanisms to coordinate subunit activities Formal division of organization into subunits
What is a benefit of economies of scale?
Lowers unit costs and increases profitability
True or false: Being locally responsive tends to raise costs for a company.
True
Primary activities of the value chain can be divided into four functions, including which two of the following?
Production Marketing & sales
Which two functions are considered primary activities?
R&D Customer service
What are three ways becoming a multinational company can increase a firm's profitability?
Realize greater cost economies Expand the market for their domestic product Realize location economies
What are three ways a company can achieve economies of scale?
Serving global markets Spreading fixed costs over a large volume Bargaining purchasing costs
Which statement about customer tastes and preferences in the global marketplace is accurate?
Significant differences in consumer preferences still exist across nations and regions.
Which three elements elements must all be consistent with each other for superior organizational performance to be attained?
Strategy Operations Market conditions
What are three things included in an organization's architecture?
Structure People Processes
What three things must be in place to achieve superior performance within a company?
The organization's strategy must make sense given market conditions. The organization's architecture must match the operations and strategy of the firm. The operations of a firm must be configured to support the strategy of the firm.
As noted in the text, a business like Caterpillar should follow the ______ strategy because it is under pressure to reduce costs and be locally responsive.
Transnational
While it might be less expensive for a US company to assemble automobile parts in New Zealand, these cost savings would be offset by high ______ costs that make the products more expensive to ship.
Transportation
Production and marketing responsibilities are typically delegated to _____ when customer preferences create a strong pressure for local responsiveness.
a firm's foreign subsidiary
After developing a computer locking system, Caffrey Computer Corp. worked out a licensing deal with Chicago Desktop (a potential competitor) to sell the lock with every computer. This agreement is an example of _____.
a strategic alliance
The totality of a firm's organization is referred to as organization _____.
architecture
Jack owns a ready-to-heat pasta company that is one of ten companies making this type of product. He would like to charge a higher price for the product since customers place a high value on it but the presence of so many competitors makes this impossible. In this situation, _____ allow(s) customers, instead of the company, to capture some of the value of the product.
consumer surplus
Managers use ______ to analyze data about how the business and its employees are functioning in order to make appropriate administrative decisions.
controls
_____ competencies are a company's abilities and skills that competitors cannot easily match or copy.
core
Chilly Cooler Corp. has developed a technology that allows its coolers to stay cold 25% longer than any of their competitors coolers. While many competitors have tried to match this technology, so far none of them have. This technology is an example of a(n) _____ for Chilly Cooler.
core competence
Toyota's superior production and logistics functions allow it to produce high-quality, well-designed cars at a lower delivered price than other firms. These are examples of
core competencies
McDonald's ability to manage fast-food operations better than most other firms in the world is an example of a(n)
core competency
The ______ of value creation activities occurs when different stages of the value chain are preformed in a variety of world-wide locations, based on maximizing value and/or minimizing costs.
global web
When the logistics function is carried out efficiently, it can create value because it lowers
costs
Organizational ______ encompasses the norms and value systems that are shared among the employees of a business.
culture
The primary activities in the value chain are R&D, production, marketing and sales, and ______.
customer service
Lowering production costs because of increased efficiencies creates value by _____ costs.
decreasing
The various components of an organization's architecture are _____ each other.
dependent on
Atkinson Appliance has improved the look, design, and speed of its dishwashers to make them more attractive to consumers. The company is trying to create value creation by using a(n) ______ strategy.
differentiation
When a firm serves a global market from a single location, it will move _____ the experience curve and establish a low-cost position.
down
When more units of a good or a service can be produced on a larger scale, yet with (on average) less input costs,______ has/have been achieved.
economies of scale
The ______ is the name given to all of the different positions a firm can adopt regarding adding value and lowering the cost of a product.
efficiency frontier
A commodity's production costs tend to decline over time. This is referred to as the ______ curve.
experience
The ______ refers to systematic reductions in production costs that have been observed to occur over the life of a product.
experience curve
As management understands how to more effectively manage an operation, production costs are likely to decrease. These decreased costs are the result of _____.
learning effects
______ refer(s) to the cost savings that result from increased production levels once efficiencies are in place.
learning effects
What two things help explain the experience curve?
learning effects economies of scale
An unstable government in a foreign country would make a company _____ to move its production facilities to that country.
less likely
Companies that enter into the global marketplace typically face two forms of competitive pressure: cost reductions and _____.
local responsiveness
Lowering the cost of value creation and allowing a firm to differentiate its products are effects of ______ economies that come from performing an activity in the optimal site.
location
Niagara Energy builds all of its energy plants near large water sources to take advantage of the lower costs associated with hydro-power. This company is using _____ to determine where to build its plants.
location economies
Which company function controls the transmission of materials from raw goods to the distribution of the finished product?
logistics
The advertising department at Shine Shape Products wants to create value for the new line of cleansers by showing customers how they can remove grease better than any other product on the market. Which primary activity function is involved in this scenario?
marketing and sales
Profit growth is defined as the percentage increase in ______ over time.
net profits
Which area of a firm includes production, marketing and sales, materials management, R&D, human resources, information systems, and the firm infrastructure?
operations
The text defines ______ as not only individuals, but the ability to recruit, compensate, and keep employees.
people
To describe individuals in terms of their values, skills, and orientation, the text uses the term
people
______ is the expression of a common sense of identity that shapes collective action within a geographical region.
regionalism
Nova Industries has created a new product to hold television monitors for commercial applications such as restaurants and airports. Which primary activity would have been involved with this creative process?
research and development
Which primary activity is concerned with the design of products and production processes?
research and development
Profitability of a company can be found by measuring a firm's ______, which is determined by dividing net profits by total invested capital.
return-on-investments
A higher rate of profit growth means a higher rate of ______ for shareholders.
returns
Jenner Auto Corp. supplies manufacturing equipment to three major automobile manufacturers. Jenner Auto promises that if its equipment breaks down, it will have the necessary parts to fix it shipped out within 24 hours. This is the core promise supporting its ______ activity which adds value to the company's product.
service
Keeley works for an online clothing retailer and in her role she answers customer inquiries about product shipments and returns. Which primary activity is Keeley involved with?
service
A company would analyze the efficiency frontier in order to determine its
strategic positioning.
A(n) ______ is a method or plan a company uses to bring about a desired result, such as achievement of a goal or solution to a problem
strategy
Decisions and actions that managers take to meet the company's goals are known as ______.
strategy
The production divisions within a company, the location of a company's decision-making responsibilities, and the establishment of integrating mechanisms all make up the organizational ______ of a company.
structure
The basic infrastructure of a company includes the organizational structure, control systems, and the culture of the firm. What other factor should also be included in this basic infrastructure?
top management
Consumers demonstrate ______ needs when the preferences of people in different countries are similar, if not exactly the same.
universal
The difference between a firm's production costs and the value consumers perceive in its products is called ______.
value creation