MGT Chapter 7

Which of the following statements regarding reverse innovation to penetrate developing markets are correct?

Selling the same product with minor adaptations in a developing market does not always work. Developing products specifically for emerging markets can have a substantial pay-off. It has become a major motivation for companies wanting to expand internationally.

Which of the following statements about currency risk are correct?

Small changes in exchange rates can result in significant differences in costs and profits. Currency fluctuations can pose substantial risks to companies conducting business abroad. Companies with operations in several countries must constantly monitor the exchange rate between its own currency and that of the host country.

Which of the following are "hidden costs" of offshoring?

an increase in inventory costs due to longer delivery times an increase in wage costs due to less productivity indirect costs, such as lower quality, more training, and increased employee supervision

Which of the following characterize globalization?

an increase in the exchange of money, ideas, and information an increase in international exchange, including trade in goods and services a growing similarity of laws, rules, norms, values, and ideas across countries

A transnational strategy is used in industries where the pressure for ______.

both local adaptation and lowering costs are high

Locating a research and development office overseas can yield which of the following advantages?

cost reduction risk reduction performance enhancement

Which of the following are the main types of risk when expanding internationally?

currency political economic

Of the following, the biggest challenge of globalization and multinational firms is ______.

determining how to meet the needs of a variety of customers who have different income levels

The ______ is a framework for explaining why countries foster successful multinational corporations.

diamond of national advantage

Which of the following is the main reason most firms are regional and not global?

distance

What type of risk is created by a lack of protection of intellectual property rights?

economic

When formulating international strategies, managers must determine the best ______ strategy and how to attain a competitive advantage.

entry

The international entry strategy that requires the least investment of resources and has the least risk is ______.

exporting

Euromoney magazine's semiannual "Country Risk Rating" evaluates which of the following?

financial and credit risks political and economic risks

Which of the following refers to the presence, absence, and quality in the nation of supplier industries and other related industries that supply services, support, or technology to firms in the industry value chain?

related and supporting industries

Which of the following are factors of the diamond of national advantage?

related and supporting industries firm strategy, structure, and rivalry demand conditions factor endowments

When companies diversify the countries from which they receive production inputs and supplies, they increase their supply chain _____.

resilience

Which of the following is the term for when new products are developed by developed-country multinational firms for emerging markets, and those products have adequate functionality at a low cost?

reverse innovation

Which of the following are examples of political risk?

social unrest military turmoil demonstrations

One of the traditional assumptions for the internationalization of products was that firms should _____ their products for all their markets worldwide in order to achieve economies of scale of production and marketing.

standardize

Which is the most likely result when a company's dependence on one country for production inputs is interrupted by a major global event, such as a natural disaster or pandemic?

supply chain disruption

Benefits of licensing and franchising include ______.

the ability to expand the company's revenue base overseas limited risk to the firm granting the license or franchise

A ______ is a business in which a multinational company owns 100% of the stock.

wholly owned subsidiary

______ risk is the potential threat to a firm's operations in a country due to fluctuations in the local money's exchange rate.

Currency

______ is producing goods in one country to sell to residents of another country.

Exporting

______ strategy is a strategy based on a firms' differentiating their products and services to adapt to local markets.

Multidomestic

______ firms are companies that manage operations in more than one country.

Multinational

Ranked by the extent of investment and risk, from least to the most, what is the order of entry for international expansion?

exporting, licensing, franchising, strategic alliance, joint venture, wholly owned subsidiary

Which of the following are considerations that can affect quality when locating overseas?

quality of external and internal coordination availability of needed talent speed of learning

Expansion into new markets exposes companies to differing market demands, R&D capabilities, functional skills, organizational processes, and managerial practices. In other words, expansion offers the companies ______.

learning opportunities

Which of the following are risks or limitations of exporting?

A firm has limited ability to tailor products to meet a local market's needs. A firm has little control over the product after it leaves the factory.

______ is an opportunity to profit by buying and selling the same good in different markets.

Arbitrage

Which of the following statements about counterfeit goods are correct?

Counterfeit goods include consumer products, chemicals, and pharmaceuticals. The value of counterfeit goods could exceed $1.9 trillion in 2022. Counterfeiting is expected to continue to be a serious international issue.

Which of the following describe risks and limitations of strategic alliances?

Cultural issues may lead to conflict between partners. Partners may withhold resources and information. Firms may work at cross-purposes and not achieve goals.

Which of the following are the three key assumptions for internationalizing products and services?

Customers' needs and interests are becoming increasingly homogeneous worldwide. Customers around the world are willing to sacrifice preferences in product features for high quality at lower prices. Companies can achieve substantial economies of scale through supplying global markets.

______ are the nature of home-market demand for the industry's product or service.

Demand conditions

Which of the following are ways a firm can establish a wholly owned subsidiary?

Develop a new operation. Purchase an existing company in the home country.

______ is a contractual arrangement in which a company receives a royalty or fee in exchange for the right to its intellectual property or other aspects of its operation; the agreement usually covers a long period of time.

Franchising

______ firms have at least 20% of their sales in each of the three major economic regions—North America, Europe, and Asia.

Global

______ strategy is based on firms' centralization and control by the corporate office, with the primary emphasis on controlling costs. It is used in industries where the pressure for local adaptation is low, and the pressure for lowering costs is high.

Global

______ is the rise of market capitalism around the world.

Globalization

Which of the following statements about demand conditions are correct?

Industries that have demanding customers often are able to anticipate future global demand conditions and proactively respond to these requirements. They refer to the demands that consumers place on an industry for goods and services. When consumers place high demands on firms, firms are motivated to meet these high standards.

Which of the following are characteristics of a multidomestic strategy?

It emphasizes adapting products and services to local markets. Decisions are generally decentralized.

Which of the following statements about arbitrage as a motivation for international expansion are correct?

It involves buying something from where it is cheap and selling it somewhere else for a higher price. Arbitrage can be applied to any stage of value chain.

Which of the following are benefits of exporting?

It is a relatively inexpensive way of entering new markets. Local intermediaries have valuable expertise and knowledge of local markets. Risk is minimized.

Which of the following are risks or limitations of wholly owned subsidiaries?

It is easy for companies to run into cultural and language difficulties. The entire risk is assumed by the parent company. They are the most risky and expensive mode of host country entry.

A multinational firm has which of the following characteristics?

It is in a position to benefit from economies of scale. It manages operations in more than one country.

______ is a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable intellectual property.

Licensing

______ risk is the potential threat to a firm's operations in a country due to the problems that managers have making decisions in the context of foreign markets.

Management

______ is shifting a value-creating activity from a domestic location to a foreign location.

Offshoring

______ is using other firms to perform value-creating activities that were previously performed in-house.

Outsourcing

______ risk is the potential threat to a firm's operations in a country due to ineffectiveness or turmoil in the domestic governmental system.

Political

Starling Sports decided to expand operations overseas. Unfortunately, Starling encountered rules and regulations that frequently changed, and Starling had no recourse. Which of the following best explains Starling's situation?

Starling encountered the absence of the rule of law.

Which of the following are risks of licensing or franchising?

The licensor forgoes potential revenues and profits. The licensor gives up control of its product. The franchiser only receives a portion of the revenues.

Which of the following describe limitations of using a global strategy?

There are potentially higher tariffs and transportation costs due to single production location. There is limited ability to adapt to local markets. There is increased dependence on a single facility.

Which of the following are limitations of a transnational strategy?

There are unique challenges in determining optimal locations to ensure quality. There are unique managerial challenges in fostering knowledge transfer. There are unique challenges in determining optimal locations to ensure optimal costs.

Rivalry is particularly intense in nations with which of the following conditions?

There is a high likelihood for potential entrants from related industries. There is strong consumer demand. There is a strong supplier base.

Which of the following are strengths of using a global strategy?

There is strong integration across various business units. There are uniform quality standards across the world. There are lowered costs due to standardization and higher economies of scale.

Which of the following are benefits of wholly owned subsidiaries?

They can leverage the parent company's knowledge and capabilities. They can yield the highest returns. They provide a high degree of control over all business activities.

What can be concluded about companies that are successful globally?

They first succeeded in highly competitive domestic markets.

Which of the following are motivations for international expansion?

To increase the company's market size

Which of the following statements regarding learning opportunities that come from overseas expansion are correct?

Companies can improve their performance through learning abroad. Managers transfer knowledge from their overseas experience back home. Expanding into new markets exposes managers to differing market demands.

A ______ strategy is based on firms' optimizing the trade-offs associated with efficiency, local adaptation, and learning.

Transnational

True or false: A hidden cost of offshoring can be the loss of intellectual property, such as trade secrets.

True

True or false: One of the challenges with globalization is for multinational firms to meet the needs of those living at the bottom of the economic pyramid in developing countries.

True

True or false: Two components of formulating international strategy are to choose an entry strategy and to attain a competitive advantage over international competitors.

True

A company that locates some operations in another country to take advantage of that country's close proximity to other regional markets via rail transportation is likely relocating for ______.

cost reduction

The selling of trademarked goods without the consent of the trademark holder is called ______.

counterfeiting

Which of the following are examples of potential challenges that managers face while managing in a host country?

cultural differences customer preferences language differences

Which of the following are the primary considerations when selecting a mode of foreign entry?

degree of ownership and control extent of investment and risk

Of the following, the biggest challenge of globalization and multinational firms is _____.

determining how to meet the needs of a variety of customers who have different income levels

Which of the following describe strengths of using an international strategy?

lowering costs due to less need to tailor products and services leveraging and diffusing a parent firm's knowledge and core competencies

______ risk is the potential threat to a firm's financial operations in a country due to policies and laws about intellectual property rights and enforcement of those laws.

Economic

What can prompt a firm to look outside its national boundaries for new markets and prepare it to compete successfully in global markets?

Experiencing intense domestic rivalry

______ are a nation's position in factors of production.

Factor endowments

______ are the conditions in the nation governing how companies are created, organized, and managed as well as the nature of domestic rivalry.

Firm strategy, structure, and rivalry

Which of the following statements about intense domestic rivalry are true?

Firms that experience intense domestic rivalry look outside their national boundaries for new markets. Firms that experience intense domestic competition are more likely to have strategies and structures to help them be successful in world markets.

What is a company trying to do when it strategically expands into new markets in order to spread out the high-cost elements of manufacturing operations?

It is trying to reduce currency risks.

Which of the following are limitations of using a multidomestic strategy?

May lead to "overadaptation" as conditions change. Decreased ability to realize cost savings through economies of scale. Greater difficulty in transferring knowledge across countries.

The benefits of strategic alliances and joint ventures include which of the following?

Partnering with host country firms provides information on local market conditions, legal issues, and culture. Risks associated with doing business in a host country are lessened through partnering with local companies. Costs are shared with partners.

_____ blocs are groups of countries that agree to increase trade among themselves by lowering trade barriers.

Trading or Trade

Which of the following statements about related and supporting industries' role in creating a diamond of national advantage are correct?

Related and supporting industries enable firms to manage their supply chain's inbound logistics more effectively. Competitive supplier bases often decrease manufacturing costs. Close working relationships with suppliers help develop competitive advantages, for example through joint research and development.

Competitive advantage for global firms typically arises from which of the following characteristics?

Relentless, continuing improvement within the firm A company culture of promoting innovation

Which of the following statements about locating some operations in another country as a means for cost reduction are correct?

Some locations can affect multiple aspects of cost structures including manpower, transportation, and logistics costs. Cost-reduction benefits parallel business-level strategies of both differentiation and cost leadership. Governments may offer incentives and tax structures to entice companies to relocate.

A global strategy emphasizes ______.

centralizing operations to a few locations economies of scale through producing standardized products and services lowering costs

When a company decides to locate some operations in another country to gain access to needed talent, it is primarily seeking to ______.

enhance its performance

The strengths of using a multidomestic strategy include the ability to ______.

enhance revenues by detecting attractive niche markets adapt products and services to local markets

Many companies expand internationally in order to increase their market size so that they ______.

increase the potential market for its products and services

Which of the following describe two limitations of using an international strategy?

limited ability to adapt to local markets inability to take advantage of new ideas and innovations occurring in local markets

The strengths of a transnational strategy include the ability to ______.

locate activities in optimal locations increase knowledge flows and learning attain economies of scale adapt to local markets

The two opposing pressures that managers face when they decide to go overseas are pressure to ______.

lower unit costs and tailor products for local adaptation

Companies sometimes expand to foreign markets to offset the ______ in their domestic market.

market saturation

Companies sometimes launch products overseas when sales have flattened because the product has reached the ______ stage in the firm's home country.

maturity

Which of the following are among the basic strategies that companies can use to compete in the global marketplace?

multidomestic strategy international strategy transnational strategy

Companies may choose to locate some operations abroad to reduce which of the following risks?

political risks currency risks economic risks

Companies optimize the location for their activities for which of the following reasons?

risk reduction enhancing performance lowering costs

Which of the following are examples of factor endowments?

supporting infrastructure of a country such as transportation and communication systems factors of production, such as skilled human resources, land, and capital

A characteristic of legal systems where behavior is governed by rules that are uniformly enforced is ______.

the rule of law

When groups of countries agree to lower trade barriers to increase trade between them, they are creating ______.

trading blocs