Deck 7: Strategies for Competing in International Markets

Question 1

Competing in the markets of foreign countries generally does not involve which of the following?

A) Country-to-country differences in consumer buying habits and buyer tastes and preferences
B) Country-to-country variations in host-government restrictions and requirements and fluctuating exchange rates
C) Whether to customize the company's offerings in each different country market or whether to offer a mostly standardized product worldwide
D) In which countries to locate company operations for maximum locational advantage (given country-to-country variations in wages rates, worker productivity, energy costs, tax rates, and the like)
E) Crafting a multicountry strategy that works just as well in one country as in another and that also has the appeal of turning the world market into one big profit sanctuary

Answer 1

E

Question 2

Which of the following is not a typical reason for a company to expand into the markets of foreign countries?

A) To gain access to new customers
B) To strengthen its capability to employ offensive strategies, especially those that involve preemptive strikes
C) To achieve lower costs and enhance the firm's competitiveness
D) To capitalize on company competencies and capabilities
E) To spread business risk across a wider geographic market base

Answer 2

B

Question 3

The advantages of manufacturing goods in a particular country and exporting them to foreign markets

A) are largely unaffected by fluctuating exchange rates.
B) are greatest when local distributors and dealers in that country can be convinced not to carry products that are made outside the country's borders.
C) can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold.
D) are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold.
E) are seriously compromised by the potential for local government officials to raise tariffs on the imports of foreign-made goods into their country.

Answer 3

D

Question 4

The reasons a company opts to expand outside its home market include

A) gaining access to new customers for the company's products/services.
B) spreading its business risk across a wider market base.
C) achieving lower costs and enhancing the company's competitiveness.
D) a desire to capitalize on its core competencies and capabilities.
E) All of these.

Question 5

One of the biggest strategic challenges to competing in the international arena include

A) how to avoid the risks of shifting exchange rates.
B) whether to charge the same price in all country markets.
C) how many foreign firms to license to produce and distribute the company's products.
D) whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers.
E) whether to pursue a global strategy or an international strategy.

Question 6

The strategic options for expansion into foreign markets include

A) employing a franchising strategy.
B) maintaining a national (one-country) production base and exporting goods to foreign markets.
C) licensing foreign firms to produce and distribute one's products.
D) establishing a subsidiary in a foreign market.
E) All of the above.

Question 7

The advantages of using a franchising strategy to pursue opportunities in foreign markets include

A) having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchisor to expend only the resources to recruit, train, and support foreign franchisees.
B) being particularly well suited to the global expansion efforts of companies with multicountry strategies.
C) helping build multiple profit sanctuaries.
D) being well suited to companies that employ cross-market subsidization.
E) being well suited to the global expansion efforts of manufacturers.

Question 8

Using domestic plants as a production base for exporting goods to selected foreign country markets

A) can be an excellent initial strategy to pursue international sales.
B) can be a competitively successful strategy when a company is focusing on vacant market niches in each foreign country.
C) works well when a firm does not have the financial resources to employ cross-market subsidization.
D) is usually a weak strategy when competitors are pursuing multicountry strategies.
E) can be a powerful strategy because the company is not vulnerable to fluctuating exchange rates.

Question 9

The advantages of using a licensing strategy to participate in foreign markets include

A) being especially well suited to the use of cross-market subsidization.
B) being able to charge lower prices than rivals.
C) enabling a company to achieve competitive advantage quickly and easily.
D) being able to leverage the company's technical know-how or patents without committing significant additional resources to markets that are unfamiliar, politically volatile, economically uncertain, or otherwise risky.
E) being able to achieve higher product quality and better product performance than with an export strategy.

Question 10

The reasons behind the accelerating pace of globalization include

A) countries with previously planned economies are embracing market or mixed economies.
B) information technology shrinks the importance of geographic distances.
C) ambitious growth-minded countries race to build global share.
D) lower barriers to international trade.
E) All of these.

Question 11

Which of the following is not one of the strategy options for expanding into markets of foreign countries?

A) A profit sanctuary strategy
B) An export strategy
C) A licensing strategy
D) Establish a subsidiary in a foreign market strategy
E) A franchising strategy

Question 12

The advantages of manufacturing goods in a particular country

A) are significantly impacted by where its production, distribution, and customer service activities are located.
B) can be affected by differences in operating costs and profitability due to wage rate and worker productivity.
C) can be affected by differences in energy costs, environmental regulations, tax rates, and inflation rates.
D) can be influenced by cheaper access to essential natural resources.
E) All of these.

Question 13

Which of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?

A) Fluctuating exchange rates do not pose significant risks to a company's competitiveness in foreign markets.
B) The advantages of manufacturing goods in a particular country are largely unaffected by fluctuating exchange rates.
C) Companies that are manufacturing goods in a particular country and are exporting much of what they produce are disadvantaged when that country's currency grows weaker relative to the currencies of the countries that the goods are being exported to.
D) Companies that are manufacturing goods in a particular country and are exporting much of what they produce are benefited when that country's currency grows weaker relative to the currencies of the countries that the goods are being exported to.
E) Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.

Question 14

Which of the following are strategy options for entering foreign markets?

A) Maintaining a national (one-country) production base and exporting goods to foreign markets.
B) Establishing a subsidiary in a foreign market.
C) Franchising and licensing strategies.
D) Forming strategic alliances or joint ventures with foreign partners.
E) All of these.

Question 15

Competing in the markets of foreign countries entails dealing with such factors as

A) fluctuating exchange rates, country-to-country variations in host-government restrictions and requirements, and variations in cultural, demographic, and market conditions.
B) important country-to-country differences in consumer buying habits and buyer tastes and preferences.
C) whether to customize the company's offerings in each different country market or whether to offer a mostly standardized product worldwide.
D) the fact that product designs suitable for one country are sometimes inappropriate in another.
E) All of these.

Question 16

The advantages of using an export strategy to build a customer base in foreign markets include

A) being able to minimize shipping costs, avoid tariffs, and curb the effects of fluctuating exchange rates.
B) minimizing capital requirements and involvement in foreign markets.
C) being cheaper and more cost effective than licensing and franchising.
D) being cheaper and more cost effective than a multicountry strategy.
E) facilitating the establishment of profit sanctuaries in foreign countries and being more suited to accommodating local buyer tastes than a global strategy.

Question 17

Which one of the following is not a reason a company decides to enter foreign markets?

A) To spread business risk across a wider geographic market base
B) To capitalize on company competencies and capabilities
C) To achieve lower costs and enhance the firm's competitiveness
D) To build the profit sanctuaries necessary to wage guerrilla offensives against global challengers endeavoring to invade its home market
E) To gain access to more buyers for the company's products/services

Question 18

A country's business climate is not a function of the political and economic risk factors, such as:

A) instability or weaknesses inherent with the national government.
B) host-government hostility toward allowing foreign businesses market entry, often requiring local produced parts and components to be included in manufacturing, allowing for ease of funds transfers from the host country, and often requiring local ownership.
C) Stability of country's monetary system.
D) Lack of property rights protections and compliance with local environmental regulation.
E) All of these.

Question 19

Which of the following is not an accurate statement as concerns competing in the markets of foreign countries?

A) A multicountry strategy is generally superior to a global strategy.
B) There are country-to-country differences in consumer buying habits and buyer tastes and preferences.
C) A company must contend with fluctuating exchange rates and country-to-country variations in host-government restrictions and requirements.
D) Product designs suitable for one country are often inappropriate in another.
E) Market growth rates vary from country to country.

Question 20

The market size and market growth rates in the foreign market can be influenced negatively by

A) population sizes, income levels and cultural influences, the current state of the infrastructure and distribution and retail networks available.
B) the ability of management to tailor a strategy to take into consideration all the country difference.
C) the large size of emerging markets such as China and India.
D) competitive rivalry that is only moderate in some countries.
E) All of these.

Question 21

The strength of a "think local, act local" multidomestic strategy is that

A) it matches a company's competitive approach to prevailing market and competitive conditions in each country market.
B) each of a company's country strategies is almost totally different from and unrelated to its strategies in other countries.
C) the plants located in different countries can be operated independent of one another, thus promoting greater achievement of scale economies.
D) it avoids host-country ownership requirements and import quotas.
E) it eliminates the costs and burdens of trying to coordinate the strategic moves undertaken in one country with the moves undertaken in the other countries.

Question 22

Establishing a subsidiary in a foreign market to take advantage of all essential value chain activities requires a strategy that

A) establishes a wholly owned subsidiary.
B) acquires a foreign company.
C) supports direct control over all aspects of operating in a foreign market.
D) establishes a start-up operation.
E) All of these.

Question 23

To use location to build competitive advantage, a company that operates multinationally or globally must

A) employ either an export strategy or a franchising strategy.
B) scatter its production plants across many countries in different parts of the world so as to minimize transportation costs.
C) consider (1) whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations and (2) in which countries to locate particular activities.
D) locate production plants in those countries having suppliers that can supply all the necessary raw materials and components so as to avoid inbound shipping costs.
E) concentrate all of its value chain activities in a single country-the one that has the best combination of low wage rates, low shipping costs, and low tax rates on profits.

Question 24

When a company operates in the markets of two or more different countries, its foremost strategic issue is

A) whether to use strategic alliances to help defeat its rivals.
B) whether to vary the company's competitive approach to fit specific market conditions and buyer preferences in each host country or whether to employ essentially the same strategy in all countries.
C) whether to maintain a national (one-country) manufacturing base and export goods to the other countries.
D) choosing which foreign companies to team up with via strategic alliances or joint ventures.
E) whether to test the waters with an export strategy before committing to some other competitive approach.

Question 25

To use location to build competitive advantage when competing in both domestic and foreign markets, a company must

A) scatter its production plants across many different country markets so as to minimize the costs of shipping to its own distribution centers and/or to wholesalers/retail dealers.
B) consider (1) whether to concentrate each activity it performs in a few select countries or to disperse performance of the activity to many nations and (2) in which countries to locate particular activities.
C) concentrate buyer-related activities in a few well-chosen locations so as to maximize the capture of distribution-related scale economies.
D) disperse both production and distribution activities across many nations in order to hedge against fluctuating exchange rates and lessen the risks of adverse political developments.
E) avoid selling in countries where there are high trade barriers or where buyers purchase in small quantities.

Question 26

The transnational approach of a firm using a "think global, act local" version of a global strategy entails

A) producing and marketing a variety of product versions under the same brand name, with each different version being designed specifically to accommodate the needs and preferences of buyers in a particular country.
B) little or no strategy coordination across countries.
C) pursuing the same basic competitive strategy theme (low-cost, differentiation, best-cost, focused) in all countries where the firm does business but giving local managers some latitude to adjust product attributes to better satisfy local buyers and to adjust production, distribution, and marketing to be responsive to local market conditions.
D) selling the company's products under a wide variety of brand names (often one brand for each country or group of neighboring countries) so that buyers in each country market will think they are buying a locally made brand.
E) selling numerous product versions (each customized to buyer tastes in one or more countries and sometimes branded for each country) but opting to only sell direct to buyers at the company's website so as to bypass the costs of establishing networks of wholesale/retail dealers in each country market.

Question 27

Acquisition of an existing firm rather than going de novo may be the least risky and cost-efficient means of overcoming entry barriers such as

A) gaining access to local distribution networks, building supplier networks, and establishing working relationships with key government officials.
B) moving directly to the task of transferring resources and personnel, integrating and redirecting activities into its own operation.
C) putting its own strategy into place.
D) accelerating efforts to build a strong market presence.
E) All of these.

Question 28

In expanding outside its domestic market, a company can gain competitive advantage by

A) not pursuing costly efforts to build multiple profit sanctuaries.
B) deliberately choosing not to compete in countries with high tariffs and high taxes (which then have to be passed along to buyers in the form of higher prices), thus keeping costs and prices lower than rivals.
C) using an export strategy to circumvent the risks of adverse exchange rate fluctuations.
D) using location to lower costs or help achieve greater product differentiation and it can use cross-border coordination in ways a domestic-only competitor cannot.
E) employing a multidomestic strategy instead of a global strategy.

Question 29

The drawbacks of a localized multidomestic strategy include

A) hindering the use of cross-market subsidization techniques and increasing company vulnerability to adverse shifts in currency exchange rates.
B) making it very difficult to take into account significant country-to-country differences in distribution channels and marketing methods.
C) making it difficult and costly to be responsive to country-to-country differences in customer needs, buying habits, cultural traditions, and market conditions.
D) hindering transfer of a company's competencies and resources across country boundaries and hindering the pursuit of a single, uniform competitive advantage in all country markets where a company operates.
E) being unsuitable for competing in the markets of emerging countries and posing added difficulty in building multiple profit sanctuaries.

Question 30

Strategic alliances, joint ventures, and cooperative agreements between domestic and foreign firms are a potentially fruitful means for the partners to

A) enter additional country markets.
B) gain better access to scale economies in production and/or marketing.
C) fill competitively important gaps in their technical expertise and/or knowledge of local markets.
D) share distribution facilities and dealer networks, thus mutually strengthening their access to buyers.
E) All of these.

Question 31

A "think global, act global" approach to strategy making is preferable to a "think local, act local" approach when

A) a big majority of the company's rivals are pursuing localized multidomestic strategies.
B) country-to-country differences are small enough to be accommodated with the framework of a mostly uniform global strategy.
C) plants need to be scattered across many countries to avoid high shipping costs.
D) market growth rates vary considerably from country to country.
E) host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards.

Question 32

Which of the following is not a potential benefit of strategic alliances or other cooperative arrangements between foreign and domestic companies?

A) Gaining wider access to attractive country markets
B) Gaining better access to scale economies in production and/or marketing
C) Filling competitively important gaps in technical expertise and/or knowledge of local markets
D) Safeguarding the company's dependence, allowing for positive engagement once the purpose has been served and ensuring products of important technical standardization requirements are not developed
E) Sharing distribution facilities and dealer networks, thus mutually strengthening access to buyers

Question 33

The competitive strategy of a firm pursuing a "think global, act local" approach to strategy making

A) entails little or no strategy coordination across countries.
B) usually involves cross-subsidizing the prices in those markets where there are significant country-to-country differences in the product attributes that customers are most interested in.
C) involves selling a mostly standardized product worldwide, but varying a company's use of distribution channels and marketing approaches to accommodate local market conditions.
D) is essentially the same in all country markets where it competes but it may nonetheless give local managers room to make minor variations where necessary to better satisfy local buyers and to better match local market conditions.
E) involves having strongly differentiated product versions for different countries and selling them under distinctly different brand names (one for each country or group of neighboring countries) so that there will be no doubt in customers' minds that the product is more local than global.

Question 34

A "think local, act local" multidomestic strategy works particularly well when

A) host governments enact regulations requiring that products sold locally meet strictly defined manufacturing specifications or performance standards.
B) there are significant country-to-country differences in customer preferences and buying habits.
C) diverse and complicated trade restrictions of host governments preclude the use of a uniform strategy from country to country.
D) there are significant country-to-country differences in distribution channels and marketing methods.
E) All of the above.

Question 35

Which is not one of the four conditions that make an internal start-up strategy appealing?

A) When creating an internal start-up is cheaper than making an acquisition
B) When adding new production capacity will adversely impact the supply-demand balance in the local market
C) Having the ability to gain good distribution access
D) Having scale economies to compete against local rivals
E) All of these

Question 36

Which of the following is not one of the problems and risks of strategic alliances between domestic and foreign firms?

A) Overcoming language and cultural barriers and the sometimes extensive managerial time required for trust-building, communication, and coordination
B) The trouble allies can have reaching mutually agreeable ways to deal with key issues
C) Becoming overly dependent on another company for essential expertise and competitive capabilities
D) Making it harder to pursue a multidomestic strategy as compared to a global strategy
E) Suspicions about whether allies are being forthright in exchanging information and expertise

Question 37

A "think local, act local" multidomestic type of strategy

A) is very risky, given fluctuating exchange rates and the propensity of foreign governments to impose tariffs on imported goods.
B) is usually defeated by a "think global, act global" type of strategy.
C) is more appealing the bigger the country-to-country differences in buyer tastes, cultural traditions, and marketing methods.
D) is generally an inferior strategy when one or more foreign competitors is pursuing a global low-cost strategy.
E) can defeat a global strategy if the "think local, act local" multidomestic strategist concentrates its efforts exclusively in those foreign markets where it has profit sanctuaries.

Question 38

Two drawbacks of a "think local, act local" multidomestic strategy are

A) that it is especially vulnerable to fluctuating exchange rates and that it can usually be defeated by companies employing cross-market subsidization tactics.
B) excessive vulnerability to fluctuating exchange rates and having to craft a separate strategy for each country market in which the company competes.
C) hindering a company's transfer of competencies and resources across country boundaries (since somewhat different competencies and capabilities are likely to be employed in different host countries) and not promoting the building of a single, unified competitive advantage in all country markets where a company competes.
D) greater exposure to both increases in tariffs and restrictive trade barriers and added difficulty in accommodating the diverse trade restrictions and regulatory requirements of host governments.
E) not being able to export products manufactured in one country to markets in other countries and being largely unsuitable for competing in the markets of emerging countries.

Question 39

A "think global, act global" approach to crafting a global strategy involves

A) pursuing the same basic competitive strategy theme (low-cost, differentiation, best-cost, focused) in all countries where the firm does business.
B) selling much the same products under the same brand names everywhere and expanding into most, if not all, nations where there is significant buyer demand.
C) integrating and coordinating the company's strategic moves worldwide.
D) utilizing the same competitive capabilities, distribution channels, and marketing approaches worldwide.
E) All of the above.

Question 40

In competing in foreign markets, companies find it advantageous to concentrate their activities in a limited number of locations when

A) there are significant scale economies in performing an activity.
B) the costs of manufacturing or other activities are significantly lower in some geographic locations than in others.
C) there is a steep learning or experience curve associated with performing an activity in a single location (thus making it economical to serve the whole world market from just one or maybe a few locations).
D) certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages.
E) All of the above.

Question 41

One of the most viable strategic options companies should consider in tailoring their strategy to fit circumstances of emerging country markets includes

A) try to change the local market to better match the way the company does business elsewhere.
B) be prepared to modify aspects of the company's business model to accommodate local circumstances.
C) prepare to compete on the basis of low price.
D) stay away from those emerging markets where it is impractical to modify the company's business model to accommodate local circumstances.
E) All of these.

Question 42

Cross-border coordination contributes to a competitive advantage for a global competitor by

A) allowing production to be shifted from country to country to take advantage of exchange rate fluctuations, energy costs, wage rates, or changes in tariffs and quotas.
B) allowing knowledge gained in one location to be transferred to operations in other countries.
C) shifting workloads from where they are unusually heavy to locations were personnel are underutilized.
D) accelerating product development and enhancing innovation by globally linking and coordinating the scattered R&D departments of a multinational company.
E) All of these.

Question 43

In which of the following circumstances is it not advantageous for a multinational competitor to concentrate its activities in a limited number of locations in order to build competitive advantage?

A) When the costs of performing certain value chain activities are significantly lower in certain geographic locations than in others
B) When a company has competitively superior patented technology that it can license to foreign partners
C) When there is a steep learning or experience curve associated with performing an activity in a single location
D) When certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages
E) When there are significant scale economies in performing the activity

Question 44

Which of the following is not a typical option that companies have to consider to tailor their strategy to fit the circumstances of emerging country markets?

A) Prepare to compete on the basis of low price
B) Be prepared to modify aspects of the company's business model to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding)
C) Try to change the local market to better match the way the company does business elsewhere
D) Develop a strategy for the short-term and forget about a long-term strategy because conditions in emerging country markets change so rapidly
E) Stay away from those emerging markets where it is impractical or uneconomic to modify the company's business model to accommodate local circumstances

Question 45

Dispersing particular value chain activities across many countries rather than concentrating them in a select few countries can be more advantageous when

A) buyer-related activities (such as sales, advertising, after-sale service and technical assistance) need to take place close to buyers.
B) high transportation costs make it uneconomical to operate from one or just a few locations.
C) it helps hedge against the risks of exchange rate fluctuations, supply disruptions, and adverse political developments.
D) there are diseconomies of scale in trying to operate from a single location.
E) All of these.

Question 46

Companies racing for global market leadership

A) generally have to consider establishing competitive positions in the markets of emerging countries.
B) are well advised to avoid all the risks and problems of competing in emerging country markets.
C) seldom have the resource capabilities it takes to be effective in competing in emerging country markets and usually are at a strong competitive disadvantage to the domestic market leaders.
D) can usually be expected to earn sizable profits quickly in emerging country markets.
E) usually encounter very low barriers in entering the markets of emerging countries.

Question 47

The ability of a multinational or global competitor to shift production from country to country to take advantage of exchange rate fluctuations, energy costs, wage rates, or changes in tariffs is an example of

A) a profit sanctuary.
B) cross-border coordination.
C) an international strategic alliance.
D) cross-market subsidization.
E) cross-market differences in cultural, demographic, and market conditions.

Question 48

Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous

A) when high transportation costs make it expensive to operate from central locations.
B) whenever buyer-related activities are best performed in locations close to buyers.
C) if diseconomies of large size exist, thereby making it more economical to perform an activity on a smaller scale in several different locations.
D) when it is desirable to hedge against (1) the risks of fluctuating exchange rates (such risks are greater when activities are concentrated in a single location) or (2) supply interruptions (due to strikes, mechanical failures, or transportation delays) or (3) adverse political developments.
E) All of the above.