BUS-187 Final Exam

Which of the following is an advantage of franchising?

A firm is relieved of many of the costs and risks of opening a foreign market on its own.

Which of the following statements is true of turnkey projects?

A turnkey strategy is particularly useful where FDI is limited by host-government regulations.

Which of the following is the most common approach to expatriate pay?

Balance sheet approach

_____ refer(s) to systematic reductions in production costs that have been observed to occur over the life of a product.

Experience curve

T/F: A firm that adopts a polycentric approach to staffing is likely to suffer from cultural myopia.

False

T/F: A small-scale entrant is more likely than a large-scale entrant to capture first-mover advantages associated with demand preemption, scale economies, and switching costs.

False

T/F: Decentralized production is favored if differences between countries in factor costs have a substantial impact on the costs of manufacturing in various countries.

False

T/F: If the spot rate is $1 = ¥120, and the 30-day forward rate is $1 = ¥130, the dollar is selling at a discount in the forward market.

False

T/F: When a tourist goes to a bank in a foreign country to convert money into the local currency, the exchange rate used is the forward rate.

False

Before a firm is allowed access to the European marketplace, the European Union requires that the quality of the firm's manufacturing processes and products be certified under a quality standard known as _____.

ISO 9000

Identify an advantage of adopting a low minimum efficient scale.

It allows the firm to accommodate demands for local responsiveness.

What is the primary advantage of licensing?

It helps a firm avoid the development costs associated with opening a foreign market.

_____ activities are basically concerned with creating the product, marketing and delivering the product to buyers, and providing support and after-sales service.

Primary

_____ refer to cooperative agreements between potential or actual competitors.

Strategic alliances

A pair of shoes costs £40 in Britain. An identical pair costs $50 in the United States when the exchange rate is £1 = $1.50. Which of the following is correct?

The U.S. offers a better deal.

Make-or-buy decisions are decisions about whether companies should perform a certain value creation activity themselves or outsource it to another entity.

True

T/F: A firm with an ethnocentric staffing policy will fill all key management positions with parent-country nationals.

True

T/F: A firm's performance appraisal systems are an important element of its control systems.

True

T/F: A firm's strategy can be defined as the actions that managers take to attain the goals of the firm.

True

T/F: According to Porter, the way to create superior value is to drive down the cost structure of the business and/or differentiate the product in some way so that consumers value it more.

True

T/F: Countries with fragmented retail systems tend to have long channels of distribution.

True

T/F: Differences in the spot exchange rate and the 30-day forward rate are normal and reflect the expectations of the foreign exchange market about future currency movements.

True

T/F: Firms that sell industrial products or other complex products favor a push strategy.

True

T/F: First-mover advantages are the advantages associated with entering a market early.

True

T/F: In a concentrated retail system, a few retailers supply most of the market

True

T/F: Just-in-time systems are used to economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process and not before.

True

T/F: Lowering the costs is one of the objectives of the production and logistics function of an international firm.

True

T/F: Poor product quality and low productivity are hidden costs associated with basing production in a foreign location.

True

T/F: The number of intermediaries between the producer and the consumer is known as the channel length.

True

T/F: Unions' bargaining power is largely derived from their ability to threaten to disrupt production

True

T/F: When two parties agree to exchange currency and execute the deal at some specific time in the future, a forward exchange occurs.

True

T/F:An expatriate manager is a citizen of one country who is working abroad in one of the firm's subsidiaries.

True

When companies disperse different stages of the value chain to those locations around the world where perceived value is maximized or where the costs of value creation are minimized, companies create:

a global web of value creation activities.

Practical training is:

aimed at helping the expatriate manager and family ease themselves into day-to-day life in the host country.

Assume that the law of one price holds. A shirt that retails for $120 in New York sells for £60 in London. The exchange rate between the British pound and the dollar is £1 = $1.50. Assuming away transportation costs and trade barriers, this creates a profit-making opportunity called

arbitrage

Responding to pressure for _____ requires that a firm differentiate its product offering and marketing strategy from country to country.

being locally responsive

The short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates is known as:

currency speculation.

Many firms pursuing a(n) ____ pricing strategy on an international scale will price low worldwide in attempting to build global sales volume as rapidly as possible, even if this means taking large losses initially.

experience curve

A(n) _____ seeks the best people for key jobs throughout the organization, regardless of nationality.

geocentric staffing policy

When a firm has a strategic goal of pursuing a low-cost strategy on a worldwide scale, the firm should follow a(n) _____ strategy.

global standardization

A firm can establish a wholly-owned subsidiary in a country by building a subsidiary from the ground up, called the ____.

greenfield strategy

When evaluating expatriates, home-country managers usually rely on:

hard data such as market share.

Economies of scale arise from all of the following sources, EXCEPT:

increasing fixed costs by limiting them to small volumes.

Which of the following occurs when the quantity of money in circulation in a country rises faster than the country's stock of goods and services?

inflation

The Six Sigma methodology _____.

is a direct descendant of the total quality management philosophy

When a channel is exclusive:

it is often difficult for a new firm to get access to shelf space in supermarkets.

The _____ states that in competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.

law of one price

When individuals gain knowledge of the most efficient ways to perform particular tasks, they are saving costs through:

learning effects

A firm benefits by basing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity. Firms that pursue such a strategy can realize:

location economies.

Research has long maintained that a major factor of success for new products is the closeness of the relationship between:

marketing and R&D.

Central to the concept of economies of scale is the idea that the best way to achieve high efficiency, and hence low unit costs, is through the _____.

mass production of a standardized output

The costs of promoting and establishing a product offering when a firm enters a foreign market prior to its rivals are known as ____.

pioneering costs

When a company charges whatever the market will bear, the company is using:

price discrimination

When a company's product has a low value-to-weight ratio, the company should _____.

produce the product in multiple locations close to major markets

When a firm emphasizes personal selling rather than mass media advertising in the promotional mix, the firm is using a:

push strategy.

When the receiver of a message evaluates a message based on the status or image of the sender, ____ are said to have occurred.

source effects

A foreign service premium is:

the extra pay that an expatriate receives for working outside his or her country of origin.

International businesses use foreign exchange markets for all of the following reasons except:

to cover themselves from all risks involved in currency speculation.

If a high-tech firm sets up operations in a foreign country to profit from a core competency in technological know-how, which of the following entry strategy is best?

wholly owned subsidiaries

In a ____, the firm owns 100 percent of the stock.

wholly owned subsidiary