Business Policy Chapter 10

Main reasons firms expand internationally (advantages)

-gain access to a larger market -gain access to low-cost input factors -develop new competencies

For which of the following companies will geographic distance be the most relevant factor in deciding whether or not to trade with a target country?

A firm that extracts and exports iron ore

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.

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 U.S. and India

Which of the following products are generally manufactured by multinational enterprises (MNEs) pursuing a global-standardization strategy?

Commodity products like computer hardware

Which of the following statements is true of an international strategy?

It enables firms to leverage their home-based core competencies in foreign markets.

Which of the following is one of the features of an international strategy?

It is characterized by limited local responsiveness.

Globalization 2.0 (1945-2000)

MNEs began to create smaller, self-contained copies of themselves, with all business functions intact, in a few key countries required significant amounts of foreign direct investment allowed for greater local responsiveness to country-specific circumstances

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

Power distance

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

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

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

To take advantage of lower taxes in the southern United States

globalization

a process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs. combines, these factors reduce the cost of doing business around the world, opening the doors to a much larger market than any one home country. this also allows companies to source supplies at lower costs and to further differentiate products.

A firm following a multidomestic strategy:

faces a greater risk of intellectual property (IP) appropriation.

Globalization 3.0 (21st century)

freely locate business functions anywhere in the world based on an optimal mix of costs, capabilities, and PESTEL factors. centers of expertise within a global network for delivering products and services.

Some multinational enterprises (MNEs) attempt to reap significant economies of scale and location economies by pursuing an international division of labor based on wherever best-of-class capabilities reside at the lowest cost. This is known as a(n) _____.

global-standardization strategy

Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the:

globalization hypothesis.

current actual level of globalization in the world

no more than 10-25%

India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because:

of an abundance of well-educated, English-speaking young people.

global strategy

part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world

For a firm pursuing a global-standardization strategy, which of the following bases of competition becomes its primary weapon?

price

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

the absence of a trading bloc.

The administrative and political distance between two trading countries reduces when:

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

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

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

consequences of economic development across the globe for MNEs

1. rising wages and other costs are likely to negate any benefits of access to low-cost input factors. 2. as the standard of living rises in emerging economies, MNEs are hoping that increased purchasing power will enable workers to purchase the products they used to make for export only.

Zenovia Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in United Marva, which has been recognized as one of the less-developed nations in the world. How will this strategic move most likely affect Zenovia Inc.?

It will be able to benefit from economic arbitrage.

Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy?

They are highly affected by exchange rate fluctuations.

In which of the following situations is pursuing an international strategy advisable?

When a firm enjoys a large domestic market, strong reputation, and brand name

multinational enterprise (MNE)

a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least 2 countries.

US MNEs make up less than 1 percent of the number of total US companies but they

account for 11% of private sector employment growth since 1990 employ 19% of the work force pay 25% of all wages account for 31% of US GDP Make up 74% of private sector R&D spending

Which of the following is not included within the types of strategic alliances?

acquisitions

Globalization 1.0 (1900-1941)

all important business functions located in home country, only sales and distribution operations took place overseas. some firms may have produced raw materials overseas. strategy formulation and implementation and knowledge flowed from domestic headquarters to international outposts

A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it:

attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company.

Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself successfully in the country of Zevar, 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, Silca Electronics Inc. incurs huge financial losses in Zevar. In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because:

it underestimates its liability of foreignness when entering the Zevar market.

United Nerumbia and Fernsland are two 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 United Nerumbia.

A trend observed during the globalization 3.0 stage involves:

multinational companies organizing as global-collaboration networks.