Strategic Management Chapter 8 Potential Questions

A fundamental reason for a country's development of advanced and specialized factors of production is often its a. lack of basic resources. b. monetary wealth. c. small workforce. d. protective tariffs.

A

A global corporate-level strategy differs from a multidomestic corporate-level strategy in that in a global strategy, a. competitive strategy is dictated by the home office. b. competitive strategy is decentralized and controlled by individual strategic business units. c. products are customized to meet the individual needs of each country. d. the firm sells in multiple countries.

A

A large domestic market can provide the country's industries a chance at dominating the world market because a. they have been able to develop economies of scale at home. b. they have access to abundant and inexpensive factors of production. c. the related and supporting industries will have been developed. d. the nation's culture and educational system will be adapted to producing the labor force needed for the industry.

A

All of the following complicate the implementation of an international diversification strategy EXCEPT a. widespread multilingualism. b. increased costs of coordination between business units. c. cultural diversity. d. logistical costs.

A

Arkadelphia Polymers, Inc., earns 60 percent of its revenue from exports to Europe and Asia. The CEO of the company would be a. concerned if the value of the dollar strengthened. b. pleased if the value of the dollar strengthened. c. unconcerned about the fluctuation in the value of the dollar because the company is widely diversified geographically. d. likely to consider moving to international strategic alliances or acquisitions if the value of the dollar fell and remained low.

A

Firms able to standarize the processes used to produce, sell, distribute, and service their products across country borders enhance their ability to a. learn how to continuously reduce costs while increase the value of their products. b. increase investment in research and development. c. access to a low-cost labor force in the host market. d. mitigate cultural differences.

A

Firms with core competencies that can be exploited across international markets are able to a. achieve synergies and produce high-quality goods at lower costs. b. enter new markets more quickly. c. enhance their market image and brand loyalty among local consumers. d. meet local government requirements more quickly than their international competitors.

A

In China, Starbucks is standardizing its operations while simultaneously decentralizing some decision-making responsibility to local levels to meet customers tastes. Starbucks is following the (BLANK) international corporate-level strategy. a. transnational b. global c. differentiation d. multidomestic

A

International corporate-level strategy focuses on a. the scope of operations through both product and geographic diversification. b. competition within each country. c. economies of scale. d. sophistication of monitoring and controlling systems.

A

Internationally diversified firms a. earn greater returns on their innovations through larger or more numerous markets. b. are more likely to produce below-average returns for investors in the long run. c. may need to decrease international activities when domestic profits are poor. d. are generally unable to achieve high levels of synergy because of differences in cultures.

A

Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national advantage? a. factors of production b. demand conditions c. related and supporting industries d. firm strategy, structure, and rivalry

A

One of the primary reasons for failure of cross-border strategic alliances is a. the incompatibility of the partners. b. conflict between legal and business systems. c. security concerns and terrorism. d. high debt financing.

A

Terrorism creates an economic risk for firms, which a. reduces the amount of investment foreign companies will make in a country perceived to be terror-prone. b. is created by governmental bans on doing business with terrorist regimes. c. is offset by the above-average returns for firms that have learned how to operate in such an environment. d. is absorbed by firms that are highly geographically diversified and that operate in both secure and insecure locations.

A

U.S. cola companies entered the global market because of a. limited growth opportunities in their domestic market. b. lower labor costs in the emerging markets. c. economies of scale that offset research and development costs. d. an increase in the return on investment from their U.S. bottling plants.

A

Which of the following is NOT a disadvantage associated with exporting? a. potential loss of proprietary technologies b. high transportation costs c. loss of control over distribution activities d. tariffs imposed by local governments

A

A U.S. manufacturer of adaptive devices for persons with disabilities is considering expanding internationally. It is a fairly small company, but it is looking for growth opportunities. This company should primarily consider the option of a. licensing. b. exporting. c. a strategic alliance. d. a greenfield venture.

B

A global corporate-level strategy emphasizes a. differentiated products. b. economies of scale. c. sensitivity to local product preferences. d. decentralizing control and limited monitoring.

B

A multidomestic corporate-level strategy has (BLANK) need for global integration and (BLANK) need for local responsiveness. a. low; low b. low; high c. high; low d. high; high

B

All of the following are international corporate-level strategies EXCEPT the (BLANK) strategy. a. multidomestic b. universal c. global d. transnational

B

An international diversification strategy is one in which a firm a. expands into nearby markets. b. expands into a potentially large number of geographic locations and markets. c. expands into one or a few markets. d. acquires a firm in a foreign country.

B

In France, fine dressmaking and tailoring have been a tradition predating Queen Marie Antoinette. Cloth manufacturers, design schools, craft apprenticeship programs, modeling agencies, and so forth, all exist to supply the clothing industry. This is an example of the (BLANK) in Porter's model. a. strategy, structure, and rivalry among firms b. related and supporting industries c. demand conditions d. factors of production

B

Increasingly, customers worldwide are demanding emphasis on local requirements and companies are needing efficiency as global competition increases. This has triggered an increase in the number of firms using the (BLANK) strategy. a. multidomestic b. transnational c. universal d. global

B

International strategy refers to a(n) a. action plan pursued by American companies to compete against foreign companies operating in the United States. b. strategy through which the firm sells products in markets outside the firm's domestic market. c. political and economic action plan developed by businesses and governments to cope with global competition. d. strategy American firms use to dominate international markets.

B

Most firms enter international markets sequentially, introducing their (BLANK) first. a. most innovative products b. largest and strongest lines of business c. most generic products, which will be more likely to generate universal product demand, d. products customized to the region

B

Moving into international markets is a particularly attractive strategy to firms whose domestic markets a. demand a differentiation strategy for success. b. are limited in opportunities for growth. c. have developed unfriendly business attitudes toward the industry. d. have too much regulation.

B

Skaredykat Inc. is considering initial expansion beyond its home market. The firm has decided not to enter markets that differ greatly from its home market, instead expanding within the twelve-nation region that includes its home country. a. The firm is not engaging in international trade. b. The firm is using a regional approach to international expansion. c. The firm will not be able understand the cultures, legal, and social norms of this market. d. Skaredykat is a scaredy-cat.

B

The increased pressures for global integration of operations have been driven mostly by a. new low-cost entrants. b. increasing demand for similar products. c. increased levels of joint ventures. d. the rise of governmental regulation.

B

The positive results associated with increasing international diversification have been shown to a. continue as the level of international diversification increases. b. level off and become negative as diversification increases past some point. c. become negative quickly. d. be centered in only one or two industries.

B

When a firm INITIALLY becomes internationally diversified, its returns a. remain stable. b. decrease. c. become more variable. d. increase

B

(BLANK) is the set of costs associated with unfamiliar operating environments; economic, administrative and cultural differences; and the challenges of coordination over distances. a. Transnational risk b. Regionalization c. Liability of foreignness d. International risk

C

A firm may narrow its focus to a specific region of the world a. because that market is most different from its domestic market and so represents an unexploited "greenfield opportunity" for its products. b. in order to obtain greater economies of scale. c. so that it can better understand the cultures, legal and social norms, and other factors that are important for effective competition in those markets. d. to take advantage of limited protections of intellectual property so that it can manufacture innovative products without restrictions.

C

A licensing agreement a. results in two firms agreeing to share the risks and the resources of a new venture. b. is best way to protect proprietary technology from future competitors. c. allows a foreign firm to purchase the rights to manufacture and sell a firm's products within a host country. d. can be greatly impacted by currency exchange rate fluctuations.

C

A multidomestic corporate-level strategy is one in which a. a corporation chooses not to compete internationally but where there are a number of international competitors in the firm's local marketplace. b. the firm produces a standardized product, but markets it differently in each country in which it competes. c. the firm customizes the product for each country in which it competes. d. the firm competes in a number of countries, but it is centrally coordinated by the home office.

C

A transnational corporate-level strategy seeks to achieve a. customization for the local market. b. economies of scale and centralized strategic control. c. global efficiency and local responsiveness. d. standardization of products across countries.

C

All of the following are correct about what managers should know about firms based in a country with a national competitive advantage EXCEPT a. success is not guaranteed as the firm implements its chosen international business-level strategy. b. the actual strategic choices made are most compelling reasons for success or failure. c. success is guaranteed as the firm implements its chosen international business-level strategy. d. the determinants of national competitive advantage provide a foundation for a firm's competitive advantages.

C

Associations such as the European Union, Organization of American States, and the North American Free Trade Association, encourage a. global strategies. b. domestication. c. regional strategies. d. nationalization.

C

Disney suffered lawsuits in France at Disneyland Paris as a result of the lack of fit between its transferred personnel policies and the French employees charged to enact them. This is an example of a. the effects of regionalization. b. the risks of a multidomestic strategy. c. the liability of foreignness. d. the effect of demand conditions.

C

If conflict in a strategic alliance or joint venture is not manageable, a(n) (BLANK) may be a better option. a. licensing strategy b. exporting strategy c. acquisition d. new wholly owned subsidiary

C

If intellectual property rights in an emerging economy are not well-protected, the number of firms in the industry is rapidly growing, and the need for global integration is high, (BLANK) is the preferred entry mode. a. exporting b. strategic alliance c. a joint venture or wholly owned subsidiary d. licensing

C

In addition to the four basic dimensions of Porter's "diamond" model, (BLANK) may also contribute to the success or failure of firms. a. national work ethic b. educational requirements c. government policy d. national pride

C

Raymond Vernon states that the classic rationale for international diversification is to a. pre-emptively dominate world markets before foreign companies can establish dominance. b. avoid domestic governmental regulation. c. extend the product's life cycle. d. avoid international governmental regulation.

C

The choices that a firm has for entering the international market include all of the following EXCEPT a. exporting. b. licensing. c. leasing. d. acquisition.

C

The decision of what entry mode to use is primarily based on all of the following factors EXCEPT a. the industry's competitive conditions. b. the country's situation and government policies. c. the worldwide economic situation. d. the firm's unique set of resources, capabilities, and core competencies.

C

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT a. factors of production. b. demand conditions. c. political and economic institutions. d. related and supporting industries.

C

U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness because of a. increasing rejection of American culture across much of the world. b. the sophistication of the international consumer because of the Internet. c. consumer needs, political and legal structures, and social norms vary by country. d. the increasing loss of economies of scale.

C

Under industry structural analysis (Chapter 2), (BLANK) rivalry is viewed as detrimental to profitability. Under the model of national advantage (Chapter 8), (BLANK) rivalry is viewed as (BLANK) as it results in competition and surviving firms are able to compete against global rivals. a. low; low; beneficial b. low; low; detrimental c. high; high; beneficial d. high; high; detrimental

C

Which of the following is NOT an incentive for firms to become multinational? a. to gain access to consumers in emerging markets b. to gain easier access to raw materials c. to avoid high domestic taxation on corporate income d. opportunities to integrate operations on a global scale

C

Which of the following is an advantage associated with greenfield ventures? a. governmental support and subsidies in the host country b. the lower cost of this type of venture c. the level of control over the firm's operations d. the lower level of risks involved

C

Working in multiple international markets can provide firms with (BLANK) perhaps even in terms of (BLANK) a. location advantages; larger markets. b. research and development activities; larger markets. c. new learning opportunities; research and development activities. d. economies of scale and learning; larger markets.

C

A global corporate-level strategy assumes a. efficiency and customization can be achieved simultaneously. b. a rise in income levels across the world. c. increasing levels of cultural differences among nations. d. more standardization of products across country markets.

D

A global strategy a. is easy to manage because of common operating decisions across borders. b. achieves efficient operations without sharing resources across country boundaries. c. increases risk because decision making is centralized at the home office. d. lacks responsiveness to local markets.

D

A nation's competitiveness depends on the capacity of its industries to (BLANK) and thereby maintain its competitive advantage. a. diversify internationally b. have access to critical resources c. protect its proprietary capabilities d. innovate

D

All of the following are reasons why firms use international strategic alliances EXCEPT a. sharing of risks and resources. b. alliances facilitate the development of new capabilities. c. learning new competencies particularly those related to technology. d. strategic alliances are easy to manage.

D

Bunyan Heavy Equipment, a U.S. firm, is investigating expanding into Russia using a greenfield venture. The committee researching this project has delivered a negative report. The MAIN concern of the committee is probably a. loss of intellectual property due to Russian piracy. b. the fluctuation in the value of the ruble. c. the numerous and conflicting legal authorities in Russia. d. Russia's recent actions to gain state control of private firms' assets.

D

Effectively implementing the (BLANK) international corporate-level strategy often produces higher performance than does implementing either the (BLANK) or (BLANK) strategies. a. multidomestic; global; transnational b. global; multidomestic; transnational c. cost leadership; differentation; focus d. transnational; multidomestic; global

D

Factors of production in Porter's model of international competitive advantage include all of the following EXCEPT a. labor. b. capital. c. infrastructure. d. technology

D

In Porter's model, a specialized factor of production would include a. abundant natural resources. b. a large workforce. c. an extensive highway transportation system. d. workers with advanced engineering skills.

D

In Porter's model, if a country has both (BLANK) and (BLANK) production factors, it is likely to serve an industry well by spawning strong home-country competitors that can also be successful global competitors. a. basic; advanced b. advanced; generalized c. basic; generalized d. advanced; specialized

D

The benefits of expanding into international markets include each of the following opportunities EXCEPT a. increasing the size of the firm's potential markets. b. economies of scale and learning. c. location advantages. d. favorable tax concessions and economic incentives by home-country governments.

D

The location advantages associated with locating facilities in other countries can include all of the following EXCEPT a. low-cost labor. b. access to critical supplies. c. access to customers. d. evasion of host country governmental regulations.

D

The means of entry into international markets that offers the greatest control is a. licensing. b. acquisitions. c. joint ventures. d. greenfield ventures.

D

The problems associated with exporting include a. merging corporate cultures. b. a partner's incompatibility. c. difficulty in negotiating relationships. d. high transportation costs and the expense of tariffs.

D

The transnational strategy is becoming increasingly necessary to compete in international markets for all the following reasons EXCEPT a. the growing number of competitors heightens the requirements to keep costs down. b. the desire for specialized products to meet consumers' needs. c. differences in culture and institutional environments also require firms to adapt their products and approaches to local environments. d. it is easy to use.

D

The two important environmental trends that influence a firm's choice and use of international corporate-level strategies are (BLANK) and (BLANK) a. culture; geographic scope. b. cost; quality. c. regionalization; globalization. d. liability of foreignness; regionalization.

D

Which of the following is NOT a disadvantage of international acquisitions? a. They are very expensive and often require debt financing. b. The acquiring firm has to deal with the regulatory requirements of a host country. c. Merging the acquired and acquiring firm is difficult. d. It is the slowest way to enter a new market.

D

Which of the following is NOT a factor pressuring companies for local responsiveness? a. differences in employment laws b. customization due to cultural differences c. government pressure for firms to use local sources for procurement d. availability of low labor costs

D

Which of the following is NOT a typical disadvantage of licensing? a. little control over the marketing of the products b. licensees may develop a competitive product after the license expires c. lower potential returns than the use of exporting or strategic alliances d. incompatibility of the licensing partners

D

Which pair of industries would NOT be considered as "related and supporting" under Porter's diamond model? a. Japanese cameras and copiers b. Italian leather-processing and shoes c. U.S. computers and software d. highway systems and the supply of debt capital

D

A U.S. manufacturer of pigments for household paint that exports about 40 percent of its production to European markets will find its sales will be harmed by a weak dollar. a. True b. False

False

A global strategy is an international strategy through which the firm offers standardized products across country markets, with competitive strategy being dictated by offices within the host markets served. a. True b. False

False

A multidomestic strategy is an international strategy in which a firm's home office determines the strategies business units are to use in each region. a. True b. False

False

Although licensing is the least costly method to enter a foreign market, its disadvantages include high costs of transportation and low control over the marketing and distribution of goods. a. True b. False

False

Because of the lack of protection of intellectual property in some foreign countries, licensing arrangements are one of the best ways for a firm to protect its technology from being appropriated by potential competitors. a. True b. False

False

Because there are still several industrial and consumer markets in which only domestic firms compete, many firms do not have to be able to compete internationally. a. True b. False

False

Coca Cola and PepsiCo are examples of firms that have found it unnecessary to aggressively pursue international strategies because of extensive growth opportunities available in the U.S. market. a. True b. False

False

Establishing a wholly-owned subsidiary provides the quickest access to a new market. a. True b. False

False

Even if effectively implemented, the transnational strategy often produces lower performance than does the implementation of either the multidomestic or global strategies. a. True b. False

False

Having substantial supplies of critical basic natural resources is a necessary condition for a country to support businesses that can successfully compete in international markets. a. True b. False

False

Location advantages are influenced by costs of production, access to natural resources and critical supplies, as well as the needs of customers, but not culture. a. True b. False

False

Research suggests that wholly owned subsidiaries and expatriate staff are inappropriate for service industries because those industries require close contact with customers, high levels of professional skills, specialized know- how, and customization. a. True b. False

False

South Korea's success in international markets is primarily a result of its abundant natural resources. a. True b. False

False

Strategic alliances tend to increase the risk associated with international expansion for the U.S. partner because of the greater dependence on the foreign firm. a. True b. False

False

The "liability of foreignness" will have a greater negative impact on a firm using a multidomestic strategy than on a firm using a global strategy. a. True b. False

False

The chief risks in the international environment are political and cultural. a. True b. False

False

The three corporate-level international strategies are cost leadership, differentiation, and focus. a. True b. False

False

When the country risk is high, firms prefer to enter with a greenfield investment rather than a joint venture. a. True b. False

False

While there are multiple means of entering new international markets, firms should use one method consistently with all of its various products and across its different markets in order to reduce administrative complexity. a. True b. False

False

A company that chooses a truly global corporate-level strategy assumes that the liability of foreignness will be minimal. a. True b. False

True

A firm based in a country with a national competitive advantage is not guaranteed success as it implements its chosen international business-level strategy. Instead, the actual strategic choices managers make may be the most compelling reasons for success or failure. a. True b. False

True

A major advantage of multidomestic strategies is the ability to customize for the specific market, although this sacrifices economies of scale. a. True b. False

True

A major incentive for the use of international strategy by French-based Carrefour Group is the potential for large demand for goods and services from emerging markets such as China and India. a. True b. False

True

A multidomestic strategy is an international strategy in which strategic and operating decisions are decentralized to the strategic business units in individual or regions. a. True b. False

True

A reason that firms use international strategies is to secure needed resources, especially minerals and energy. a. True b. False

True

A transnational strategy is an international strategy in which the firm seeks to achieve both global efficiency and local responsiveness. a. True b. False

True

A transnational strategy is difficult to use because of its conflicting goals. a. True b. False

True

Acquisitions, greenfield ventures, and sometimes joint ventures are appropriate when firms want to establish a strong presence in an international market. a. True b. False

True

After a firm decides to compete internationally, it must select its strategy and choose a mode of entry into international markets. a. True b. False

True

Although leaders in Russia have tried to reassure potential investors about their property rights, political risks in the form of weak laws and commonplace government corruption make firms leery of investing in Russia. a. True b. False

True

An increase in the value of the U.S. dollar is an example of an economic risk in that it can reduce the value of U.S. multinational firms' international assets and earnings in other countries. a. True b. False

True

As an indication of the importance of economies of scale, Ford Motor Company runs a single global business developing cars and trucks that can be built and sold through the world. a. True b. False

True

Both the size and the nature of a country's domestic demand for a particular industry's good or service are important in Porter's determinants of national advantage. a. True b. False

True

By choosing a region where markets are more similar, the firm may be able to better understand those markets and cater to their needs, but also achieve economies through sharing of resources. a. True b. False

True

Cultural differences affect location advantages in that business transactions are less difficult for a firm to complete when there is a strong match among the cultures with which the firm is involved. a. True b. False

True

Evidence suggests that, in general, using an international cost leadership strategy when exporting to developed countries has the most positive effect on firm performance while using an international differentiation strategy with larger scale when exporting to emerging economies leads to the greatest amounts of success. a. True b. False

True

Export, licensing, and the strategic alliance entry modes are all appropriate for early market development. a. True b. False

True

Export, licensing, and the strategic alliance entry modes are also appropriate when firms want to establish a strong presence in an international market. a. True b. False

True

Exporting and licensing are the most appropriate ways for smaller firms to first enter international markets. a. True b. False

True

Fluctuation in the value of different currencies is a major economic risk associated with international diversification. a. True b. False

True

Four types of distances are associated with the liability of foreignness: cultural, administrative, geographic, and economic. a. True b. False

True

In place of relatively stable and predictable domestic markets, firms across the globe find that they are competing in relatively unstable and unpredictable global markets. a. True b. False

True

In some industries, technology drives globalization because the economies of scale necessary to reduce costs cannot be met by competing in domestic markets alone. a. True b. False

True

International associations such as the European Union, the Organization of American States, and the North American Free Trade Association encourage regionalization of competition rather than globalization. a. True b. False

True

International diversification can help to reduce a firm's overall risk through the stabilization of returns. a. True b. False

True

International diversification is a strategy through which a firm expands the sale of its goods and services across borders of global regions and countries into a potentially large number of geographic locations of markets. Instead of entering one or a few markets, international diversification means that the firm enters multiple markets. a. True b. False

True

Italy has become the leader in the shoe industry because of related and supporting industries such as a well- established leather-processing industry that provides the leather needed to construct shoes and related products. a. True b. False

True

Michael Porter's Determinants of National Advantage describe factors associated with the firm's domestic environment that contribute to its dominance in a particular global industry. a. True b. False

True

Multinational firms have many opportunities to learn from their experiences in international markets, but they must have a strong R&D system to absorb the knowledge. a. True b. False

True

One reason why firms pursue international opportunities is to extend the product's life cycle. a. True b. False

True

Research has shown that, as international diversification increases, firms' returns decrease initially but then increase quickly as firms learn to manage international expansion. a. True b. False

True

Research suggests that the performance of the global strategy is enhanced if it deploys in areas where regional integration across countries is occurring. a. True b. False

True

Rivals Airbus and Boeing have multiple manufacturing facilities and outsource activities partly for the purpose of developing economies of scale as a source of being able to create value for customers. a. True b. False

True

Some of the costs incurred by firms pursuing international diversification may derive from higher coordination expenses, trade barriers, and lack of familiarity with local cultures. a. True b. False

True

The "liability of foreignness" means that many firms need to focus more on local adaptation or risk problems such as the Walt Disney Company faced opening its theme park in France. a. True b. False

True

The "regionalization" environmental trend means that firms can focus on a region (customization) but also have some standardization or sharing within the region. a. True b. False

True

The amount of diversification in a firm's international operations that can be managed varies from company to company and is affected by manager's abilities to deal with ambiguity and complexity. a. True b. False

True

The firm using a global strategy seeks to develop economies of scale as it produces the same or virtually the same products for distribution to customers throughout the world who are assumed to have similar needs. a. True b. False

True

The global strategy offers greater opportunities to take innovations developed at the corporate level or in one market and apply them to other markets. a. True b. False

True

The greenfield venture option is useful when control of proprietary technology is important in an international expansion. a. True b. False

True

The growing number of global competitors heightens the requirements to keep costs down and there is the desire for more specialized products to meet customer needs. These two pressures make transnational strategies increasingly necessary. a. True b. False

True

The high cost of transportation, expense of tariffs, and loss of control are three disadvantages of exporting. a. True b. False

True

The three basic benefits of international strategies are 1) increased market size; 2) increased economies of scale and learning; and 3) development of competitive advantages through location. a. True b. False

True

When a firm initially pursues an international business-level strategy, the resources and capabilities established in the home country frequently allow the firm to pursue the strategy into markets located in other countries. a. True b. False

True