Deck 8: Strategy in the Global Environment

Question 1

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.

Answer 1

True

Question 2

The globalization of production has been decreasing as companies face lower barriers to international trade and location economies.

Answer 2

False

Question 3

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.

Answer 3

True

Question 4

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

Question 5

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.

Question 6

Most manufacturing companies begin their global expansion by exporting.

Question 7

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.

Question 8

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

Question 9

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

Question 10

The best part of global strategic alliances is that selection of the right partner does not affect success of the alliance.

Question 11

Local responsiveness may be driven by economic and political demands placed on companies by host country governments.

Question 12

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

Question 13

A transnational strategy makes the most sense when there are strong pressures for cost reductions and when demand for local responsiveness is minimal.

Question 14

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

Question 15

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.

Question 16

Southwest Airlines,Sony,and Costco conduct business in two or more countries.These companies are referred to as multinational companies.

Question 17

MTV is a good example of a company that has had to pursue a transnational strategy.

Question 18

In 2000,the best-selling Christmas item was the Razor Scooter and in 2001 it was Bratz dolls.Today,these items are not in high demand.This represents differences in customer tastes and preferences.

Question 19

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.

Question 20

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

Question 21

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.

Question 22

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

Question 23

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.

Question 24

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.

Question 25

The globalization of production has allowed firms to

A) lower their market share.
B) lower their cost structure.
C) respond to individual market segments.
D) avoid international competition.
E) all of these choices.

Question 26

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.

Question 27

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

Question 28

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.

Question 29

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.

Question 30

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.

Question 31

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.

Question 32

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 price positioning.
D) realizing cost economies from global expansion.
E) realizing location economies.

Question 33

Which of the following has occurred in international trade over the past half-century?

A) There has been a dramatic increase in the 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 increased.
D) The volume of world trade has decreased dramatically.
E) All of these.

Question 34

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.

Question 35

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.

Question 36

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.

Question 37

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

Question 38

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.

Question 39

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.

Question 40

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.

Question 41

Factors of production include all but which of the following?

A) Land
B) Labor
C) Raw materials
D) Ethnic diversity
E) Managerial sophistication

Question 42

Black and Decker,Capitol One,Gillette,and Unilever are all companies that conduct business in two or more national markets.These companies are known as

A) bimarket companies.
B) national companies.
C) transnational companies.
D) multinational companies.
E) localized companies.

Question 43

In the wireless telecommunications industry,different technical standards are found in different parts of the world.A technical standard known as GSM is common in Europe,and an alternative standard,CDMA,is more common in the United States and parts of Asia.Equipment designed for GSM will not work on a CDMA network and vice versa.Which of the following pressures for local responsiveness does this represent?

A) Global environmental demands
B) Host government demands
C) Differences in distribution channels
D) Differences in customer tastes and preferences
E) Differences in infrastructure

Question 44

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.

Question 45

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.

Question 46

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

Question 47

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

Question 48

Swedish strength in fabricated steel products has drawn on strengths in Sweden's specialty steel industry.This is an example of which of the following attributes that impact national competitive advantage?

A) Local demand conditions
B) Competitiveness of related and supporting industries
C) Intensity of rivalry
D) Factor endowments
E) Differences in distribution channels

Question 49

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

Question 50

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

Question 51

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.

Question 52

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-term strategy for this firm?

A) Global standardization
B) International
C) Localization
D) Transnational
E) Joint venture

Question 53

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

Question 54

Which of these is (are)the risk(s)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.
E) None of these.

Question 55

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

Question 56

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.

Question 57

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.

Question 58

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

Question 59

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.

Question 60

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.

Question 61

Managers at WKL Entertainment Inc.are deciding on a global strategy.The company is looking to sell its services across nations with substantial differences in consumer preferences and where cost pressures are not too intense.Which strategy should WKL Entertainment Inc.managers pursue?

A) Global standardization
B) Transnational
C) Localization
D) International
E) Multinational

Question 62

What is meant by the term national competitive advantage,and what are the attributes of a nation that affect the global competitiveness of companies located within that nation?

Question 63

Identify and discuss the general ways in which companies can increase their profitability and profit growth through global expansion.

Question 64

List and briefly descibe each of the four basic global strategies.

Question 65

Whirlpool,a leading U.S.maker of household appliances,has a wholly owned subsidiary that is responsible for research and development (R&D),manufacturing,and sales in over two dozen European countries,from Norway to Greece.What are some of the potential advantages that Whirlpool may gain from its use of a wholly owned subsidiary for global expansion? What are some of the potential disadvantages?

Question 66

What are the potential benefits and risks of global strategic alliances? What actions can a firm take to minimize the risks and maximize the benefits?