International Business Chapter 12 Multiple Choice

Cost reduction pressures tend to be particularly intense in industries that A. create products that serve universal needs. B. create customized products. C. are not involved in international business. D. produce products that have inelastic demand. E. serve different customers with different needs.

A. create products that serve universal needs

Johnson Food Products believes that as far as its products are concerned, tastes vary worldwide and so it has to customize its product offering, marketing strategy, and business strategy to differing national conditions. Johnson Food Products' ability to increase its profitability and profit growth by expanding globally is constrained A. by the imperative of localization. B. by the economies of scale. C. due to customer surplus. D. due to the leveraging of skills developed in foreign operations. E. due to the dispersion of individual value creation activities.

A. by the imperative of localization

Which of the following is most likely to necessitate the delegation of marketing functions to national subsidiaries? A. differences in distribution channels B. pressures for decreasing consumer surplus C. lack of product customization D. pressures for increasing economies of scale E. pressures for increasing consumers' reservation price

A. differences in distribution channels

According to Michael Porter, what are the two basic strategies for creating value and attaining a competitive advantage in an industry? A. differentiation and low-cost B. value creation and generalization C. one-size-fits-all and zero-sum D. comparison and standardization E. profitability and strategic fit

A. differentiation and low-cost

Which of the following refers to systematic reductions in production costs that have been observed to occur over the life of a product? A. experience curve B. learning effects C. location economies D. efficiency slope E. economies of scale

A. experience curve

The liberalization of the world trade and investment environment in recent decades, by facilitating greater international competition, has generally A. increased cost pressures. B. decreased the demand for local responsiveness. C. decreased pressures for cost reduction. D. increased consumer surplus. E. reduced the production of conventional commodity products.

A. increased cost pressures

Mayer Life Systems, a manufacturer of surgical and medical appliances, invented and patented a new dialysis machine that radically reduced maintenance and operational issues. Responding to a global demand, it decided to sell the machines manufactured at its plant in the United States to various markets across the globe. Since the product features provided by Mayer were not provided by any other competitor, Mayer did not feel any pressure for cost reductions. Which of the following strategies is most likely being pursued by Mayer? A. international B. localization C. global standardization D. transnational E. nationalization

A. international

Merck, the pharmaceutical company, has taken more than a thousand drugs through the federal approval process and so can do it more cost efficiently than many of its competitors who are relatively new to the industry. Which of the following refers to cost savings that come to Merck in the drug approval process? A. learning effects B. exponential effects C. ancillary effects D. economies of scale E. location economies

A. learning effects

The two phenomena that help explain the experience curve are A. learning effects and economies of scale. B. technology inputs and wealth transfer. C. leveraging subsidiary and local responsiveness. D. standardized manufacturing and global web. E. efficiency frontier and location economies.

A. learning effects and economies of scale

Typically, the price a firm charges for a good or service is A. less than the value placed on that good or service by the customer. B. more than what customers assume it would be. C. more than the market price for similar goods or services. D. the same as the value placed on that good or service by the customer. E. less than the lowest priced similar good or service in the market.

A. less than the value placed on that good or service by the customer

Which of the following conditions is most favorable to reap gains from global scale economies? A. low demand for local responsiveness B. high pressures for cost reduction C. lack of universal needs D. national differences in accepted business practices E. high pressure to delegate production to domestic subsidiaries

A. low demand for local responsiveness

By using significant standardization in the use of aircrafts and by streamlining its operations, Southwest Airlines competes by offering its' flights at a lower price than the competition. According to Michael Porter, the strategy that Southwest Airlines is using is A. low- cost. B. differentiation. C. value transfer. D. efficiency frontier. E. diversification.

A. low-cost

Processes are the A. manner in which decisions are made and work is performed within the organization. B. metrics used to measure the performance of subunits. C. devices used to reward appropriate managerial behavior. D. metrics used to make judgments about how well managers are running the subunits. E. norms and value systems that are shared among the employees of an organization.

A. manner in which decisions are made and work is performed within the organization

The value creation activities of a firm are categorized as A. primary activities and support activities. B. strategic activities and functional activities. C. ancillary functions and tertiary functions. D. primary activities and core activities. E. goal-oriented activities and organizational activities.

A. primary activities and support activities

Managing an alliance successfully requires building interpersonal relationships between the firms' managers, or what is sometimes referred to as A. relational capital. B. interorganizational synergy. C. power equilibrium. D. symbiotics. E. intraorganizational coordination.

A. relational capital

Which of the following terms best represents the requirements that are the same all over the world, such as steel, bulk chemicals, and industrial electronics? A. universal needs B. efficiency frontier C. global web D. lateral requirements E. supreme needs

A. universal needs

Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. In this scenario, Omega's value creation is A. $38. B. $48. C. $10. D. $28. E. $272.

B. $48

Which of the following statements is true about economies of scale? A. Economies of scale lead to an increase in the average unit cost of a product. B. Attaining economies of scale increases a firm's profitability. C. The ability to spread variable costs over a large volume is a source of economies of scale. D. Economies of scale result due to the increase in the perceived value of a product. E. Economies of scale refer to cost savings that come from learning by doing.

B. Attaining economies of scale increases a firm's profitability

_____ are a part of the organization architecture that consists of the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits. A. Reports B. Controls C. Rewards D. Knowledge flows E. Dominions

B. Controls

Which of the following is an observation made by researchers Bartlett and Ghoshal regarding modern multinational enterprises? A. Global logistics industry makes the concept of "location economies" redundant for international firms. B. Core competencies and skills can develop in any of the firm's worldwide operations. C. Flow of skills between a firm and its global subsidiaries should be unidirectional. D. Differentiating across geographic markets helps a firm in reducing costs. E. Customer demands for local customization are on the decline worldwide.

B. Core competencies and skills can develop in any of the firm's worldwide operations

For an international business, which of the following is most likely to be an outcome of protectionism and nationalism in a host-country? A. increase in the attractiveness of location economies B. pressure for localization of production C. requirement of standardization of products or services D. pressure for cost reduction E. decrease in the significance of local responsiveness

B. Pressure for localization of production

A number of studies have observed that a product's production costs decline by some quantity about each time A. annual output is halved. B. cumulative output doubles. C. the workforce is trimmed by 75 percent. D. fixed investment triples. E. foreign domestic investment doubles.

B. cumulative output doubles

Which of the following is a value creation activity that falls into the category of primary activities? A. creation and maintenance of information systems B. customer service C. human resources D. logistics E. company infrastructure maintenance

B. cusomer service

In a bid to compete better in a highly-competitive fitness products market, Omega is focusing primarily on increasing the attractiveness of its product. What Omega is doing is referred to as a A. standardization strategy. B. differentiation strategy. C. target-identification strategy. D. low-cost strategy. E. profitability strategy.

B. differentiation strategy

The efficiency frontier has a convex shape because of A. a high-cost structure. B. diminishing returns. C. a significantly low product value. D. low production costs. E. high profit growth.

B. diminishing returns

Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. While Tom values the Omega wrist band at $122, his friend Dan values it at $105. The value placed by Tom and Dan are what economists would call A. producer's surplus. B. each customer's reservation price. C. each customer's value price. D. the efficiency frontier. E. competitive advantage.

B. each customer's reservation price

Netflix incurs a huge fixed cost to obtain streaming rights to movies and television programs. However, it is able to spread this cost over a large number of subscribers that results in a cost-savings phenomenon referred to as A. volume synergies. B. economies of scale. C. captured savings. D. size effects. E. location economies.

B. economies of scale

Which of the following strategies is most likely to be pursued by a firm when there are strong pressures for cost reductions and demands for local responsiveness are minimal? A. domestic strategy B. global standardization strategy C. international strategy D. transnational strategy E. nationalization strategy

B. global standardization strategy

Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. One of the reasons why Omega typically charges for its wrist band less than the value placed on it by the customer is because A. the firm attempts to create value for the consumers by providing them a wide range of products. B. it is normally impossible to segment a market based on each customer's reservation price. C. the value creation results in a corresponding reduction in costs of production. D. the firm frequently modifies its products to compete with the products introduced by other firms. E. it is highly unlikely that the same good or service will be available to the customers from other firms.

B. it is normally impossible to segment a market based on each customer's reservation price.

Of all the value creation activities in a firm, which of the following creates value by discovering consumer needs and communicating them back to the R&D function of the company, which can then design products that better match those needs? A. production B. marketing and sales C. human resources D. logistics E. information systems

B. marketing and sales

The rate of return that a firm makes on its invested capital is referred to as A. stakeholder return. B. profitability. C. profit growth. D. process value. E. strategic fit.

B. profitability

Which of the following is a primary activity in the operations of a firm? A. logistics function B. research and development C. information systems D. human resource function E. company infrastructure

B. research and development

A cooperative agreement between potential or actual competitors is called a(n) A. tactical union. B. strategic alliance. C. political affiliation. D. economic association. E. nationalization.

B. strategic alliance

Who among the following should be viewed as part of a firm's infrastructure? A. procurement manager B. top management C. production manager D. research and development scientist E. marketing personnel

B. top management

A global car manufacturer wants to start production in China. While catering to local responsiveness, what can the firm do to get scale economies? A. increase costs whenever possible B. use common vehicle platforms and components across many different models C. shorten the production runs for each component D. increase the duplication of functions required for each operation E. manufacture only one type of car and sell it in all the international markets

B. use common vehicle platforms and components across many different models

The value of Omega's top selling fitness product to an average consumer is $150 and the average unit cost of producing that product is $65. In this scenario, $85 ($150-$65) represents A. customer surplus. B. value creation. C. cost curve. D. value efficiency. E. customer reservation.

B. value creation

Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. In this scenario, the consumer surplus is A. $38. B. $48. C. $10. D. $28. E. $272.

C. $10

How does possessing a core competence help a firm? A. It helps a firm to create value in such a way that premium pricing is impossible. B. It reduces a firm's dependence on its logistics function. C. It enables a firm to reduce the costs of value creation. D. It reduces the scope of transfer of skills to foreign markets. E. It reduces the need to replicate a business model in a foreign market.

C. It enables a firm to reduce the costs of value creation

Which of the following is a disadvantage of a strategic alliance? A. Entering into a strategic alliance makes it difficult for a firm to enter into a foreign market. B. As a result of strategic alliance, fixed costs of developing new products tend to increase. C. Strategic alliance gives competitors a low-cost route to new technology and markets. D. Firms that enter into a strategic alliance with a foreign firm tend to face higher trade barriers. E. Strategic alliance always leads to a loss to either of the firms involved.

C. Strategic alliance gives competitors a low-cost route to new technology and markets

Assume that the value of a base model computer to an average consumer is $300, the average price that Dell can charge a consumer for that product is $275, and the average unit cost of producing that product for Dell is $150. For this scenario, which of the following is true? A. Dell can easily increase its price above $300 B. The profit for Dell on each computer is $150 C. The consumer surplus per computer is $25. D. The higher the intensity of competitive pressure, the higher the price that Dell can charge relative to $300. E. The lower the consumer surplus, the greater the value for the money the consumer gets.

C. The consumer surplus per computer is $25

Which of the following statements is true about an international strategy? A. International strategy typically involves taking products first produced for foreign markets and then customizing them for domestic markets. B. International strategy should be pursued by a firm if it manufactures a product that satisfies local, rather than universal, needs. C. When a firm pursues an international strategy, the head office of the firm retains fairly tight control over marketing and product strategy. D. Firms pursuing the international strategy tend to outsource their development functions such as R&D. E. International strategy should be pursued by a firm only if it faces strong competition in foreign markets.

C. When a firm pursues an international strategy, the head office of the firm retains fairly tight control over marketing and product strategy

One of the principal risks associated with a strategic alliance is that A. it brings together the complementary skills of alliance partners. B. it makes it difficult for the partner firms to enter into a foreign market. C. a firm can give away more than it receives. D. it does not allow firms to share fixed costs. E. it almost always fails.

C. a firm can give away more than it receives

In which of the following tasks will the learning effects be most significant? A. pizza delivery for a fast-food major B. data entry for a loan recovery center C. assembly process involving 1,000 complex steps D. sewing buttons onto shirts in a garment factory E. delivering letters to different recipients

C. assembly process involving 1,000 complex steps

According to Michael Porter, superior profitability goes to a firm that A. creates similar products as their competitors. B. keeps the gap between value and cost of production smaller than the gap attained by competitors. C. drives down the cost structure of its business. D. has the highest cost structure in the industry. E. has the least valuable product in the industry.

C. drives down the cost structure of its business

Which of the following shows all of the different positions that a firm can adopt with regard to value creation and low cost assuming that its internal operations are configured adequately to support a particular position? A. demand-value model B. experience curve C. efficiency frontier D. optimal output model E. surplus curve

C. efficiency frontier

A firm's profitability is maximized when it A. creates products similar to the products of its competitors. B. strips all the value out of its product offering. C. ensures that it has the right organization structure in place to execute its strategy. D. picks a position on the efficiency frontier that is not viable. E. does not configure its internal operations to reduce costs.

C. ensures that it has the right organizational structure in place to execute its strategy

Omega locates it global manufacturing in Mexico, its global distribution in Honduras, and its design in Germany. By dispersing different stages of its value chain to those locations around the world where the value added is maximized or where the costs of value creation are minimized, Omega has created a(n) A. integral circle. B. dispersal chain. C. global web. D. international mesh. E. worldwide circle.

C. global web

A company can increase its growth rate by taking goods or services developed at home and selling them internationally. The returns from such a strategy are likely to be greater if A. the product is already being offered by local companies in the nations that the company enters. B. the product is a generic product that requires little differentiation. C. indigenous competitors in the nations that the company enters lack comparable products. D. there is a high inflation in the nations that the company enters. E. the product is perceived to be very costly in the home country of the company.

C. indigenous competitors in the nations that the company enters lack comparable products

Xerox had a monopoly on photocopiers for several years as the technology underlying the photocopier was protected by strong patents. As it served a universal need, this favorable position led Xerox to pursue a(n) A. global standardization strategy. B. localization strategy. C. international strategy. D. transnational strategy. E. nationalization strategy.

C. international strategy

Which of the following strategies focuses on increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets? A. international strategy B. global standardization strategy C. localization strategy D. transnational strategy E. nationalization strategy

C. localization strategy

Serving a global market from a single location is consistent with A. establishing a high-cost position. B. taking advantage of location economies. C. moving down the experience curve. D. operating from a position which falls inside the efficiency frontier. E. going up the global web.

C. moving down the experience curve

Firms that compete in the global marketplace typically face two types of competitive pressure A. pressures for increasing investment and pressures to minimize consumer surplus. B. pressures for labor skill enhancement and pressures to minimize economies of scale. C. pressures for cost reductions and pressures to be locally responsive. D. pressures for global promotions and pressures to move down the efficiency frontier. E. pressures for product standardization and pressures to move up the experience curve.

C. pressures for cost reductions and pressures to be locally responsive

Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. While Omega's pricing practice results in a consumer surplus, it typically charges a lower price for the wrist band than the value placed on it by customers because A. the value creation results in a corresponding reduction in costs of production. B. it is highly unlikely that the same good or service will be available to the customers from other firms. C. the firm is competing with other firms for the customer's business. D. the firm charges a price that reveals a consumer's assessment of the product's value. E. the firm creates value for the customer by producing a wide range of products.

C. the firm is competing with other firms for the customer's business

Which of the following caveats is most likely to discourage global expansion of businesses? A. economies of scale B. high consumers' reservation prices C. trade barriers D. mass customization E. low transportation costs

C. trade barriers

Firms that pursue a(n) _____ strategy differentiate their product offering across geographic markets to account for local differences. A. international B. global standardization C. transnational D. multidomestic E. nationalization

C. transnational

Which of the following supports the argument that customer demands for local customization are on the decline worldwide? A. Local and indigenous industries are increasingly filling up available demand. B. High costs of local customization are deterring companies from doing so. C. Governments across the world are standardizing their legal procedures. D. Customer tastes have converged worldwide. E. Managers worldwide ignore the differences in consumer tastes and preferences.

D. Cusomer tastes have converged worldwide

Which of the following is true of a localization strategy? A. It allows a firm to capture the cost reductions of mass-producing a standardized product. B. It reduces duplication of functions. C. It involves longer production runs. D. It makes sense if the value added by customization supports higher pricing. E. It substantially reduces local demand.

D. It makes sense if the value added by customization supports higher pricing

Which of the following is true about learning effects? A. They tend to be more significant in nonrepetitive tasks. B. They tend to be less significant when a task is technologically complex. C. They typically last a lifetime. D. They are important only during the start-up period of a new process. E. They do not have any effect on the cost of production.

D. They are important only during the start-up period of a new process

The 2,500 people working in Omega's corporate office deal with the organizational structure, control systems, and culture of the firm. These three things comprise which support function of Omega? A. human resources B. logistics C. information systems D. company infrastructure E. inventory management

D. company infrastructure

The appropriateness of the strategy that a firm chooses to use in an international market varies with the extent of pressures for A. quality improvement and product standardization. B. customer surplus and quality improvements. C. customer surplus and product standardization. D. cost reductions and local responsiveness. E. product standardization and cost reductions.

D. cost reductions and local responsiveness

Which of the following is a support activity in the operations of a firm? A. research and development B. customer service C. marketing and sales D. creation and maintenance of information systems E. production

D. creation and maintenance of information systems

Which of the following functions creates a perception of superior value in the minds of consumers by solving consumer problems and by supporting them after they have purchased the product? A. production B. marketing and sales C. human resources D. customer service E. logistics

D. customer service

Joanna's assessment of the value of a handbag sold at $110 is $200. The $200 is referred to as the A. market price. B. customer's negotiated price. C. base value of the product. D. customer's reservation price. E. profit growth price.

D. customer's reservation price

Superior value creation relative to rivals requires that the firm A. creates similar products as its competitors so that consumers do not have to pay a premium price. B. has the highest cost structure in the industry. C. creates the least valuable product in the eyes of consumers. D. ensures that the gap between value and cost of production is greater than the gap attained by competitors. E. drives up the cost structure of its business.

D. ensures that the gap between value and cost of production is greater than the gap attained by competitors

Omega recently found that its flagship product had cost the company $129 to manufacture when the company launched it ten years ago. Now, the same product cost just $72 to manufacture. Which of the following terms best represents the systematic reductions in production costs that Omega has achieved over the ten-year life of its flagship product? A. global web B. dispersion linkage C. economies of scale D. experience curve E. efficiency frontier

D. experience curve

Firms that pursue a(n) _____ strategy focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies. A. international B. transnational C. localization D. global standardization E. nationalization

D. global standardization

Pressures for cost reduction are intense in firms A. that produce products that are well differentiated. B. whose major competitors are based in high-cost locations. C. with persistent low capacity. D. in which consumers face low switching costs. E. with no international competition.

D. in which consumers face low swithcing costs

Firms that pursue a(n) _____ strategy take products first produced for their domestic market and sell them across various markets with only minimal local customization. A. nationalization B. transnational C. global standardization D. international E. localization

D. international

Over the course of nearly a hundred years, Omega's labor productivity has increases over time as its employees understand the most efficient ways to perform particular tasks. This is a result of A. diminishing returns. B. location economies. C. economies of time. D. learning effects. E. an efficiency frontier.

D. learning effects

Ford believes that by producing its small cars in Mexico they can take advantage of lower wage rates in that country. By pursuing such a strategy, Ford is most likely to realize A. a position inside the efficiency frontier. B. the experience curve. C. economies of scale. D. location economies. E. demographic advantages.

D. location economies

American Apparel produces in-house all the products that it sells through its network of stores. It has a function in its value chain that controls the transmission of physical materials through the value chain, from procurement through production and into distribution. For American Apparel, that function is A. human resources. B. finance. C. marketing. D. logistics. E. research and development.

D. logistics

Which of the following terms best represents the norms and value systems that are shared among the employees of an organization? A. process scenario B. organizational structure C. business structure D. organizational culture E. management structure

D. organizational culture

For a firm to maximize its profitability, it is necessary that it A. creates products similar to the products of its competitors. B. does not configure its internal operations to reduce costs. C. minimizes the value of the consumer surplus. D. picks a position on the efficiency frontier that is viable. E. strips all the value out of its product offering.

D. picks a position on the efficiency frontier that is viable

For Bank of America, "production" typically occurs when the A. customer specifies the service requirements. B. service is paid for by the customer. C. service is designed in-house. D. service is delivered to the customer. E. customer provides feedback.

D. service is delivered to the customer

Which of the following allows two or more firms to share the fixed costs (and associated risks) of developing new products or processes? A. franchising agreement B. global web C. free trade agreement D. strategic alliance E. dispersion linkage

D. strategic alliance

Profit growth is measured by A. dividing the net profits of the firm by total invested capital. B. subtracting the previous year's gross profit from the current year's gross profit. C. calculating the difference between the previous year's profitability and the current year's profitability. D. the percentage increase in net profits over time. E. adding the profitability of the last two fiscal years.

D. the percentage increase in net profits over time

Which of the following strategies is a firm most likely to pursue when it simultaneously faces both strong cost pressures and strong pressures for local responsiveness? A. global standardization strategy B. localization strategy C. international strategy D. transnational strategy E. nationalization strategy

D. transnational strategy

Which of the following is most likely to be the advantage of locating a value creation activity in the optimal location for that activity? A. It increases the costs of value creation. B. It decreases consumer surplus. C. It helps the firm to achieve a high-cost position. D. It nullifies all trade barriers. E. It enables a firm to differentiate its product offering from those of competitors.

E. It enables a firm to differentiate its product offering from those of competitors

Which of the following is true of a transnational strategy? A. It is easy to implement because it does not place any conflicting demands on a company. B. It is used when the pressures for cost reductions are low. C. It is usually used when the pressure for local responsiveness is relatively low. D. It enables the one-way flow of core competencies. E. It is used by firms that try to achieve low costs through location economies, economies of scale, and learning effects.

E. It is used by firms that try to achieve low costs through location economies, economies of scale, and learning effects

Which of the following is true of a firm that pursues a global standardization strategy? A. It ensures that it pursues a high-cost strategy on a global scale. B. It has its production, marketing, and R&D activities in only one optimum location. C. It tries to customize its products to local conditions. D. It has shorter production runs. E. It reaps maximum benefits from economies of scale and learning effects.

E. It reaps maximum benefits from economies of scale and learning effects

Learning effects tend to be more significant when A. a task involves a few simple steps. B. a task is repeated for a period of over five years. C. the workforce consists of unskilled labor. D. the cumulative output becomes half of what it was originally. E. a technologically complex task is repeated.

E. a technologically complex task is repeated

A firm maximizes its profitability when it A. creates products similar to the products of its competitors. B. minimizes the value provided by its products. C. picks a position on the efficiency frontier that is not viable. D. strips all the value out of its product offering. E. configures its internal operations to support the position selected by it on the efficiency frontier.

E. configures its internal operations to support the position selected by it on the efficiency frontier

By producing its products in larger volume than its competitors, Omega is able to achieve substantial reductions in unit cost. Which of the following refers to Omega's advantage? A. location economies B. learning effects C. standardization economies D. core economies E. economies of scale

E. economies of scale

In general, the more value customers place on a firm's products A. the lesser the profitability of the firm. B. the higher the competitive pressure from other firms. C. the lesser the quality of the product. D. the lesser the consumer surplus for those products. E. the higher the price the firm can charge for those products.

E. the higher the price the firm can charge for those products

A firm is most likely to pursue a global standardization strategy when A. it wants to implement a high-cost strategy on a global scale. B. it wants to reduce consumer surplus. C. there are no universal needs to be served. D. there are strong demands for local responsiveness. E. there are strong pressures for cost reduction.

E. there are strong pressures for cost reduction