Deck 8: Global Strategy

Question 1

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.

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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.

Answer 3

False

Question 4

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

Question 5

According to the Chapter 8 Strategic Focus, Starbucks' international strategy for success in China is a cost leadership business-level strategy coupled with a multidomestic corporate-level strategy.

Question 6

Embracing the global marketplace is important to Starbucks because it commands less that one percent of the global coffee market suggesting that there is room for growth. (Chapter 8 Opening Case)

Question 7

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.

Question 8

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. By 2015, Ford intends for about 75% of the vehicles it sells to be variants of about 5 basic platforms.

Question 9

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.

Question 10

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

Question 11

According to the Chapter 8 Strategic Focus, Starbucks implements the transnational strategy by using its core competencies to standardize its operations to gain global efficiences while decentralizing decision making responsibilities to local units.

Question 12

The three corporate-level international strategies are cost leadership, differentiation, and focus.

Question 13

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

Question 14

Coca Cola and PepsiCo approach international growth differently. Coca Cola is the world's largest snack-food producer and relies on overseas sales to make up for slower sales volumes in North America. In contrast, PepsiCo which is less diversified, derives only 32% of it sales from North America, an indication of the importance of international markets to its performance.

Question 15

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

Question 16

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.

Question 17

As nations industrialize, the demand for some products and services such as Starbucks (Chapter 8 Opening Case) becomes more similiar as a result of similar lifestyles in those nations.

Question 18

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.

Question 19

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.

Question 20

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.

Question 21

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.

Question 22

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.

Question 23

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.

Question 24

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

Question 25

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.

Question 26

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.

Question 27

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

Question 28

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.

Question 29

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

Question 30

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

Question 31

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

Question 32

A transnational strategy is difficult to use because of its conflicting goals.

Question 33

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

Question 34

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

Question 35

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

Question 36

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.

Question 37

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

Question 38

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

Question 39

Part of Japan's success in the video game industry is derived from two related and support industries: cartoons and animation, and electronics.

Question 40

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.

Question 41

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

Question 42

Walmart's most common entry modes into international markets are acquisitions and joint ventures (Chapter 8 Strategic Focus).

Question 43

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.

Question 44

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

Question 45

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

Question 46

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.

Question 47

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

Question 48

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.

Question 49

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.

Question 50

In order to preserve its competitive advantage in low-cost operations, Walmart uses only new wholly-owned subsidiaries (greenfields) to enter international markets (Chapter 8 Strategic Focus).

Question 51

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

Question 52

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.

Question 53

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.

Question 54

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.

Question 55

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

Question 56

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 differentation strategy with larger scale when exporting to emerging economies leads to the greatest amounts of success.

Question 57

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.

Question 58

Walmart depends on its distribution, warehousing, logistics, and data management core competencies developed in domestic markets when entering international markets (Chapter 8 Strategic Focus).

Question 59

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.

Question 60

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

Question 61

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.

Question 62

The chief risks in the international environment are political and cultural.

Question 63

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.

Question 64

Asahi Group Holdings Ltd. of Japan is an example of a firm that seeks to become one of the top 10 food and beverage companies via international diversification.

Question 65

Which international corporate-level strategy strategy does Starbucks use? (Chapter 8 Opening Case)

A) global
B) multidomestic
C) licensing
D) transnational

Question 66

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.

Question 67

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.

Question 68

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

Question 69

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

Question 70

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

Question 71

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

Question 72

The Chapter 8 Opening Case indicates that main basic benefit that Starbucks derives from its international strategies is

A) economies of scale and learning
B) location advantages
C) increased market size
D) extending the product life cycle

Question 73

A 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.

Question 74

The Haier Group would be an example of a company pursuing international diversification since it has expanded into multiple markets and regions rather than just a few (Chapter 8 Strategic Focus).

Question 75

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.

Question 76

The Haier Group concluded that its diversification strategy should be confined to countries in Asia where it had strengths in understanding cultures and institutions (Chapter 8 Strategic Focus).

Question 77

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

Question 78

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

Question 79

International strategy refers to a(an)

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.

Question 80

The Haier Group is an example of a firm using the multidomestic international corporate-level strategy as a means to build its global brand name (Chapter 8 Strategic Focus).