EXAM 2: MGT405- CH 8 Q

T/F: A transnational strategy makes the most sense when demand for local responsiveness is minimal.

False

T/F: All nations have similar management ideologies, which enable them to build national competitive advantages.

False

T/F: Global standardization strategy emphasizes customization and product differentiation.

False

T/F: If a company's competitive advantage derives from its control of proprietary technological knowhow, it should either license its technology to others or pursue a joint venture.

False

T/F: The globalization of production has been decreasing as companies have been facing lower barriers to international trade and location economies.

False

T/F: Companies that pursue a global standardization strategy are often in the business of industrial-goods industries whose products often serve universal needs.

True

T/F: Company A has entered into an alliance with Company B with the agreement that they will exchange skills and technologies that the other desires to help them both profit. One way to achieve the goal of this alliance is to enter into a cross-licensing agreement.

True

T/F: Company A has established itself in a global market. Company B entered the market with a lower cost structure due to efficient manufacturing and lower priced products and has taken the global market share from Company A. This is an example of a negative aspect of pursuing an international strategy.

True

T/F: Economies of scale can be achieved by international expansion because a company can lower its average unit cost, better utilize its production facilities, and increase its bargaining power with suppliers.

True

T/F: Factor endowments—the cost and quality of factors of production—are a prime determinant of the competitive advantage that certain countries have in certain industries.

True

T/F: Licensing is a good choice for companies that are short the capital funds needed to develop overseas operations or hesitant to risk resources in a questionable political climate in a foreign country.

True

T/F: Local responsiveness may be driven by economic and political demands placed on companies by host country governments.

True

T/F: Location economies refer to the economic benefits that arise from performing a value creation activity at an optimal location.

True

T/F: Most manufacturing companies begin their global expansion by exporting.

True

T/F: One advantage of a joint venture is that a company may benefit from a local partner's knowledge of the many dimensions of a host country.

True

T/F: Starbucks, Sony, and Coca-Cola conduct business in two or more countries. These companies can be referred to as multinational companies.

True

T/F: The result of the shift of national to global markets is the change from oligopolies to segments of fragmented, global industries in which competition threatens profitability and forces these companies to focus intently on qualities such as efficiency and customer responsiveness.

True

T/F: The steps a company should take to select a good partner include collecting available information, compiling data from third parties that have had business dealings with the potential partner, and establishing a relationship through face-to-face meetings to ensure that the partnership is a good fit.

True

T/F: The upside of using a localization strategy is that a company can charge a higher price because the value achieved by local customization and greater local demand allows the company to reduce costs by attaining scale economies in the local market.

True

T/F: To take advantage of the possible value that global subsidiaries can bring, companies must be open to receive resources from outside the corporate center and provide incentives for new ideas and risk-taking by employees.

True

Ford and Mazda have decided to enter into a strategic alliance and have agreed upon an appropriate alliance structure. The companies have decided to host a conference for management and employees to better understand the purpose and objectives of the alliance and allow employees of both companies to build interpersonal relationships which will build trust and facilitate harmonious relations between the two firms. Which of the following describes this alliance management technique? a. Building relational capital b. Awareness of cultural sensitivity c. Creating learning symmetry d. Securing competitive position e. Establishing a cost-sharing partnership

a. Building relational capital

Which of the following is a disadvantage of franchising? a. It doesn't ensure consistent product quality. b. It hinders companies ability to engage in global strategic coordination. c. It involves high development costs and risks. d. It enables the company to collect all the profits made by the franchisees. e. It frees companies from the task of monitoring and assisting operations at franchisees.

a. It doesn't ensure consistent product quality.

A company, Pluto Inc., employs the franchising strategy to enter a new national market. Which of the following statements is MOST likely to be true of Pluto? a. It is more likely to be a service company. b. It is more likely to have a greater control over the quality the products manufactured in the foreign country. c. It is less likely to impose strict rules regarding how a franchisee does business. d. It is less likely to receive royalty payments from the franchisee. e. It is more likely to bear the development costs associated with opening a foreign market on its own.

a. It is more likely to be a service company.

Which of the following might necessitate the delegation of manufacturing and production functions to foreign subsidiaries? a. Pressures for local responsiveness due to differences in infrastructure or traditional practices among countries b. When meaningful differentiation on non-price factors is difficult and price is the main competitive weapon c. Where there is persistent excess capacity, and where consumers are powerful and face low switching costs d. In industries producing commodity-type products e. The liberalization of the world trade and investment environment in recent decades

a. Pressures for local responsiveness due to differences in infrastructure or traditional practices among countries

Strong pressures for convergence due to a shared history and culture, or the establishment of a trading block where there are deliberate attempts to harmonize trade policies, infrastructure, and regulations have contributed to the rise in which of the following trends? a. Regionalism b. Globalization c. Monopolies d. Nationalism e. Traditional practices

a. Regionalism

Which of the following is a disadvantage of strategic alliances? a. They give competitors a low-cost route to new technology and markets. b. They do not facilitate entry into a foreign market. c. They do not allow for sharing of risks and fixed costs. d. They mandate that the companies do not share complementary competencies and assets. e. They cause problems when it comes to establishing technological standards for the industry.

a. They give competitors a low-cost route to new technology and markets.

Companies that pursue which of the following strategies are trying to develop a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company's global network of operations? a. Transnational b. Downsizing c. Centralization d. Localization e. Global standardization

a. Transnational

Swedish strength in fabricated steel products (such as ball bearings and cutting tools) has drawn on strengths in Sweden's specialty steel industry. This is an example of which of the following attributes that impact national competitive advantage? a. Local demand conditions b. Competitiveness of related and supporting industries c. Intensity of rivalry in an industry d. Factor endowments e. Differences in distribution channels

b. Competitiveness of related and supporting industries

Dietizza is a fast-food network that makes low-calorie pizzas. As the firm wishes to expand its operations in different locations, it has licensed a few entrepreneurs to open Dietizza outlets under the company's trademark. The entrepreneurs will take up the responsibility of costs, while Dietizza will assist them in running operations. The company will receive royalty payments and a percentage of profits from the entrepreneurs. Which of the following concepts is illustrated here? a. Exporting b. Franchising c. Wholly owned subsidiary d. Strategic alliance e. Joint venture

b. Franchising

Pressures for cost reductions are intense in which of the following industries? a. Industries producing commodity-type products that serve specific needs b. Industrial and consumer products such as handheld calculators and personal computers c. Industries where major competitors are based in high-cost locations d. Industries where there is persistent lowered capacity e. Industries where consumers are not powerful and face high switching costs

b. Industrial and consumer products such as handheld calculators and personal computers

Japanese customer's sophisticated knowledge of cameras created pressure for innovation and quality that stimulated the Japanese camera industry to improve product quality and introduce innovative models. This is an example of which of the following attributes? a. Factor endowments b. Local demand conditions c. Related and supporting industries d. Firm strategy, structure, and rivalry e. Using the framework ​

b. Local demand conditions

Nutrimax, a sports foods manufacturer, has recently expanded its operations to different countries. The company has realized that customers in different countries have different tastes and preferences. So, the company customizes its products based on the country where it's selling. In this scenario, Nutrimax is most likely to be using which of the following strategies? a. Global standardization b. Localization c. Achilles heel d. Centralization e. Transnational

b. Localization

Which of the following has occurred in international trade over the past half-century? a. There has been a dramatic increase in the barriers to international trade. b. Tariff rates on manufactured goods traded by advanced nations have fallen. c. Regulations prohibiting foreign companies from entering domestic markets and establishing production facilities have increased. d. The volume of world trade has decreased dramatically. e. There has been a decline in the value of foreign direct investment.

b. Tariff rates on manufactured goods traded by advanced nations have fallen.

Relish is a large fast-food chain that operates in many countries. As there are several competitors in the fast-food sector, the company has been facing intense pressures for achieving low-cost structures. The company also faces the task of customizing its product line as there are significant differences in tastes and preferences among customers in different geographic locations. To achieve both low costs and product differentiation, the company should aim to pursue a which of the following strategies? a. Global standardization b. Transnational c. Localization d. Downsizing e. Divestment

b. Transnational

Global expansion: a. is feasible only for non-technology-based companies. b. can enable companies to increase their profitability and grow their profits more rapidly. c. has significantly decreased in the recent years as the industry barriers are now higher. d. does not involve selling existing products to new markets in different countries. e. is not feasible for service-based firms.

b. can enable companies to increase their profitability and grow their profits more rapidly.

In order to achieve a competitive advantage in certain countries and certain industries using factor endowments, a company needs to have which of the following? a. Only basic factors of production such as land, labor, and capital b. Only advanced factors of production such as technological know-how and managerial sophistication c. A combination of basic and advanced factors of production d. Demand for the industry's product or service e. Factor endowments are not a prime determinant of the competitive advantage

c. A combination of basic and advanced factors of production

Which of the following statements is true in the context of local demand conditions? a. Companies are typically least sensitive to the needs of their closest customers. b. Home demand plays little role in helping companies upgrade their national competitive advantage. c. A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding. d. The characteristics of international demand alone shape the attributes of a company's products; not local demand. e. Local demand characteristics have little role to play in creating pressure for innovation and quality.

c. A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding.

Which of the following factors increases pressures for local responsiveness? a. Powerful buyers b. Uniformity in distribution channels c. Host government demands d. Similarities in customer tastes and preferences e. Competitors that are based in high-cost locations

c. Host government demands

Which of the following statements is true about global standardization strategy? a. It emphasizes product customization to specifically meet customer needs. b. It involves the spreading of production, marketing, and research and development activities of companies to all the locations it operates in. c. It makes most sense when there are strong pressures for cost reductions. d. It makes most sense when there is maximum pressure for local responsiveness. e. It fails to focus on achieving location and scale economies.

c. It makes most sense when there are strong pressures for cost reductions.

Which of the following statements is true about international strategy? a. It is usually adopted by companies that face intense cost pressures due to competition. b. It makes most sense when the pressures for local responsiveness are very intense. c. It often involves the head office retaining tight control over marketing and product strategy. d. It often involves decentralizing product development functions such as R&D to different subsidiaries. e. It involves extensive scope for localization and product differentiation.

c. It often involves the head office retaining tight control over marketing and product strategy.

Aries Travels is a company that offers holiday and travel packages. The company realizes that customer preferences vary and thus extensively customizes its packages. As there are not many competitors in the market in which Aries Travels operates, there are minimal pressures to reduce costs. Aries Travels is most likely to have adopted which of the following strategies? a. Global standardization b. International c. Localization d. Transnational e. Harvest

c. Localization

Which of the following is responsible for the emergence of enormous global markets for standardized consumer products such as McDonald's hamburgers, Coca-Cola, and GAP clothes? a. Global marketing strategies b. Lowered tariffs and the removal of trade barriers c. Modern communications and transport technologies d. Significant differences in consumer tastes and preferences e. The infrastructure or traditional practices among countries

c. Modern communications and transport technologies

The Achilles heel of international strategy is that: a. economies of scale cannot be achieved. b. customization of products makes the company lose its credibility. c. competitors inevitably emerge. d. non-price differences among products hold little importance. e. customer preferences eventually become identical.

c. competitors inevitably emerge.

Most manufacturing companies begin their global expansion by: a. licensing. b. franchising. c. exporting. d. forming a joint venture. e. setting up a wholly owned subsidiary in the host country.

c. exporting.

Which of the following is NOT a desired characteristic of a partner in a strategic alliance? a. A partner should be instrumental in aiding the company accomplish strategic goals such as achieving market access. b. A partner should be willing to share the costs and risks of new-product development. c. A partner should allow access to critical core competencies. d. A partner should bring their own vision for the alliance to help establish a new agenda. e. A partner will not exploit the alliance and will offer as much as it takes from the alliance.

d. A partner should bring their own vision for the alliance to help establish a new agenda.

Which of the following is NOT a risk of exporting? a. Tariff barriers b. Transportation costs c. Location diseconomies d. High manufacturing costs e. Delegation of marketing activities to a local agent

d. High manufacturing costs

WKL Entertainment Inc. is a service-based firm with very few competitors. The company is looking to sell the same basic product services in different nations and charge a relatively high price for it. WKL does not face direct competitors, so the company does not have to deal with strong pressures to minimize its costs. Which of the following strategies should WKL Entertainment Inc. managers pursue? a. Global standardization b. Transnational c. Localization d. International e. Multinational

d. International

Which of the following statements is true about transnational strategy? a. It gives little emphasis to cost reduction and achieving scale economies. b. It makes little sense when the pressures for local responsiveness are intense. c. It is an easy one to pursue because it places minimal demands on the company. d. It fosters a flow of resources such as process knowledge between different subsidiaries in the company's global network of operations. e. It is adopted by companies that produce standardized goods that do not require product differentiation.

d. It fosters a flow of resources such as process knowledge between different subsidiaries in the company's global network of operations.

Which of the following statements is true about localization strategy? a. It focuses on marketing a standardized product worldwide to achieve cost reductions. b. It makes most sense when cost pressures are extremely intense. c. It is most appropriate when there are similarities among consumer tastes and preferences across nations. d. It involves some duplication of functions and smaller production runs. e. It usually relieves companies of the task of closely monitoring their costs.

d. It involves some duplication of functions and smaller production runs.

Which of the following environments are optimal for a localization strategy? a. When pressures for local responsiveness and cost reductions are both low b. When pressures for local responsiveness and cost reductions are both high c. When pressures for local responsiveness are low and pressures for cost reductions are high d. When pressures for local responsiveness are high and pressures for cost reductions are low e. When pressures for local responsiveness and cost reductions are both moderate

d. When pressures for local responsiveness are high and pressures for cost reductions are low

Which of the following entry modes allows a company to engage in global strategic coordination? a. Exporting b. Licensing c. Joint ventures d. Wholly owned subsidiaries e. Franchising

d. Wholly owned subsidiaries

When a company performs a value creation activity in a region that is optimal for that activity, wherever in the world that might be, it is trying to capitalize on: a. negative feedback loops. b. economies of scope. c. the transnational strategy. d. location economies. e. its localization strategy.

d. location economies.

Black and Decker, Capitol One, Gillette, and Unilever are all companies that conduct business in two or more national markets. These companies are known as: a. bimarket companies. b. national companies. c. domestic companies. d. multinational companies. e. localized companies.

d. multinational companies.

Which of the following describes an effect of the increased competition caused by the globalization of production and markets in an industry? a. A company must face rivals not only on the domestic, but also on the foreign front. b. There has been a change from consolidated oligopolies to smaller fragmented, global industries that battle each other for market share. c. It has increased both the threat of entry and the intensity of rivalry within many formerly protected national markets. d. The threat of decreased profitability has caused companies to focus on efficiency, quality, customer responsiveness, and innovative ability. e. All of these are effects of the increased competition caused by the globalization of production and markets in an industry.

e. All of these are effects of the increased competition caused by the globalization of production and markets in an industry.

Which of the following is an example of regional convergence? a. Organization of the Petroleum Exporting Countries (OPEC) b. European Union (EU) c. North American Free Trade Agreement (NAFTA) d. Association of South East Asian Nations (ASEAN) e. All of these are examples of regional convergence.

e. All of these are examples of regional convergence.

In the wireless telecommunications industry, different technical standards are found in different parts of the world. A technical standard known as GSM is common in Europe, and an alternative standard, CDMA, is more common in the United States and parts of Asia. Equipment designed for GSM will not work on a CDMA network and vice versa. Which of the following pressures for local responsiveness does this represent? a. Global environmental demands b. Host government demands c. Differences in distribution channels d. Differences in customer tastes and preferences e. Differences in infrastructure

e. Differences in infrastructure

Which of the following is an advantage of international licensing? a. It enables the company to realize scale economies and location economies through manufacturing products in a centralized location. b. It allows the company to collect profits from one licensee and use them to support others. c. It eliminates the risk of losing control over a technology that the company owns. d. It enables the company to coordinate its strategy efficiently to achieve competitive advantage. e. It takes away the pressure of development costs and risks associated with opening a foreign market from the company.

e. It takes away the pressure of development costs and risks associated with opening a foreign market from the company.

Which of the following strategies is represented by McDonald's experimenting with their traditional menu, as well as changing the layout and theme of restaurants in foreign locations? a. Realizing location economies b. Realizing cost economies from global volume c. Expanding the market by leveraging products d. Attempting to minimize unit costs e. Leveraging the competencies of global subsidiaries

e. Leveraging the competencies of global subsidiaries

Which of the following factors increases pressures for cost reductions? a. Meaningful differentiation between products b. Reduced international competition c. Competitors that are based in high-cost locations d. High switching costs e. Persistent excess capacity

e. Persistent excess capacity

Which entry mode gives a multinational company the tightest control over foreign operations? a. Exporting from the home country and letting a foreign agent organize local marketing b. Licensing c. Franchising d. Entering into a joint venture with a foreign company to set up overseas operations e. Setting up a wholly owned subsidiary

e. Setting up a wholly owned subsidiary

Which of the following statements is true in the context of attributes of national competitive advantage? a. Factor endowments do not encompass aspects such as managerial sophistication. b. Companies are typically least sensitive to the needs of their closest customers. c. The benefits of investments in advanced factors of production by related and supporting industries are confined to those industries. d. Domestic rivalry creates pressures to increase costs and avoid investing in upgrading advanced factors. e. The nature of home demand shapes the attributes of domestically made products.

e. The nature of home demand shapes the attributes of domestically made products.

United States electronics companies setting up research and production facilities in Japan to take advantage of Japanese success in consumer electronics is an example of which of the following? a. Factor endowments b. Local demand conditions c. Related and supporting industries d. Firm strategy, structure, and rivalry e. Using the framework

e. Using the framework

Global economies of scale can be realized by: a. restricting the expansion of overseas sales. b. limiting the utilization of production facilities. c. curbing bargaining power with suppliers. d. decreasing cost savings through learning effects. e. spreading the fixed costs associated with developing a product.

e. spreading the fixed costs associated with developing a product.