Capstone Final Ch. 10

Which of the following statements is true of a multidomestic strategy? A. Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets. B. The multidomestic strategy is one of the main strategies companies pursued in the Globalization 1.0 stage. C. Companies pursuing a multidomestic strategy generally follow a cost-leadership strategy at the business level. D. The multidomestic strategy effectively protects firms from the risk of intellectual property appropriation.

A. Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets. Multinational companies frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic domestic markets, such as Japan or Saudi Arabia.

Fragra Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. SaveMart Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario? A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements. B. Fragra Inc. will pursue a differentiation strategy at the business level, whereas SaveMarket Inc. will pursue a cost-leadership strategy at the business level. C. Fragra Inc. will be better protected from exchange rate fluctuations when compared to SaveMarket Inc. D. Fragra Inc. will not be able to leverage its home-based core competencies in foreign markets as much as SaveMarket Inc.

A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements. An international strategy is essentially a strategy in which a company sells the same products or services in both domestic and foreign markets. Firms pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers will perceive them to be domestic companies.

Hans is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Hans consider while choosing his strategy? A. He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance. B. He should rely on his firm's business-level strategy as a clue to possible strategies pursued globally. C. He should remember that he has only one framework at his disposal to make global strategy decisions. D. He must remember that higher levels of control and a lower likelihood of any loss in reputation go along with less investment-intensive foreign entry modes.

A. He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance. The strategist must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.

Which of the following statements is true of an international strategy? A. It enables firms to leverage their home-based core competencies in foreign markets. B. It is advantageous when firms face high pressures for both local responsiveness and cost reductions. C. It relies on joint ventures to reap economies of scale by accessing a larger market. D. It effectively protects a firm from exchange rate fluctuations.

A. It enables firms to leverage their home-based core competencies in foreign markets. An international strategy is essentially a strategy in which a firm sells the same products or services in both domestic and foreign markets. It enables firms to leverage their home-based core competencies in foreign markets.

Which of the following is a benefit of the transnational strategy? A. It facilitates global learning and harnesses economies of location. B. It completely eliminates a firm's risk of intellectual property expropriation. C. It helps to create a matrix global structure, which is cost-effective and easy to implement. D. It helps a firm pursue a cost-leadership strategy by minimizing the need for local responsiveness.

A. It facilitates global learning and harnesses economies of location. Besides harnessing economies of scale and location, a transnational strategy also aims to benefit from global learning. Firms typically implement a transnational strategy through a global matrix structure. That structure combines economies of scale along specific product divisions with economies of learning attainable in specific geographic regions.

Which of the following is one of the features of an international strategy? A. It is characterized by limited local responsiveness. B. It is one of the newest types of global strategies. C. It is characterized by cost-leadership as a preferred business strategy. D. It is often used successfully by firms with relatively small domestic markets.

A. It is characterized by limited local responsiveness. An international strategy is essentially a strategy in which a firm sells the same products or services in both domestic and foreign markets. A strength of the international strategy—its limited local responsiveness—is also a weakness in many industries.

Plethora Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in United Bejukistan, which has been recognized as one of the less-developed nations in the world. How will this strategic move most likely affect Plethora Inc.? A. It will be able to benefit from economic arbitrage. B. It will be able to successfully leverage its competitive advantage from economies of standardization. C. It will be able to replicate its existing business model easily. D. It will be able to easily sell products for which demand varies by income.

A. It will be able to benefit from economic arbitrage. Plethora Inc. will most likely be able to benefit from economic arbitrage. Companies from wealthy countries also trade with companies from poor countries to benefit from economic arbitrage.

Which of the following is most likely an accurate statement? A. The multinational enterprise PanDigital benefited from advances in communications technology. B. The multinational enterprise TransEuropa was hindered by falling investments barriers. C. The multinational enterprise ShopWorld benefited from rising trade barriers. D. The multinational enterprise GeoPlus was hindered by reduced transportation costs.

A. The multinational enterprise PanDigital benefited from advances in communications technology. Multinational enterprises (MNE) are closely involved with the globalization process. This process benefits from advances in communications, falling trade and investment barriers, and reduced transportation costs.

Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement? A. a multidomestic strategy B. an international strategy C. a global-standardization strategy D. a one-product strategy

A. a multi domestic strategy In this scenario, Evara Cosmetics Inc. most likely implements a multidomestic strategy. Firms pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers will perceive them to be domestic companies.

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage? A. benefits from lower labor costs in manufacturing and services B. access to low-cost raw materials such as lumber and iron ore C. low levels of economic growth in emerging economies D. inefficient infrastructure in countries like China, which have brought down setting-up costs

A. benefits from lower labor costs in manufacturing and services Access to low-cost raw materials such as lumber, iron ore, oil, and coal was a key driver behind Globalization 1.0 and 2.0. During Globalization 3.0, firms have expanded globally to benefit from lower labor costs in manufacturing and services.

The _____ states that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally. A. death-of-distance hypothesis B. local-responsiveness hypothesis C. real options framework D. dynamic capabilities framework

A. death-of-distance hypothesis Because firms can now, more than ever, source inputs globally, many believe that location must be diminishing in importance as an explanation of firm-level competitive advantage. This idea is called the death-of-distance hypothesis.

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved A. exporting goods. B. making foreign direct investments. C. making foreign institutional investments. D. licensing production and distribution.

A. exporting goods During Globalization 1.0, basically all the important business functions were located in the home country. Typically, only sales and distribution operations took place overseas—essentially exporting goods to other markets.

For which of the following products is an international strategy most suitable? A. for luxury goods that can be shipped across the globe B. for products with low value-to-weight ratios such as steel C. for food products that are specific to certain cultures D. for products with high linguistic content

A. for luxury goods that can be shipped across the globe An international strategy is well-suited for high-end products with high value-to-weight ratios such as machine tools and luxury goods that can be shipped across the globe.

Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the A. globalization hypothesis. B. upper-echelons theory. C. real-options perspective. D. global scaling theory.

A. globalization hypothesis. In support of the globalization hypothesis, Toyota is selling its hybrid Prius vehicle successfully in 80 countries. Most vehicles today are built on global platforms and modified (sometimes only cosmetically) to meet local tastes and standards.

Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.? A. greenfield operation B. export C. joint venture D. acquisition

A. greenfield operation The foreign entry mode opted by Lucar Steels Inc. is greenfield operation. Greenfield operations involve building new plants and facilities from scratch.

The global-standardization strategy arises out of the combination of A. high pressure for cost reductions and low pressure for local responsiveness. B. high pressure for local responsiveness and low pressure for cost reductions. C. low pressure for both local responsiveness and cost reductions. D. high pressure for both local responsiveness and cost reductions.

A. high pressure for cost reductions and low pressure for local responsiveness. The global-standardization strategy arises out of the combination of high pressure for cost reductions and low pressure for local responsiveness.

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer A. higher quality for lower costs for international routes. B. higher quality for similar costs for U.S domestic routes. C. similar quality for lower costs for international routes. D. similar quality for lower costs for U.S domestic routes.

A. higher quality for lower costs for international routes. As mentioned in Strategy Highlight 10.1, Emirates, Etihad Airways, and Qatar Airways are using a blue ocean strategy to attract new customers and thereby threaten the dominance of U.S. legacy carriers. This strategy involves offering higher quality at lower cost for international routes than the U.S. carriers.

United Borova Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country A. is a world leader in the pharmaceutical industry. B. has nationalized the pharmaceutical industry. C. has low levels of competition, providing other multinational companies with an opportunity to take over the pharmaceutical industry. D. is a potential foreign market for multinational pharmaceutical companies to sell their products.

A. is a world leader in the pharmaceutical industry. National competitive advantage refers to world leadership in specific industries. Companies from home countries that are world leaders in specific industries tend to be the strongest competitors globally.

Global Frontier Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Global Frontier wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm? A. joint ventures B. acquisitions C. greenfield operations D. exports

A. joint ventures Joint ventures would be the best entry mode for Global Frontier because it is not as expensive as acquisitions or greenfield operations, but it allows for more control than exports.

Which of the following will most likely increase geographic distance between two countries? A. lack of adequate transportation between the two countries B. differences in consumer incomes between the two countries C. lack of human resources available in the two countries D. different knowledge base in the two countries

A. lack of adequate transportation between the two countries Geographic distance between two countries increases with lack of common border, waterway access, adequate transportation, or communication links.

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of A. location economies. B. economies of scope. C.learning races. D. network effects.

A. location economies. In this example, Unilever is trying to reap the benefits of location economies, which are benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be.

McDonald's uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of the following strategies is the fast-food chain pursuing? A. multidomestic strategy B. focused differentiation strategy C. global-standardization strategy D. international strategy

A. multidomestic strategy McDonald's is pursuing a multidomestic strategy. Multinational companies pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers will perceive them to be domestic companies. This strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions.

Swiss-based Nestlé, the largest food company in the world, is well-known for customizing its product offerings to suit local preferences, tastes, and requirements. By doing this, Nestlé is pursuing a(n) A. multidomestic strategy. B. international strategy. C. global-standardization strategy. D. transnational strategy.

A. multidomestic strategy. Nestlé is pursuing a multidomestic strategy. This strategy attempts to maximize local-responsiveness, with the intent that local consumers will perceive them to be domestic companies.

Which of the following factors is the most important determinant of economic distance? A. the wealth and per capita income of consumers B. the ethnicity and religion of consumers C. the presence of legal institutions in a country D. the topography of a country

A. the wealth and per capita income of consumers The wealth and per capita income of consumers is the most important determinant of economic distance.

A(n) _____ strategy arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions. A. transnational B. multidomestic C. international D. global-standardization

A. transnational Multinational companies pursuing a transnational strategy attempt to combine the benefits of a localization strategy (high local-responsiveness) with those of a global-standardization strategy (lowest cost position attainable). This strategy arises out of the combination of high pressure for local-responsiveness and high pressure for cost-reductions.

Which of the following accurately describes what the integration-responsiveness framework does? A. By juxtaposing the pressures a multinational company faces for export tariffs and foreign responsiveness, it devises four strategies to gain and sustain competitive advantage. B. By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage. C. By juxtaposing the pressures a multinational company faces for export tariffs and local-responsiveness, it devises two strategies to gain and sustain competitive advantage. D. By juxtaposing the pressures a multinational company faces for cost-reduction and foreign responsiveness, it devises two strategies to gain and sustain competitive advantage.

B. By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage. By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, the integration-responsiveness framework devises four strategies to gain and sustain competitive advantage.

Food Works Inc. is a multinational fast-food chain that follows a multidomestic strategy. Which of the following statements most likely holds true for the company? A. The company's competitive advantage lies in leveraging its home-based core competencies in foreign markets. B. Each country unit owned by the company will tend to be highly autonomous. C. Majority of the value creation for the company will take place in its home country. D. The company will not face any operational inefficiency as the key business functions do not have to be duplicated.

B. Each country unit owned by the company will tend to be highly autonomous. The statement that most likely holds true for Food Works Inc. is that each country unit owned by the company will tend to be highly autonomous. For firms following a multidomestic strategy, each country unit will tend to be highly autonomous, and the MNE will be unable to reap economies of scale or learning across regions.

_____ is a process of closer integration and exchange between different countries and peoples worldwide. A. Diversification B. Globalization C. Standardization D. Modification

B. Globalization Globalization is a process of closer integration and exchange between different countries and peoples worldwide

Although demand for IKEA's low-cost furnishings has increased, its annual store growth has slowed to fewer than ten new stores a year. Why has this happened? A. IKEA has failed to hire top designers for its furniture. B. IKEA's global supply chain has become bottlenecked. C. IKEA has had a revolving door of CEOs for the past 20 years. D. IKEA's holding companies are all located in Sweden.

B. IKEA's global supply chain has become bottlenecked. As discussed in Chapter Case 10, IKEA's global supply chain has become a bottleneck. IKEA has difficulty finding suppliers that are a strategic fit with its highly efficient operations. Related to this issue is the fact that wood remains one of IKEA's main input factors, and the world's consumers are becoming more sensitive to the issue of deforestation and its possible link to global warming. In the near future, IKEA must find low-cost replacement materials for wood.

Which of the following is a feature of a multinational company pursuing a global-standardization strategy? A. Its key business functions are located at the home country headquarters. B. Its business-level strategy tends to be cost-leadership. C. Its competitive advantage lies in its high local responsiveness. D. Its core competency lies in its strong product differentiation.

B. Its business-level strategy tends to be cost-leadership The global-standardization strategy arises out of the combination of high pressure for cost reductions and low pressure for local responsiveness. Multinational companies who use this strategy are often organized as networks. This lets them strive for the lowest cost position possible.

After testing its products in foreign markets by pursuing an international strategy, GR Foods Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the company? A. The company's operations will become more cost-efficient. B. The company's exposure to exchange rate fluctuations will reduce. C. The company will be able to reap greater benefits from economies of scale. D. The company will be exposed to a lower risk of intellectual property appropriation.

B. The company's exposure to exchange rate fluctuations will reduce. The company's exposure to exchange rate fluctuations will reduce. Multinational enterprises (MNEs) following a multidomestic strategy, in contrast with an international strategy, face reduced exchange-rate exposure because the majority of the value creation takes place in the host-country business units, which tend to span all functions.

Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy? A. The firm customizes products and services to better suit local requirements. B. The firm reaps significant economies of scale and location economies. C. The firm follows a differentiation strategy at the business level. D. The firm has all its key business functions located in the home country.

B. The firm reaps significant economies of scale and location economies. MNEs following a global-standardization strategy attempt to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost.

How will an increase in coordinated economic and political integration between countries affect the world economy? A. The world's market economies will become self-sufficient and independent. B. There will be gains in social welfare and living standards across the globe. C. The cost of labor will further decline in emerging economies. D. There will be a movement away from global-collaboration networks among multinational enterprises (MNEs).

B. There will be gains in social welfare and living standards across the globe. More gains in social welfare and living standards can be had through further globalization if future integration is managed effectively through coordinated efforts by governments.

Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy? A. They cannot leverage their home-based core competencies in foreign markets. B. They are highly affected by exchange rate fluctuations. C. They have to be highly responsive to local needs and preferences. D. They cannot reap the benefits of economies of scale due to their highly customized products.

B. They are highly affected by exchange rate fluctuations. MNEs following an international strategy are highly affected by exchange rate fluctuations. An international strategy is essentially a strategy in which a firm sells the same products or services in both domestic and foreign markets.

Marc Works Inc., a reputed brand for fine writing instruments, is implementing an international strategy in its firms. Torque Inc., a laptop brand, is pursuing a global-standardization strategy in its firms. Which of the following statements most likely holds true in this scenario? A. While Marc Works Inc.'s competitive advantage lies in its high local responsiveness, Torque Inc. will lack such capabilities. B. Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc. C. Torque Inc.'s business functions are highly centralized, whereas Marc Works Inc. organizes its activities worldwide. D. Torque Inc. is exposed to greater risks of exchange rate fluctuations.

B. Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc. Torque Inc. most likely focuses more on cost-reductions when compared to Marc Works Inc. The global-standardization strategy arises out of the combination of high pressure for cost-reductions and low pressure for local responsiveness. An international strategy is advantageous when the multinational enterprise MNE faces low pressures for both local responsiveness and cost-reductions.

For which of the following companies will geographic distance be the most relevant factor in deciding whether or not to trade with a target country? A. a firm that manufactures cell phone batteries B. a firm that extracts and exports iron ore C. a firm that produces movies D. a firm that sells wristwatches

B. a firm that extracts and exports iron ore Geographic distance is particularly relevant when trading products with low value-to-weight ratios such as steel, cement, or other bulk products and fragile and perishable products such as glass or fresh meats and fruits.

Fierce domestic competition in Lobekistan makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, Lobekistan's motorcycles have a competitive advantage in the global market. According to Porter's diamond framework, this scenario shows the influence of competitive intensity in A. a peripheral industry. B. a focal industry. C. supportive complementors. D. related complementors.

B. a focal industry In Michael Porter's diamond framework, factor conditions describe a country's endowments in terms of natural, human, and other resources.

Which of the following products are generally manufactured by multinational enterprises (MNEs) pursuing a global-standardization strategy? A. products with a high value-to-weight ratios like luxury goods B. commodity products like computer hardware C. consumer products related to national and/or religious identity like food D. products that carry country-specific quality associations like wine

B. commodity products like computer hardware MNEs that manufacture commodity products (such as computer hardware) or offer services (such as business process outsourcing) generally pursue a global-standardization strategy.

Which of the following modes of entering a foreign market allows for the lowest level of control? A. greenfield ventures B. exporting C. joint ventures D. acquisitions

B. exporting Exporting, licensing, and franchising are vehicles of foreign expansion that require low investments but also allow for a low level of control.

In Michael Porter's diamond framework, _____ describe a country's endowments in terms of natural, human, and other resources. A. market conditions B. factor conditions C. demand conditions D. supply conditions

B. factor conditions In Michael Porter's diamond framework, factor conditions describe a country's endowments in terms of natural, human, and other resources.

Which of the following types of organizations comparatively requires the lowest levels of investment and control? A. joint ventures B. franchising C. acquisition D. greenfield operations

B. franchising The type of organization that comparatively requires the lowest levels of investment and control is franchising.

A greater cultural distance between two trading countries A. increases linguistic similarities between the two countries. B. increases the liability of foreignness. C. reduces the uncertainty of doing business. D. reduces the transaction costs associated with business.

B. increases the liability of foreignness. A greater cultural distance can increase the cost and uncertainty of conducting business abroad. In short, greater cultural distance increases the liability of foreignness.

When a firm pursues a(n) _____, it sells the same products or services in both domestic and foreign markets. A. domestic strategy B. international strategy C. differentiation strategy D. localization strategy

B. international strategy An international strategy is essentially a strategy in which a firm sells the same products or services in both domestic and foreign markets. It enables firms to leverage their home-based core competencies in foreign markets.

A firm is said to be pursuing a polycentric innovation strategy when A. its research facility is situated in the headquarters and all other business activities are located around the world. B. it draws from multiple, equally important research facilities located throughout the world. C. it restricts its innovation to Western economies and production to developing markets. D. its knowledge flow takes a one-way path—from its headquarters to the subsidiaries.

B. it draws from multiple, equally important research facilities located throughout the world. Many multinational enterprises (MNEs) now are replacing the one-way innovation flow from Western economies to developing markets with a polycentric innovation strategy—a strategy in which MNEs now draw on multiple, equally important innovation hubs throughout the world.

Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself successfully in the country of Zevar, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Silca Electronics Inc. incurs huge financial losses in Zevar. In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because A. it overestimates its need to protect its intellectual property. B. it underestimates its liability of foreignness when entering the Zevar market. C. it underestimates its dwindling reputation before it enters the Zevar market. D. it overestimates the geographic and cultural distance between Pelo and Zevar.

B. it underestimates its liability of foreignness when entering the Zevar market. In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because it underestimates its liability of foreignness when entering the Zevar market. Liability of foreignness consists of the additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances.

ChocoNuts Inc. produces an inexpensive candy bar that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has ChocoNuts performed poorly in? A. cost-reduction B. local-responsiveness C. global-standardization D. transnational strategy

B. local-responsiveness Local-responsiveness is the need to tailor product and service offerings to fit local consumer preferences and host-country requirements. ChocoNuts has performed poorly in this regard because it has failed to satisfy the consumer preferences of its host country, Japan.

idemore Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Ridemore Autos Inc. is reaping the benefits of A. economies of scope. B. location economies. C. resource immobility. D. resource ambiguity.

B. location economies. In this scenario, Ridemore Autos Inc. is reaping the benefits of location economies. Location economies are benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be.

A trend observed during the Globalization 3.0 stage involves A. countries around the globe becoming more self-sufficient and independent. B. multinational companies organizing as global-collaboration networks. C. privately-owned firms getting nationalized. D. world's market economies becoming less integrated.

B. multinational companies organizing as global-collaboration networks. Based on an optimal mix of costs, skills, and PESTEL factors, multinational enterprises are organized as global-collaboration networks that perform business functions throughout the world.

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? A. inability to implement its trademark focused-differentiation strategy in the German market B. significant differences between its U.S. personnel policies and Germany's culture C. Germany's unfamiliarity with retail discount powerhouses D. Metro's hostile takeover of Walmart in Germany

B. significant differences between its U.S. personnel policies and Germany's culture As mentioned in Strategy Highlight 10.2, Walmart attempted to implement its U.S. personnel policies and procedures: the Walmart cheer, a door greeter, every associate within 10 feet of a customer smiling and offering help, bagging groceries at the checkout, video surveillance, a prohibition against dating co-workers, and so on. German employees, however, simply refused to accept these policies.

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with A. differences in climates and time zones. B. the absence of a trading bloc. C. physical remoteness. D. the lack of connective ethnic and social networks.

B. the absence of a trading bloc. Administrative and political distance between two countries increases with absence of trading bloc.

Which of the following factors pertaining to national competitive advantage enabled Nokia, a multinational company from Finland, to become an early leader in cell phones? A. the competitive intensity in the cell phone industry of Finland B. the huge demand for high-quality wireless services in Finland C. the abundance of natural resources in Finland D. the related and supporting industries present in Finland

B. the huge demand for high-quality wireless services in Finland A lack of landlines for telephone service has resulted in the Finnish demand for high-quality wireless services, combined with reliable handsets and long battery life that can be operated in remote areas with often hostile environments. Cell phones have long been a necessity for survival in rural areas of Finland. This situation enabled Nokia to become an early leader in cell phones.

Which of the following statements best describes local responsiveness? A. the process of producing goods in one country and selling them in another B. the need to tailor product and service offerings to fit native consumer preferences and host-country requirements C. the belief that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous D. the additional costs of doing business in an unfamiliar culture and economic environment, and of coordinating across geographic distances

B. the need to tailor product and service offerings to fit native consumer preferences and host-country requirements In some instances, firms experience pressure for local responsiveness—the need to tailor product and service offerings to fit local consumer preferences and host-country requirements.

Which of the following is a primary reason why firms pursue a global strategy? A. to improve their reputation B. to enhance their competitive advantage C. to expand their research capabilities D. to gain more political influence

B. to enhance their competitive advantage The decision to pursue a global strategy clearly comes from the firm's assessment that doing so will enhance its competitive advantage and that the benefits of globalization will exceed the costs.

Which of the following countries has a high geographic distance but a low cultural distance from the United States? A. Canada B. Mexico C. Australia D. France

C. Australia Australia has a high geographic distance from the United States. These countries are more than 9,000 miles apart. However, they have a low cultural distance because they both share a common language.

Which of the following is an observable feature in the Globalization 3.0 stage? A. Knowledge flow between the local replicas of the multinational enterprises and their U.S. headquarters is limited. B. Only sales and distribution functions of a multinational enterprise are located in a few key countries. C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world. D. Firms have reorganized from a global enterprise with different centers of expertise to a multinational company with self-contained operations in a few selected countries.

C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world. Companies now freely locate business functions anywhere in the world based on an optimal mix of costs, capabilities, and PESTEL factors. Multinational companies have reorganized from self-contained operations in a few selected countries to a more seamless global enterprise with centers of expertise.

GreenThings Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. TransGold Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario? A. While TransGold Inc.'s competitive advantage will lie in its high local responsiveness, GreenThings Inc. will lack such competencies. B. GreenThings Inc. will face greater pressure for cost-reductions than TransGold Inc. due to its strategy choice. C. Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries. D. While GreenThings Inc. will require a global matrix structure, TransGold Inc. will require a traditional headquarters model.

C. Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries. A multidomestic strategy is costly and inefficient because it requires the duplication of key business functions across multiple countries. Each country unit tends to be highly autonomous. Similarly for a transnational strategy, high local-responsiveness typically requires that key business functions are frequently duplicated in each host country.

In which of the following stages of globalization did firms organize as networks to pursue a global-standardization strategy? A. Globalization 1.0 B. Globalization 2.0 C. Globalization 3.0 D. Globalization 4.0

C. Globalization 3.0 Multinational enterprises (MNEs) who use a global-standardization strategy are often organized as global-collaboration networks. In the Globalization 3.0 stage, the MNE's strategic objective changes. The MNE reorganizes from a multinational company with self-contained operations in a few selected countries to a more seamless global enterprise with centers of expertise.

Which of the following statements best explains how the presence of top-notch complementors within a firm's industry affects the focal firm's business? A. It weakens the national competitive advantage enjoyed by the focal firm. B. It improves the factor conditions in the focal firm's domestic market. C. It increases the value of the focal firm's offering from a customer's perspective. D. It reduces the economic contribution created by the focal firm.

C. It increases the value of the focal firm's offering from a customer's perspective. The availability of top-notch complementors—firms that provide a good or service that leads customers to value the focal firm's offering more when the two are combined—further strengthens national competitive advantage.

Which of the following is a drawback of pursuing a transnational strategy? A. It creates bottlenecks for global learning. B. It exposes a firm to diseconomies of scale and location. C. It requires a global matrix structure, which is difficult to implement. D. It involves locating all key business activities in the home country headquarters.

C. It requires a global matrix structure, which is difficult to implement. Although a transnational strategy is quite appealing, the required matrix structure is rather difficult to implement because of the organizational complexities involved. High local-responsiveness typically requires that key business functions are frequently duplicated in each host country, leading to higher costs.

Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance? A. Olax, which has the same wealth and per capita income as Zeda B. Jordax, which has a very profitable economy and where people speak Jordaxian C. Segar, where people speak English and have a low standard of living D. Terra, which is located close to Zeda and is easily accessible by road

C. Segar, where people speak English and have a low standard of living The country that is most likely to be the closest to Zeda in terms of cultural distance is Segar, where people speak English and have a low standard of living. Cultural differences find their expression in language, ethnicity, religion, and social norms.

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode? A. They are easy to initiate and terminate. B. They require low amounts of investments in terms of capital. C. They reduce a firm's exposure to loss of reputation. D. They are based on contracts rather than ownership.

C. They reduce a firm's exposure to loss of reputation. Foreign entry modes with a high level of control such as foreign acquisitions or greenfield plants reduce the firm's exposure to two particular downsides of global business: loss of reputation and loss of intellectual property.

Stop n' Save Inc., a supermarket chain, is implementing a multidomestic strategy. SunLife Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other? A. Stop n' Save Inc. will focus more on cost-reduction than SunLife Inc. B. Stop n' Save Inc. will have its business functions spread across the world; SunLife Inc.'s business functions will be highly centralized. C. Unlike SunLife Inc., Stop n' Save Inc. will be able to pursue a differentiation strategy at the business level. D. Unlike SunLife Inc., Stop n' Save Inc. will be able to reap significant economies of scale and location economies.

C. Unlike SunLife Inc., Stop n' Save Inc. will be able to pursue a differentiation strategy at the business level. Unlike SunLife Inc., Stop n' Save Inc. will be able to pursue a differentiation strategy at the business level. For firms following a global-standardization strategy, their business-level strategy tends to be cost leadership. Firms following a multidomestic strategy generally pursue a differentiation strategy at the business level.

Which of the following statements is true with regard to international trade between countries? A. Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies. B. Colony-colonizer relationships have a strong negative effect on bilateral trade between countries. C. Wealthy countries engage in relatively more cross-border trade than poorer ones. D. Political integrations decrease the expected trade intensity between two countries.

C. Wealthy countries engage in relatively more cross-border trade than poorer ones. Wealthy countries engage in relatively more cross-border trade than poorer ones. Rich countries tend to trade with other rich countries; in addition, poor countries also trade more frequently with rich countries than with other poor countries.

Octa Autos Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though it may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.? A. exporting B. franchise agreement C. acquisition D. licensing

C. acquisition Acquisition is the foreign entry mode that would best suit Octa Autos Inc. Greenfield operations and acquisitions are foreign entry modes that require a high level of investment in terms of capital and other resources, but also allow for a high level of control.

Which of the following is not included within the types of strategic alliances? A. joint ventures B. franchising C. acquisitions D. licensing

C. acquisitions Acquisitions and strategic alliances (including licensing, franchising, and joint ventures) are popular vehicles for entry into foreign markets.

A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it A. is pursued in response to low pressure for local responsiveness and low pressure for cost reduction. B. attempts to reap significant economies of scale by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. C. attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company. D. operates on the assumptions made in the globalization hypothesis in order to lower costs.

C. attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company. MNEs pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers will perceive them to be domestic companies.

Why did the American MTV network cable channel fail when pursuing a global-standardization strategy? A. because MTV failed to understand that music videos were a commodity product B. because the globalization hypothesis holds true for the music industry C. because cultural distance most affects products with high linguistic content D. because an international strategy was more suitable for the music industry

C. because cultural distance most affects products with high linguistic content MTV reasoned that music videos were a commodity product that would attract worldwide audiences. However, cultural distance most affects products with high linguistic content such as TV. Even in a music video channel, audiences have a distinct preference for at least some local content.

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India? A. because of the political differences between India and U.S. B. because NAFTA prohibits Walmart from investing in countries outside North America C. because of the large economic distance between U.S. and India D. because Walmart's low-cost strategy has not been accepted by Indian consumers

C. because of the large economic distance between U.S. and India Although Walmart in Canada is a virtual carbon copy of the Walmart in the United States, Walmart in India is very different. This is because replication of an existing business model is much easier in a country where the incomes are relatively similar and resources, complements, and infrastructure are of roughly equal quality.

A firm pursuing a transnational strategy would believe that A. key business functions should be located in its home country headquarters. B. local-responsiveness is more important than cost-reductions for competitive advantage. C. best practices, ideas, and innovations should be diffused throughout the world. D. the majority of the value creation should take place in the home country.

C. best practices, ideas, and innovations should be diffused throughout the world. Multinational enterprises typically implement a transnational strategy through a global matrix structure. That structure combines economies of scale along specific product divisions with economies of learning attainable in specific geographic regions. The idea is that best practices, ideas, and innovations will be diffused throughout the world, regardless of their origination.

How has the administrative and political distance between Canada, Mexico, and the United States been reduced? A. by adopting similar national cultures B. by lowering the disparities between their per capita incomes C. by establishing the North American Free Trade Agreement (NAFTA) D. by reducing their linguistic differences

C. by establishing the North American Free Trade Agreement (NAFTA) Canada and Mexico partner with the United States in the NAFTA, increasing trade in goods and services between the three countries. An administrative and political distance factor that is significant in predicting the amount of trade between two countries include whether they belong to the same regional trading bloc.

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another? A. greenfield operations B. brownfield operations C. exporting D. crowdsourcing

C. exporting Exporting involves producing goods in one country to sell in another. It is one of the oldest forms of internationalization. It is often used to test whether a foreign market is ready for a firm's products.

A firm following a multidomestic strategy A. is highly efficient. B. lacks local responsiveness. C. faces a greater risk of intellectual property (IP) appropriation. D. requires exposing explicit knowledge because products are manufactured locally.

C. faces a greater risk of intellectual property (IP) appropriation. The risk of IP appropriation increases when companies follow a multidomestic strategy. Besides exposing codified knowledge embedded in products, as is the case with an international strategy, a multidomestic strategy also requires exposing tacit knowledge because products are manufactured locally.

For which of the following types of industries is a multidomestic strategy most common? A. machine-tool industries B. genetic industries C. food industries D. capital goods industries

C. food industries A multidomestic strategy is common in the consumer products and food industries. This strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions.

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

C. global-standardization MNEs following a global-standardization strategy attempt to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost.

Jade Mobiles Inc., a cell phone manufacturing company, has its product development centers located in the U.S. and South Korea. The manufacturing units are located in China and Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its cell phones. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Jade Mobiles Inc. most likely pursue? A. international strategy B. multidomestic strategy C. global-standardization strategy D. localization strategy

C. global-standardization strategy In this scenario, Jade Mobiles Inc. most likely pursues a global-standardization strategy. Multinational companies following a global-standardization strategy attempt to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost.

For a multinational enterprise (MNE), applying the globalization hypothesis would mean A. being highly responsive to the heterogeneous needs and preferences of consumers globally, without focusing on cost reduction. B. customizing each product sold by an enterprise to differentiate it from its competitors. C. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards. D. pursuing a focused differentiation strategy instead of a cost-leadership strategy to gain a competitive advantage.

C. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards. The globalization hypothesis states that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous. For a multinational enterprise (MNE), applying the globalization hypothesis would mean manufacturing products on international platforms and slightly modifying them to meet local tastes and standards. The strategic foundations of the globalization hypothesis are based primarily on cost reduction

Some of the best engineering and car companies are in Germany. Thus, it can be concluded that Germany has a _____ in the automobile industry. A. capital gain B. trade surplus C. national competitive advantage D. liability of foreignness

C. national competitive advantage National competitive advantage refers to world leadership in specific industries. Companies from home countries that are world leaders in specific industries tend to be the strongest competitors globally.

Michael Porter's diamond framework is used to explain A. national value creation. B. domestic value creation. C. national competitive advantage. D. domestic competitive advantage.

C. national competitive advantage. Michael Porter's diamond framework is used to explain national competitive advantage. It analyzes why some nations are outperforming others in specific industries.

Allgreva Inc. is located in Movaria near the nation of Clozame. Allgreva is considering expanding into Clozame. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, Movaria rules this land. Which of the following would most likely prevent Allgreva from expanding into Clozame? A. geographic distance B. economic distance C. political distance D. cultural distance

C. political distance This scenario shows a situation with extreme political distance between two countries, caused by a dispute over an area of land. Such political distance could prevent Allgreva from expanding into Clozame.

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because A. they pursue a cost-leadership strategy in their respective industries. B. they are highly responsive to the local needs and preferences of customers in the host countries. C. they offer the same products or services in all their stores throughout the world. D. they attempt to combine benefits of localization and standardization strategies simultaneously.

C. they offer the same products or services in all their stores throughout the world. Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because they offer the same products or services in all their stores throughout the world. An international strategy is essentially a strategy in which a company sells the same products or services in both domestic and foreign markets. It enables MNEs to leverage their home-based core competencies in foreign markets.

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally? A. international strategy B. global-standardization strategy C. transnational strategy D. focused-differentiation strategy

C. transnational strategy While implementing the transnational strategy, the idea is that best practices, ideas, and innovations will be diffused throughout the world, regardless of their origination. The managers' mantra is to think globally, but act locally.

Which of the following will most likely harm a MNE's reputation? A. Principal-agent problems cause a MNE to merge with another MNE. B. Increased competition causes a MNE to close a factory in a developing country. C. Wages for workers in a factory owned by a MNE increase, causing profits to decline. D. A sweatshop owned by a MNE has an explosion that kills hundreds of workers.

D. A sweatshop owned by a MNE has an explosion that kills hundreds of workers. The explosion in a sweatshop will most likely harm a MNEs reputation because sweatshops are known for having poor working conditions and low wages. Therefore, for an MNE to use a sweatshop lowers their reputation. Having an explosion that kills hundreds of workers in the sweatshop will harm the MNE's reputation even mor

Which of the following is a feature of the Globalization 2.0 stage? A. Huge investments in fiber-optic cable networks around the world enabled companies to operate as global-collaboration networks. B. Only sales and distribution operations took place overseas, while all the important business functions were located in the home country. C. Two-way knowledge flow between the local subsidiaries and their U.S. headquarters was strong. D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries. From 1945 to the end of the 20th century, in the Globalization 2.0 stage, MNEs began to create smaller, self-contained copies of themselves, with all business functions intact, in a few key countries (notably, Western European countries, Japan, and Australia).

Which of the following describes a firm in the Globalization 1.0 stage? A. Robinson Inc. has a large office in New York, which is one cog in a global network. B. Robinson Inc. has a large office in New York, which functions with other large offices in Europe and Asia. C. Robinson Inc. has a base office in New York and a replica office in Amsterdam. D. Robinson Inc. has a base office in New York and distributes some of its products overseas.

D. Robinson Inc. has a base office in New York and distributes some of its products overseas. In Globalization 1.0 stage, basically all the important business functions were located in the home country. Typically, only sales and distribution operations took place overseas—essentially exporting goods to other markets.

How has China been affected by its one-child-per-family policy and appreciation of its currency? A. The purchasing power of its workforce has reduced. B. The value added to production has reduced. C. The standard of living within the economy has lowered. D. The country's advantage in low-cost manufacturing has reduced.

D. The country's advantage in low-cost manufacturing has reduced. Rising wages, fewer workers due to the effects of China's one-child-per-family policy, and appreciation of the Chinese currency now combine to lessen the country's advantage in low-cost manufacturing.

Which of the following is a drawback of pursuing a multidomestic strategy? A. The strategy allows for the lowest possible local responsiveness. B. The strategy lowers the differentiation of a firm's product and service offerings. C. The strategy exposes a firm to greater exchange rate fluctuation when compared to an international strategy. D. The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

D. The strategy is costly and inefficient because it requires the duplication of key business functions across several countries. A multidomestic strategy is costly and inefficient because it requires the duplication of key business functions across multiple countries. Each country unit tends to be highly autonomous, and the MNE is unable to reap economies of scale or learning across regions.

To keep track of the latest developments in computing, Lenovo's research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets? A. a transnational strategy B. a multidomestic strategy C. a localization strategy D. a global-standardization strategy

D. a global-standardization strategy The global-standardization strategy would require Lenovo to organize its operations worldwide to develop uniform products for its domestic and foreign markets. Firms following a global-standardization strategy attempt to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost.

Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50 countries and employs over 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Shine Enterprises Inc. most likely use? A. an international strategy B. a focused-differentiation strategy C. a multidomestic strategy D. a transnational strategy

D. a transnational strategy Shine Enterprises Inc. most likely uses a transnational strategy. Multinational enterprises (MNEs) pursuing a transnational strategy attempt to combine the benefits of a localization strategy (high local-responsiveness) with those of a global-standardization strategy (lowest cost position attainable).

Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost? A. a multidomestic strategy B. an international strategy C. a global-standardization strategy D. a transnational strategy

D. a transnational strategy A transnational strategy is generally used by multinational companies that pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost.

Opula Inc., a luxury car company, sells the same cars and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Opula Inc. most likely pursue? A. a multidomestic strategy B. a transnational strategy C. a global-standardization strategy D. an international strategy

D. an international strategy Opula Autos Inc. pursues an international strategy. An international strategy is essentially a strategy in which a firm sells the same products or services in both domestic and foreign markets. This strategy is advantageous when the MNE faces low pressures for both local responsiveness and cost reductions.

The transnational strategy is similar to a(n) _____ strategy because they both focus on product differentiation and low costs. A. liquidation B. product diversification C. international D. blue ocean

D. blue ocean The transnational strategy is similar to a blue ocean strategy because they both focus on product differentiation and low costs.

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ______ distance. A. political B. geographic C. administrative D. cultural

D. cultural When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high cultural distance. Cultural differences find their expression in language, ethnicity, religion, and social norms.

Due to dense urban living conditions, hot and humid summers, and high energy costs, it is not surprising that Japanese customers want small, quiet, and energy-efficient air conditioners. Which feature of Porter's diamond framework does this scenario best exemplify? A. factor conditions B. complementor availability C. competitive intensity D. demand conditions

D. demand conditions This scenario best exemplifies the demand conditions feature of Porter's diamond framework. Demand conditions are the specific characteristics of demand in a firm's domestic market.

Which of the following entry modes was used extensively in Globalization 1.0 stage? A. strategic alliances B. acquisitions C. greenfield operations D. exports

D. exports Exporting is one of the oldest forms of internationalization. It was used extensively in Globalization 1.0 stage.

Japanese and European engineering companies entered China to participate in building the world's largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint-venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners' advanced technology to create their own, next-generation high-speed trains. This example best highlights the _____ that firms can experience when expanding overseas. A. threat of new entrants B. liability of foreignness C. loss of reputation D. intellectual property exposure

D. intellectual property exposure This example highlights the intellectual property exposure that firms can face when expanding overseas. The issue of protecting intellectual property in foreign markets also looms large. When required to partner with a foreign host firm, companies may find their intellectual property being siphoned off and reverse-engineered.

Because keeping cost low is critical to IKEA's value innovation, it switched from a(n) A. transnational strategy to a multidomestic strategy. B. transnational strategy to a global-standardization strategy. C. international strategy to a multidomestic strategy. D. international strategy to a global-standardization strategy.

D. international strategy to a global-standardization strategy. As mentioned in Chapter Case 10, because keeping costs low is critical to IKEA's value innovation, it shifted from an international strategy to a global-standardization strategy, in which it attempts to achieve economies of scale through efficiently managing a global supply chain

United Nerumbia and Fernsland are two neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of A. food processed in Fernsland. B. movies and TV shows produced in United Nerumbia. C. iron ore extracted in Fernsland. D. luxury items manufactured in United Nerumbia.

D. luxury items manufactured in United Nerumbia. Between the two countries, trade of luxury items manufactured in United Nerumbia will be most affected. Economic distance most affects industries or products for which demand varies by income (cars).

The risk of intellectual property appropriation increases when companies follow a multidomestic strategy because products are A. difficult to differentiate. B. complex to produce. C. exported long distances. D. manufactured locally.

D. manufactured locally. The risk of intellectual property appropriation increases when companies follow a multidomestic strategy because products are manufactured locally. Knowledge that is at risk of appropriation may include, for example, the process of how to create consumer products of higher perceived quality.

A(n) _____ arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions. A. international strategy B. transnational strategy C. global-standardization strategy D. multidomestic strategy

D. multidomestic strategy Multidomestic strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions.

Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm's shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a A. nonprofit organization. B. nationalized firm. C. sole proprietorship. D. multinational enterprise.

D. multinational enterprise. In this scenario, Diva Rule Inc. is most likely a multination enterprise (MNE). The MNE is the engine behind globalization—a firm that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries

India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because A. it has emerged as a manufacturing powerhouse. B. of an efficient infrastructure and high labor costs. C. it has an abundance of uneducated workers who are highly trainable. D. of an abundance of well-educated, English-speaking young people.

D. of an abundance of well-educated, English-speaking young people. India carved out a competitive advantage in business process outsourcing (BPO), not only because of low-cost labor but because of an abundance of well-educated, English-speaking young people.

Which of the following is part of Geert Hofstede's cultural dimensions? A. locus of control B. self-efficacy C. span of control D. power distance

D. power distance Four dimensions of culture have emerged: power distance, individualism, masculinity-femininity, and uncertainty avoidance. More recently, Hofstede added a fifth cultural dimension: long-term orientation.

For a firm pursuing a global-standardization strategy, which of the following bases of competition becomes its primary weapon? A. product differentiation B. superior customer service C. local responsiveness D. price

D. price Because there is little or no differentiation or local responsiveness (because products are standardized), price becomes the main competitive weapon for a firm pursuing the global-standardization strategy.

SmallWorld Inc. is a global Internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries. SmallWorld Inc. is most likely doing this to A. reduce its geographical distance from the other countries. B. increase its administrative distance from the other countries. C. increase its economic distance from the other countries. D. reduce its cultural distance from the other countries.

D. reduce its cultural distance from the other countries. SmallWorld Inc. is most likely doing this to reduce its cultural distance from the other countries. Cultural differences find their expression in language, ethnicity, religion, and social norms.

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of A. factor conditions. B. competitive intensity in a focal industry. C. demand conditions. D. related and supporting industries/complementors.

D. related and supporting industries/complementors. This example shows the effectiveness of related and supporting industries/complementors. The availability of top-notch supporting industries, such as the suppliers in Japan, further strengthens a firm's national competitive advantage.

The administrative and political distance between two trading countries reduces when A. there are FDI restrictions in the host country. B. there is no independent central bank in the host country. C. there are tariffs and trade quotas in the host country. D. there is a well-functioning capital market in the host country.

D. there is a well-functioning capital market in the host country. Strong legal and ethical pillars as well as well-functioning economic institutions like capital markets and an independent central bank reduce administrative and political distance. Strong institutions, both formal and informal, reduce uncertainty, and thus reduce transaction costs.

European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it is employing this strategy? A. to take advantage of the high labor costs in the southern United States B. to take advantage of the high cost of living in the southern United States C. to take advantage of the low impact of globalization in the United States D. to take advantage of lower taxes in the southern United States

D. to take advantage of lower taxes in the southern United States European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. It's doing so in order to avoid voluntary import restrictions, to take advantage of business-friendly conditions such as lower taxes, labor cost, and cost of living, as well as other incentives provided by host states in the southern United States, and to be closer to customers in North America.

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n) A. multidomestic strategy. B. international strategy. C. global-standardization strategy. D. transnational strategy.

D. transnational strategy. Bertelsmann follows a transnational strategy. This type of strategy attempts to combine the benefits of localization and standardization strategies by creating a global matrix structure.

In which of the following situations is pursuing an international strategy advisable? A. when a firm manufactures products related to national and religious identity B. when a firm operates in an industry where the pressure to keep the costs low is extremely high C. when a firm wants to be perceived as a domestic company by the host-country consumers D. when a firm enjoys a large domestic market, strong reputation, and brand name

D. when a firm enjoys a large domestic market, strong reputation, and brand name An international strategy is often used successfully by firms with relatively large domestic markets, and strong reputations and brand names. These firms, capitalizing on the fact that foreign customers want to buy the original product, tend to use differentiation as their preferred business strategy.

As a result of globalization, the A. economies around the world are becoming more independent. B. cultural distance between countries is increasing. C. cost of doing business around the world is increasing. D. world's market economies are becoming more integrated.

D. world's market economies are becoming more integrated. Globalization allows companies to source supplies at lower costs and to further differentiate products. Consequently, the world's market economies are becoming more integrated and interdependent.