Ch.

8
One of the great growth industries of the past few decades has been the wireless phone industry.

a. True
Nokia and IKEA are both German companies.
b. False

The globalization of production has been increasing as companies take advantage of lower barriers to international
trade and location economies.
a. True
Many experts believe that the world's economic system is moving toward a system in which national markets are
merging into one huge global marketplace.
a. True

Relative to the United States, Mexico has more advanced factors of production.
b. False

Factor endowments-the cost and quality of factors of production-are a prime deinant of the competitive advantage
that certain countries have in certain industries.
a. True

A company can increase its growth rate by taking goods or services developed at home and selling them
internationally.
a. True

Location economies refer to the economic benefits that arise from performing a value creation activity at central
headquarters.
b. False

A company may create value if it can leverage the skills created within subsidiaries and apply them to other
operations within the firm's global network.
a. True

By offering a standardized product to the global marketplace and manufacturing that product in each nation in which
it does business, a multinational company can realize substantial scale economies.

b. False

Walmart's basic approach to overseas expansion has been to open retail outlets in each of the countries to which it
exports.
b. False

Pressure for cost reductions encourages a firm to pursue a cost-leadership strategy, while pressure for local
responsiveness encourages a firm to pursue differentiation.

a. True

Local responsiveness may be driven by economic and political demands placed on companies by host country
governments.
a. True
A transnational strategy makes the most sense when there are strong pressures for cost reductions and when
demand for local responsiveness is minimal.
b. False

A localization strategy is most appropriate when there are

substantial differences across nations with regard to consumer tastes and preferences and when cost pressures are
not too intense.
a. True

Companies that pursue a global standardization strategy are trying to develop a business model that simultaneously
achieves low costs and differentiates the product offering across geographic markets.
b. False

Small-scale entry into foreign markets may make it more difficult for the small-scale entrant to build market share
and capture first-mover advantages.
a. True

Most manufacturing companies begin their global expansion by exporting.

a. True

An international strategy may not be viable in the long and to survive, companies that can pursue it need to shift
toward a global standardization strategy.
a. True

International licensing is an arrangement whereby a foreign licensee buys the rights to produce a company's product
in the licensee's country for a negotiated fee.
a. True

When a company licenses its technology it can quickly lose control over it.
a. True

One advantage of a joint venture is that a company may benefit from a local partner's knowledge of the many
dimensions of a host country.
a. True

An early mover entering a foreign country will experience many advantages but few or no disadvantages.
b. False

Small-scale entry into foreign markets can be advantageous because it allows a company to learn about a foreign
market while simultaneously limiting the company's exposure to that market.
a. True

If a company's competitive advantage derives from its control of proprietary technological know-how, it should
either license its technology to others or pursue a joint venture.
b. False

Careful selection of the right partner is one key to the success of global strategic alliances.
a.True

An important ingredient of success in a strategic alliance appears to be cultural sensitivity.

a. True

The most rapid growth rate for household TV ownership is in the United States.
b. False

The majority of programming for MTV networks now takes place overseas.
b. False

Which of the following has occurred in international trade over the

past half-century?

a. There has been a dramatic lowering of barriers to

international trade.
b. Tariff rates on manufactured goods traded by advanced nations have fallen.
c. Regulations prohibiting foreign companies from entering domestic markets and establishing production facilities
have been removed.
d. The volume of world trade has increased dramatically.
e. All of these choices.

e. All of these choices.

The globalization of production has allowed firms to

a. increase their market share.

b. lower their cost structure.
c. respond to individual market segments.
d. avoid international competition.
e. all of these choices.

b. lower their cost structure.

When a company increases its growth rate by taking goods or services developed at home and selling them
internationally, it is

a. leveraging its existing products.

b. taking the path of least resistance.
c. engaging in product positioning.
d. realizing cost economies from global expansion.
e. realizing location economies.

a. leveraging its existing products.

When a company expands its sales volume through international expansion, it can realize cost savings from
economies of scale through all of the following except

a. spreading fixed costs over its global sales volume.

b. utilizing its production facilities more intensely.
c. increased bargaining power with its suppliers.
d. learning effects associated with higher volume.
e. improved responsiveness.

e. improved responsiveness.

When a company performs a value creation activity in the optimal location for that activity, wherever in the world
that might be, it is trying to capitalize on
a. economies of scale.
b. economies of scope.
c. the transnational strategy.
d. location economies.
e. its localization strategy.

d. location economies.

Which of the following is not a necessity for leveraging the skills of global subsidiaries?

a. The firm must have incentives for local managers to share knowledge and ideas.
b. The firm's managers must be aware that competencies can develop anywhere.
c. The firm must be pursuing a strategy of differentiation.
d. The firm's managers must help to transfer competencies around the company.
e. The firm must offer incentives that encourage employees to take necessary risks.

c. The firm must be pursuing a strategy of differentiation.

Global expansion

a. is feasible only for large companies.

b. can enable companies to increase their profitability and grow their profits more rapidly.
c. allows domestic companies in the mature stage of the industry life cycle to maintain profits but not to increase
them.
d. requires locating facilities in foreign countries.
e. makes sense for manufacturing firms but not for service firms.

b. can enable companies to increase their profitability and grow their profits more rapidly.

The ability to realize cost economies from global volume is greatest in the case of

a. products that need to be customized to local requirements.

b. commodity-type products that serve universal needs.
c. low-weight, high-value products that can be differentiated by global companies.
d. products that can be economically manufactured in small
batches.
e. companies competing in industries where they face a large
number of multinational competitors.

b. commodity-type products that serve universal needs.

In 1952, the Iranian oil industry was nationalized so that foreign ownership of oil-producing land and equipment was
made illegal and the assets were confiscated. Which of the following disadvantages of global
expansion is shown in this example?

a. Political risk
b. Increased tariffs
c. Lower costs for labor and raw materials
d. Commodity products that command low profits
e. Products that need to be customized to local requirements

a. Political risk
Dell is expanding its market share in European countries because its direct-sales model is more effective than the
business model used by its European rivals. Which of the following benefits of global expansion is Dell experiencing,
relative to its competitors?

a. Lower costs for labor and raw materials

b. Further exploitation of distinctive competencies
c. Decreased political and economic risk
d. Better realization of location economies
e. More incentive for local subsidiaries to develop competencies

b. Further exploitation of distinctive competencies

Which of the following factors increases pressures for cost reductions?

a. Differences in distribution channels

b. Increasing national wealth
c. Great transportation needs
d. High switching costs
e. Price as the main competitive weapon in a market

e. Price as the main competitive weapon in a market

Which of the following factors increases pressures for local responsiveness?

a. Powerful buyers
b. Persistent excess capacity
c. Low-cost competitors
d. Differences in customer tastes and preferences
e. Trade barriers

d. Differences in customer tastes and preferences

When toymaker Mattel sells Barbie dolls in the Middle East, it changes the doll's shape to one that is a more accurate
portrayal of a female body. Mattel does this to

a. create a commodity-type product.

b. transfer technological know-how.
c. increase product standardization.
d. realize experience curve effects.
e. respond to differences in local tastes.

e. respond to differences in local tastes.

Differences in tastes and preferences

a. increase pressures for cost reductions.

b. reduce profit potential.
c. increase pressures for local responsiveness.
d. reduce pressures from the host government.
e. prevent a company from pursuing a licensing strategy.

c. increase pressures for local responsiveness.

Host government demands generally

a. increase pressures for local responsiveness.

b. increase pressures for cost reductions.
c. discourage foreign companies from operating in the home country.
d. impede a company's ability to minimize its transaction costs.
e. impede a company's ability to differentiate its product
offering across national borders.

a. increase pressures for local responsiveness.

A localization strategy is based on which of the following ideas?

a. There is a convergence in the tastes of consumers in different nations of the world.

b. There are substantial economies of scale to be realized from centralizing global production.
c. Consumer tastes and preferences differ among national markets.
d. There are cost advantages associated with manufacturing a standard product for global consumption.
e. Competitive strategy should be centralized at the world head office.

c. Consumer tastes and preferences differ among national markets.

Clear Vision's decision to own a manufacturing facility overseas was not influenced by which of the following factors?

a. Low labor costs

b. Availability of a skilled work force
c. Geographical proximity to India
d. Tax breaks given by the Hong Kong government
e. Ability to find a Chinese partner

c. Geographical proximity to India

Cost reduction pressures can be particularly intense in industries producing

a. commodity-type products.
b. highly differential products.
c. goods that do not compete on the basis of price.
d. goods servicing narrowly defined markets.
e. highly advertised goods.

a. commodity-type products.

Strong pressures for local responsiveness emerge when customer tastes and preferences

a. differ significantly between countries.

b. differ slightly between countries.
c. are universally alike.
d. are cyclical in nature.
e. none of these choices.

a. differ significantly between countries.

When entering an overseas market, which of the following factors should be considered?
a. Size of the market
b. Purchasing power
c. Consumer demand for the company's product
d. Economic risks
e. All of these choices

e. All of these choices

In which of the following circumstances does a global

standardization strategy make the most sense?

a. Global market standardization is not possible, and there are no significant economies of scale to be realized from
centralizing global manufacturing.
b. Global market standardization is possible, but there are no significant economies of scale to be realized from
centralizing global manufacturing.
c. Global market standardization is not possible, but there are significant economies of scale to be realized from
centralizing global manufacturing.
d. Consumer tastes and preferences differ among national markets, and economies of scale are insubstantial.
e. Global market standardization is possible, and there are significant economies of scale to be realized from
centralizing global manufacturing.

e. Global market standardization is possible, and there are significant economies of scale to be realized from
centralizing global manufacturing.

In which of the following circumstances does a localization strategy make the most sense?

a. Global market standardization is not possible, and there are no significant economies of scale to be realized from
centralizing global manufacturing.
b. Global market standardization is possible, but there are no significant economies of scale to be realized from
centralizing global manufacturing.
c. Global market standardization is not possible, but there are significant economies of scale to be realized from
centralizing global manufacturing.
d. Global market standardization is possible, and there are significant economies of scale to be realized from
centralizing global manufacturing.
e. Consumer tastes and preferences differ among national markets, and economies of scale are substantial.

a. Global market standardization is not possible, and there are no significant economies of scale to be realized from
centralizing global manufacturing.

Which of the following companies increased company growth rates by developing products at home and then
expanding sales of these products in international markets?

a. Procter & Gamble

b. Ford
c. Toyota
d. All of these choices
e. None of these choices

d. All of these choices

Procter & Gamble grew rapidly in international markets because of its

a. skills in mass-marketing.
b. patents on essential products.
c. financial stamina.
d. work force diversity.
e. concentric diversification.

a. skills in mass-marketing.

Managers of a multinational enterprise must recognize that skills

a. need to be transferred from headquarters to the firm's overseas operations.

b. may arise from anywhere within the firm's global network.
c. developed overseas usually do not rise to the level of domestic skills.
d. should not deviate from their domestic level.
e. must be tightly controlled to assume global similarity.

b. may arise from anywhere within the firm's global network.

The Achilles heel of international strategy is that

a. market demand inevitably dries up.

b. costs cannot be sufficiently controlled over long periods of time.
c. competitors inevitably emerge.
d. prices eventually tumble drastically.
e. all of these choices.

c. competitors inevitably emerge.

Disadvantages of a global strategy include

a. lack of local responsiveness.

b. inability to engage in global strategic coordination.
c. failure to exploit experience curve effects.
d. lack of control over quality.
e. inability to realize location economies.

a. lack of local responsiveness.

Which of the following is not an objective of a transnational company?

a. Local responsiveness
b. Realization of experience-based economies
c. Low cross-national integration
d. Global learning
e. Realization of location economies

c. Low cross-national integration

A company with a business-level strategy of cost leadership should pursue which of the following global expansion
strategies?

a. Localization
b. Simple
c. International
d. Transnational
e. Global standardization

e. Global standardization

A telecommunications firm develops new wireless cellular phones, a technology in which foreign competition is low
and the need for local responsiveness is high. What is the most appropriate short- strategy for this firm?

a. Global standardization
b. International
c. Localization
d. Transnational
e. Joint venture

b. International

Foreign subsidiaries play a major role in shaping the future direction of a company pursuing a(n)

a. transnational strategy.
b. international strategy.
c. localization strategy.
d. joint venture.
e. global standardization strategy.

a. transnational strategy.

Firms should choose likely countries for an international expansion effort based on all of the following except the

a. size of the market.

b. existing wealth of consumers in that market.
c. likely future wealth of consumers in that market.
d. political stability of that market.
e. age of the country.

e. age of the country.

A localization strategy is most appropriate when

a. there are relatively few differences from one location to another.

b. consumer tastes and preferences are universally similar.
c. consumer tastes and preferences differ substantially across nations.
d. there is no need to customize products.
e. local demand and national demand are equal.

c. consumer tastes and preferences differ substantially across nations.

A company that enters a foreign market by entering into a licensing agreement with a local company

a. can realize location economies.

b. can engage in global strategic coordination.
c. can realize experience-curve effects.
d. risks losing control over its technology to the venture
partner.
e. can engage in global strategic coordination and realize
experience-curve effects.

d. risks losing control over its technology to the venture

partner.

For a hotel company whose competitive advantage is based on high brand-name recognition, which of the following
ways of serving an overseas market makes the most sense?

a. Franchising
b. Licensing
c. Exporting
d. Entering into a joint venture with a foreign company
e. Setting up a wholly owned subsidiary

a. Franchising

Which entry mode gives a multinational the tightest control over foreign operations?

a. Exporting from the home country and letting a foreign agent organize local marketing
b. Licensing
c. Franchising
d. Entering into a joint venture with a foreign company to set up overseas operations
e. Setting up a wholly owned subsidiary

e. Setting up a wholly owned subsidiary

Which of the following companies exemplifies the trend toward national markets merging into one large global
marketplace?

a. McDonald's
b. Starbucks
c. Coca-Cola
d. Nokia
e. All of these choices

e. All of these choices

Which of the following is not an attribute of a national

or country-specific environment that has an impact on global competitiveness of companies located in that nation?

a. Factory production endowments

b. Local demand conditions
c. Related and supporting industries
d. Strategy, structure, and rivalry of firms within the nation
e. Advertising expenses

e. Advertising expenses

A nation's companies gain competitive advantage if their domestic customers are

a. nondemanding purchasers.
b. able to obtain products or services in other countries.
c. sophisticated and demanding.
d. willing to spend money on novelties.
e. not willing to accept low-priced products.

c. sophisticated and demanding.

Global economies of scale can be realized by

a. expansion of overseas sales.

b. better utilization of production facilities.
c. boosting bargaining power with suppliers.
d. increasing cost savings through learning effects.
e. all of these choices.

e. all of these choices.

Factors of production include all but which of the following?

a. Land
b. Labor
c. Raw materials
d. Ethnic diversity
e. Managerial sophistication

d. Ethnic diversity

Which of the following entry modes allow(s) a company to engage in global strategic coordination?

a. Exporting
b. Licensing
c. Joint ventures
d. Wholly owned subsidiaries
e. Joint ventures and wholly owned subsidiaries

d. Wholly owned subsidiaries

A key to making a strategic alliance work is

a. having one partner handle daily operations.

b. selecting the right partner.
c. sharing all knowledge.
d. enforcing one culture for both partners.
e. reducing investment in the alliance to a minimum.

b. selecting the right partner.

Attaining a credible commitment from a potential partner

a. is a step in partner selection.

b. requires the ability to share skills with partners.
c. requires the ability to learn from alliance partners.
d. is a way to minimize opportunism.
e. requires the ability to share skills with and learn from
alliance partners.

d. is a way to minimize opportunism.

Companies that pursue a transnational strategy are trying to develop

a. a business model that achieves low costs.

b. a differentiation strategy across geographical markets.
c. a flow of skills between different subsidiaries in the global network.
d. all of these choices.
e. none of these choices.

d. all of these choices.

Most manufacturing companies begin their global expansion by

a. licensing.
b. franchising.
c. exporting.
d. forming a joint venture.
e. setting up a wholly owned subsidiary in the host country.

c. exporting.

Which of the following is not a risk of exporting?

a. Tariff barriers
b. Transportation costs
c. Location diseconomies
d. Prime interest rates
e. Delegation of marketing activities to a local agent

d. Prime interest rates

What are the risks associated with licensing as a means of entering overseas markets?

a. Licensing limits a company's ability to coordinate strategic moves across countries.

b. A company may lose control of its technology.
c. A company may lose control over its manufacturing, marketing, and strategic functions.
d. All of these choices.
e. None of these choices.

d. All of these choices.