Quiz 7 study guide
Which one of the following is not a factor that a company must contend with in competing in the markets of foreign countries? Multiple Choice Variations in market growth rates from country to country and important country-to-country differences in consumer buying habits and buyer tastes and preferences Country-to-country variations in host-government policies and trade requirements Product designs suitable for one country are sometimes inappropriate in another Vulnerability to adverse shifts in currency exchange rates A need to convince shippers to keep transportation costs low
A need to convince shippers to keep transportation costs low Explanation All of the above market conditions across countries except transportation costs greatly influence a company's strategy choices in international markets: (1) buyer tastes, differing population sizes, income levels, market growth rates, and other demographic factors that influence product customization decisions; (2) wage rates, worker productivity, energy costs, environmental regulations, tax rates, and inflation rates that influence location choices; and (3) government policies, economic risk, and political risk that make a country's business climate attractive or unattractive.
Which of the following is not a potential motivation for entering into strategic alliances or other cooperative arrangements with foreign companies? Multiple Choice Gain wider access to attractive country markets Gain better access to scale economies in production and/or marketing Fill competitively important gaps in their technical expertise and/or knowledge of local markets Better enable the use of a "think global, act global" strategy and facilitate cross-market subsidization Share distribution facilities and dealer networks, thus mutually strengthening the allies' access to buyers
Better enable the use of a "think global, act global" strategy and facilitate cross-market subsidization Explanation Strategic alliances, joint ventures, and other cooperative agreements with foreign companies are a favorite and potentially fruitful means for entering a foreign market or strengthening a firm's competitiveness in world markets in order to: (1) strengthen a company's ability to gain a foothold in a desirable market; (2) capture economies of scale in production and/or marketing; (3) fill gaps in technical expertise and/or knowledge of local markets (buying habits and product preferences of consumers, local customs, and so on); (4) share distribution facilities and dealer networks to mutually strengthen access to buyers; and (5) refocus energies away from competition between allies and instead refocus then toward teaming up to close the gap on leading companies; and (6) allow each partner to preserve its independence and avoid using perhaps scarce financial resources to fund acquisitions.
Which of the following statements about entering developing markets such as China, India, Russia, and Brazil is correct? Multiple Choice Observing and following the lead of local competitors is the sole guarantee of success in developing markets. Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers. Entering an emerging market should always involve a best-cost strategy. Standardized products are typically more successful in emerging country markets. Profitability always comes quickly to entrants into developing markets because of global branding.
Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers.Correct Explanation Among the strategy options for tailoring a company's strategy to fit the sometimes unusual or challenging circumstances presented in developing-country markets such as China, India, Brazil, or Russia are the following: (1) prepare to compete on the basis of low price, (2) modify aspects of the company's business model or strategy to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding), (3) try to change the local market to better match the way the company does business elsewhere, and (4) stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances. Patience and long-term thinking are also essential, as profitability does not often come quickly or easily to entrants.
In order to use location to build competitive advantage when competing on domestic and international level a company must; Multiple Choice transfer company expertise to cross-border markets and initiate actions to contend on an international level. pursue blue-ocean opportunities both in the company's home country market and in global markets. use acquisition and rapid-growth strategies to better defend against expansion-minded international rivals. try to change the local market to better match the way the company does business elsewhere. Consider whether to concentrate each activity it performs in a few select countries or disperse the performance of the activity to many nations and determine in which countries it should locate particular activities
Consider whether to concentrate each activity it performs in a few select countries or disperse the performance of the activity to many nations and determine in which countries it should locate particular activities Explanation To use location to build competitive advantage, a company must consider: (1) whether to concentrate each internal process in a few countries or to disperse the performance of each process to many nations, (2) in which countries to locate particular activities and how to engage in cross-border coordination of those activities, (3) whether to concentrate or disperse operations, and (4) locating value chain activities among various countries in ways that lower costs and achieve greater product differentiation.
Which of the following is not a typical option that companies have to consider to tailor their strategy to fit the circumstances of developing country markets? Multiple Choice Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals.CorrectPrepare to compete on the basis of low price. Be prepared to modify aspects of the company's business model to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding). Try to change the local market to better match the way the company does business elsewhere. Stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances.
Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals. Explanation Among the strategy options for tailoring a company's strategy to fit the sometimes unusual or challenging circumstances presented in developing-country markets are the following: (1) prepare to compete on the basis of low price, (2) modify aspects of the company's business model or strategy to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding), (3) try to change the local market to better match the way the company does business elsewhere, and (4) stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances.
Which one of the following statements concerning the impact of fluctuating exchange rates on companies competing in foreign markets is not true? Multiple Choice Fluctuating exchange rates pose significant risks to a company's competitiveness in foreign markets. Exchange rate shifts can produce sometimes favorable and sometimes unfavorable effects on a company's competitiveness. Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made. Exporters win when the currency of the country from which the goods are being exported grows weaker relative to the currencies of the countries to which goods are being exported. If the exchange rate of U.S. dollars for euros changes from $1.15 per euro to $1.25 per euro, then it is correct to say that the U.S. dollar has grown weaker.
Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made. Explanation Fluctuating exchange rates impact companies that export goods to foreign countries. Companies always gain in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak. Exporters are disadvantaged when the currency of the country where goods are being manufactured grows stronger. Domestic producers under pressure from lower-cost imports are benefited when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made, causing imports to be more expensive and domestically produced goods more price-competitive.
Which of the following is not an advantage of utilizing a licensing strategy to participate in foreign markets? Multiple Choice The ability to shift the costs and risks to the licensee The ability to generate income from royalties The ability to enter international markets even though the company lacks international organizational capabilities and the resources to do so The ability to avoid risks of committing resources to country markets that are unfamiliar or otherwise risky The ability to safeguard the company's technical know-how or patents
The ability to safeguard the company's technical know-how or patents Explanation The advantages of a licensing entry strategy to participate in foreign markets accrue when a firm with valuable technical know-how or a unique patented product wishes to leverage without committing significant organizational capabilities and resources to enter foreign markets that are unfamiliar, politically full of risk, or economically uncertain. The big disadvantage of licensing is the risk of providing valuable technological know-how to foreign companies and thereby losing some degree of control over its use; monitoring licensees and safeguarding the company's proprietary know-how can prove quite difficult in some circumstances.
Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous Multiple Choice when high transportation costs make it expensive to operate from central locations. whenever buyer-related activities are best performed in locations close to buyers. if economies of scale are essential to achieving acceptable production costs. Two answers are correct when high transportation costs make it expensive to operate from central locations and whenever buyer-related activities are best performed in locations close to buyers. if trade barriers and transportation costs fall, making it more profitable to operate from a central location in the company's home market.
Two answers are correct when high transportation costs make it expensive to operate from central locations and whenever buyer-related activities are best performed in locations close to buyers. Explanation Dispersing an internal process across many countries is more advantageous in some situations. Buyer-related activities such as distribution to dealers, sales and advertising, and after-sale service usually must take place close to buyers, making it necessary to physically locate the capability to perform such activities in every country market where a global firm has major customers. Dispersing activities to many locations is also competitively important when high transportation costs, diseconomies of large size, and trade barriers make it too expensive to operate from a central location or to hedge against the risks of fluctuating exchange rates and adverse political developments.
The advantages of manufacturing goods in a particular country and exporting them to foreign markets Multiple Choice are seriously compromised by the potential for local government officials to raise tariffs on the imports of foreign-made goods into their country. are greatest when local consumers prefer products manufactured inside the country's borders. are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. are largely unaffected by tariffs or quotas.
are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. Explanation Fluctuating exchange rates impact companies that export goods to foreign countries. Companies always gain in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak. Exporters are disadvantaged when the currency of the country where goods are being manufactured grows stronger.
The multidomestic strategy of "think local, act local" Multiple Choice is most appropriate when the need for local responsiveness is low. avoids host country ownership requirements and import quotas. facilitates the transfer of a company's capabilities, knowledge, and other resources across country borders. is the only global market entry strategy conducive to building a single worldwide competitive advantage. becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly.
becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly. Explanation A think-local, act-local approach to strategy making is most appropriate when the need for local responsiveness is high due to significant cross-country differences in demographic, cultural, and market conditions and when the potential for efficiency gains from standardization is limited.
Using domestic plants as a production base for exporting goods to selected foreign country markets Multiple Choice is usually a superior approach to competing in international markets. can be a competitively successful strategy when a company is focusing on vacant market niches in each foreign country. can be an excellent initial strategy to pursue international sales. is usually a weak strategy when competitors are pursuing licensing strategies. can be a powerful strategy because the company is not vulnerable to tariffs or quotas.
can be an excellent initial strategy to pursue international sales. Explanation Using domestic plants as a production base for exporting goods to foreign markets is an excellent initial strategy for pursuing international sales. It is a conservative way to test the international waters.
A "think global, act global" approach to strategy making is preferable to a "think local, act local" approach when Multiple Choice customer preferences vary significantly from country to country.it is necessary to delegate strategy making to local managers with firsthand knowledge of local conditions. plants need to be scattered across many countries to avoid high shipping costs. country-to-country differences are small enough to be accommodated within the framework of a mostly uniform global strategy. host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards.
country-to-country differences are small enough to be accommodated within the framework of a mostly uniform global strategy. Explanation While multidomestic strategies are best suited for industries where a fairly high degree of local responsiveness is important, global strategies are best suited for globally standardized industries in which small country-by-country differences can be accommodated by a global strategy.
Which of the following is the biggest strategic issue when competing in the markets of foreign countries? Multiple Choice determining whether to standardize or customize the company's offerings. learning about the regulation processes and political and capital requirements of each country market. selecting among global, transnational, or international entry strategies. deciding which price strategy to follow. avoiding the risks posed by fluctuating exchange rates.
determining whether to standardize or customize the company's offerings Explanation Companies operating in an international marketplace have to wrestle with whether and how much to customize their offerings in each country market to match local buyers' tastes and preferences or whether to pursue a strategy of offering a mostly standardized product worldwide. The tension between the market pressures to localize a company's product offerings country by country and the competitive pressures to lower costs is one of the big strategic issues that participants in foreign markets have to resolve.
A "think global, act global" multi-domestic type of strategy Multiple Choice focuses on the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business. always makes a company vulnerable to rivals employing "think global, act global" strategies. protects a multinational firm against fluctuating exchange rates. is generally an inferior strategy when one or more foreign competitors is pursuing a global low-cost strategy. employs essentially the same basic competitive strategy theme in all country markets.
focuses on the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business. Explanation Companies employing a global strategy sell the same products under the same brand names everywhere, utilize much the same distribution channels in all countries, and compete on the basis of the same capabilities and marketing approaches worldwide. Although the company's strategy or product offering may be adapted in minor ways to accommodate specific situations in a few host countries, the company's fundamental competitive approach (low cost, differentiation, best cost, or focused) remains very much intact worldwide, and local managers stick close to the global strategy.
The primary reasons that companies opt to expand into foreign markets are to Multiple Choice boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape dealing with strong labor unions. gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base. grow sales faster than the industry average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances. avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of a global strategy instead of a multidomestic strategy. raise the entry barriers for industry newcomers, neutralize the bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers.
gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base. Explanation A company may opt to expand outside its home country for a variety of reasons, including: (1) to gain access to new customers; (2) to achieve lower costs and enhance competitiveness; (3) to leverage core competencies in new markets; (4) to gain access to resources and capabilities (labor, resources, technology, distribution networks) in foreign markets; and (5) to spread business risk across a wider market base.
The advantages of using a franchising strategy to pursue opportunities in foreign markets include Multiple Choice being particularly well-suited to the international expansion efforts of companies with global strategies. having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees. helping build brand awareness in international markets. being well suited to companies that employ cross-market subsidization. gaining support from local governments in the form of subsidies and meeting local content requirements.
having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees. Explanation Franchising has much the same advantages as licensing. The franchisee bears most of the costs and risks of establishing foreign locations, so a franchisor has to expend only the resources to recruit, train, support, and monitor franchisees.
The chief difference between a "think global, act global" and a "think global, act local" approach to crafting a global strategy is that Multiple Choice a "think global, act local" approach involves charging much different prices in the various country markets where the company competes. a "think global, act local" approach involves much less adherence to using the same basic competitive strategy theme (low-cost, differentiation, best-cost, or focused) in all country markets. a "think global, act local" approach involves considerably less adherence to utilizing the same capabilities, distribution channels, and marketing approaches worldwide. local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions. a "think global, act global" approach involves selling under a single brand worldwide, whereas a "think global, act local" approach involves the use of multiple brands (often a local brand for each local market).
local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions. Explanation The major difference between global ("think global, act global") and transnational ("think global, act local") strategies are approaches to accommodate cross-country variations in buyer tastes, local customs, and market conditions. Transnational strategies tend to allow local managers more latitude in adapting the global strategy while also striving for the benefits of standardization.
Multinational competitors tend to concentrate activities in a limited number of locations when Multiple Choice prices and competitive conditions are strongly linked across country markets to form a world market. there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages. the risk of fluctuating exchange rates is very high. host-country governments can be persuaded to erect high tariff barriers to protect the company's operations from foreign competitors and it is not imperative to be responsive to buyer needs and competitive conditions in each country. competitive conditions make it infeasible to employ a profit sanctuary strategy or an export strategy.
there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages. Explanation Multinational companies should concentrate internal processes in a few locations in the following situations: (1) when the costs of manufacturing or other activities are significantly lower in some geographic locations than in others; (2) when there are significant scale economies; (3) when there is a steep learning curve associated with performing an activity; and/or (4) when certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages, such as a sophisticated production facility or highly trained local personnel.
Companies tend to concentrate their activities in a limited number of locations Multiple Choice where the costs of manufacturing or other activities are significantly higher. where there are significant scale diseconomies. when there is a steep learning curve associated with performing an activity. when certain locations have inferior resources or allow for poorer coordination of related activities. where sophisticated production facilities or highly trained local personnel are unavailable.
when there is a steep learning curve associated with performing an activity. Explanation Multinational companies should concentrate internal processes in a few locations in the following situations: (1) when the costs of manufacturing or other activities are significantly lower in some geographic locations than in others (2) when there are significant scale economies (3) when there is a steep learning curve associated with performing an activity and/or (4) when certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages, such as a sophisticated production facility or highly trained local personnel
One of the biggest strategic challenges to competing in the international arena is Multiple Choice whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers. determining how many foreign firms to license to produce and distribute the company's products. whether to pursue a global strategy or an international strategy. whether to offer a product at a priced based on the median income of the population. whether to charge the same price in all country markets.
whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers. Explanation Companies operating in a global marketplace must wrestle with whether and how much to customize their offerings in each different country market to match the tastes and preferences of local buyers or whether to pursue a strategy of offering a mostly standardized product worldwide.