Chapter Practice

Question
Answer

the trend towards worldwide markets makes it easier to predict where competitors will spring up. true or false?
false

because many countries are investing in countries other than their own, each country is becoming more autonomous and independent. true or false?
false

an advantage of international expansion is that competition within foreign countries is generally very similar to that of the US. true or false?
false

In michael porter’s “diamond of competitive advantage” there are 4 broad attributes that, as a system, constitute a nation’s competitiveness in an industry. true or false?
true

the factor endowments of a country are inherited and cannot be created. true or false?
false

with regard to factor conditions the pool of resources that a firm has is much more important than the speed and efficiency with which these resources are deployed. true or false?
false

demanding domestic consumers tend to push firms to move ahead of companies in other countries where consumers are less demanding and more complacent. true or false?
true

high levels of environmental awareness in Denmark have led to a decline in Denmark’s industrial competitiveness in the international marketplace. true or false?
false

countries with a strong supplier base benefit by adding efficiency to upstream activities. true or false?
true

typically, intense rivalry in domestic markets does not force firms to look outside their national boundaries for new markets. true or false?
false

many international firms are increasing their efforts to market their products and services to countries such as India and China as the ranks of their middle class continue to increase. true or false?
true

international expansion can extend the life cycle of a product that is in its maturity stage in a firm’s home country. true or false?
true

an advantage of international expansion is that it can enable a firm to optimize the location of every activity in its value chain. true or false?
true

the laws, and the enforcement of laws, associated with the protection of intellectual property rights, represent a significant currency and management risk to multinational firms. true or false?
false

differences in foreign markets such as culture, language, and customs can represent significant management risks when firms enter foreign markets. true or false?
true

offshoring takes place when a firm decides to shift an activity that they were previously performing in a domestic location to a foreign location. true or false?
true

2 opposing pressures that managers face when they compete in foreign markets are cost reduction and adaption to local markets. true or false?
true

theodore levitt has argued that people around the world are willing to sacrifice preferences in product features, functions, and design if they are offered lower prices and high quality. true or false?
true

among theordore levitt’s assumptions that would favor a global strategy is that consumers around the world are becoming less price sensitive. true or false?
false

within a worldwide market, the most effective strategies are neither purely multidomestic nor purely global. true or false?
true

industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy than those in which more value is added downstream. true or false?
true

in a global strategy a firm operates all its businesses under a single common strategy regardless of location. true or false?
true

a multidomestic strategy is the most appropriate strategy for international operations because it drives economies of scale as far as possible and provides a middle of the road product appealing to the largest number of consumers in every market. t or f?
false

the need to attain economies of scale encourages multinational firms to operate under a multidomestic strategy. true or false?
false

corporations with multiple foreign operations that act very independently of one another are following a multidomestic strategy. true or false?
true

a multidomestic strategy would likely include the use of high volume, centralized production facilities to maximize economies of scale. true or false?
false

a limitation of a multidomestic strategy is that it may lead to overadaptation as conditions change. true or false?
true

multinational firms following a transnational strategy strive to optimize the tradeoffs associated with efficiency, local adaptation, and learning. true or false?
true

a key tenet of transnational strategy is improved adaptation to all competitive situations as well as flexibility by capitalizing on communication and knowledge flows throughout the organization. true or false
true

according to studies by Rugman and Verbeke, most of the world’s 500 firms are global- not regional or biregional. true or false?
false

a franchise generally expires after a few years whereas a license is designed to last into perpetuity. true or false?
false

typically joint ventures involve less control and risk than franchising. true or false?
false

typically the best method of entry into a foreign market is the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control. true or false?
false

a major trend in international developments include:
greater international trade and operations, growing recognition of an international managerial perspective, a large increase in international investment

the reasons that explain why some governments make better use of the inflows from foreign investment and know how than others include:
governmental practices that are business friendly, local entrepreneurs that can train workers and invest in modern technology, sound management of broader economic factors such as interest rates and inflation

according to michael porter’s framework all of these factors affect a nation’s competitiveness
factor conditions, demand characteristics, related and supported industries

rivalry is intense in nations with conditions of ____ consumer demand, _____ supplier bases, and _____ new entrant potential from related industries
strong, strong, high

according to michael porter, firms that have experienced intense domestic competition are:
more likely to design strategies and structures that allow them to successfully compete abroad.

all of these factors have made India’s software services industry extremely competitive on a global scale
large pool of skilled workers, large network of public and private educational institutions, large, growing market and sophisticated customers

advantages of global diversification
firm not being solely dependent on domestic market, firm with large margins at home helping subsidize its operations in other nations, potential to lower costs of operation even if the primary market is at home

optimizing the location of every activity in the value chain can yield all of these strategic advantages
performance enhancements, cost reduction, extending the life cycle of the product or service

Microsoft decided to establish a corporate research laboratory in Cambridge, England
to access the outstanding technical and professional talent available there so that they can attain world class excellence in selected value creating activities

the sale of boeing’s commercial aircraft and microsoft’s operating systems in many countries enable these companies to benefit from:
economies of scale

Many US multinational companies set up maquiladora operations south of the US-Mexico border primarily
to take advantage of the low cost of labor

appreciation of the US dollar will have this impact on McDonalds
lower profits, because foreign profits will be reduced when measured in dollars

This occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in house
outsourcing

what is one of Theodore Levitt’s assumptions supporting a pure global strategy?
MNCs can compete with aggressive pricing on low cost products that meet the common needs of global consumers

pressures to reduce costs require that
a company must pursue what is economically beneficial to the company including maximizing economies of scale and learning curve effects

Low pressure for local adaptation combined with low pressure for lower costs would suggest what type of strategy?
international

High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy?
multidomestic

Software Tech Inc. a company in the computer software industry, invests heavily in R&D and product design. Thus, most of its value is added
upstream

Industries in which proportionally more value is added in _____ activities are more likely to benefit from a ______ strategy.
upstream, global

What types of international firms are most likely to benefit from a global strategy as opposed to a multidomestic strategy?
firms in industries that have much value added in research and design or manufacturing

Recent trends that might lead to managers of multinational corporations to adopt a more decentralized strategy for their operations would include
consumers are the world are increasingly willing to trade off idiosyncratic preferences in product features for lower price, flexible mftg trends have allowed a decline in the min volume required to reach acceptable levels of production efficiency

Firms following a global strategy strive to offer ______ products and services as well as locate manufacturing, R&D, and marketing activities in ______ locations.
standardized, few

Gillete’s worldwide success with its Sensor razor demonstrates
that a global marketing effort can sometimes be successful

as in the case of Siebel systems, elements of a global strategy may facilitate the competitive advantage of differentiation by
the creation of a world wide network to achieve consistent service regardless of location.

risks associated with global strategy
firm with only one mfg location must export its product, geographic concentration of any activity may also tend to isolate that activity from the target market, concentrating an activity in a single location makes the firm dependent on that location

limitations of global strategy:
limited ability to adapt to local markets, concentration of activities may increase dependence on single facility, single locations may lead to higher tariffs and transportation costs

Elements of a multidomestic strategy may facilitate the competitive advantage of cost leadership by
decreased shipping and transportation costs inherent in local production

limitations of a multidomestic strategy
less ability to realize cost savings through scale economies, greater difficulty in transferring knowledge across countries, may lead to overadpatation as conditions change

high pressure for local adaptation combined with high pressure for lower costs would suggest what type of international strategy?
transnational

Units coordinate their activities with headquarters and one another, units adapt to special circumstances only the face, and the entire org draws upon relevant corporate resources. These are attributes of:
transnational strategy

What is a disadvantage of a transnational strategy?
unique managerial challenges in fostering knowledge transfer

in order to realize the strongest competitive advantage, firms engaged in worldwide competition must
pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy in order to achieve optimal results

According to studies by Rugman and Verbeke, approx how many of the world’s largest 500 firms are global, that is, they have at least 20% of their total revenues each in North America, Asia, and Europe?
10

What describes the most typical order of entry into foreign markets?
exporting, licensing, franchising, joint venture, and wholly owned subsidiary

a domestic corporation considering expanding into international markets for the first time will typically
consider implementing a low risk/low control strategy such as exporting

The form of entry strategy into operations that offers the lowest level of control would be:
exporting

Fees that a multinational receives from a foreign licensee in return for its use of intellectual property are usually called
royalties

the difference between a franchise and licensing contract is that
a franchise contract is more specific and longer in duration

_________ entails the creation of a third party legal entity; whereas _______ do not.
joint ventures, strategic alliances

a business in which a multinational company owns 100% of the stock
wholly owned subsidiary

This is most appropriate where a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations in many countries
wholly owned subsidiaries