Deck 8: International Strategy

Question 1

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.

Answer 1

False

Question 2

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.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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 5

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 6

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 7

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 8

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

Question 9

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 10

A major incentive for the use of international 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 11

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 12

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

Question 13

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

Question 14

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.

Question 15

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.

Question 16

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

Question 17

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 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

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

Question 20

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 21

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 22

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

Question 23

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 24

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 25

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

Question 26

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

Question 27

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 28

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

Question 29

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 30

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 31

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

Question 32

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

Question 33

A multi-domestic strategy is an international strategy in which a firm's home office determines the strategies business units are to use in each region.

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

A major advantage of multi-domestic strategies is the ability to customize products and services for the specific market, although this sacrifices economies of scale.

Question 41

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 42

The amount of diversification in a firm's international operations that can be managed varies from company to company and is affected by managers' abilities to deal with ambiguity and complexity.

Question 43

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 44

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

Question 45

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

Question 46

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 47

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 48

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

Question 49

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

Question 50

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

Question 51

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 52

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 53

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

Question 54

International strategy refers to a(n):

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 55

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

Question 56

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 57

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

Question 58

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

Question 59

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 60

An 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 61

Moving into international markets is a particularly attractive strategy to firms whose domestic markets:

A) demand a differentiation strategy for success.
B) are limited in opportunities for growth.
C) have developed unfriendly business attitudes toward the industry.
D) have too much regulation.

Question 62

Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national advantage?

A) Factors of production
B) Demand conditions
C) Related and supporting industries
D) Firm strategy, structure, and rivalry

Question 63

U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness because of:

A) increasing rejection of American culture across much of the world.
B) the sophistication of the international consumer because of the Internet.
C) consumer needs, political and legal structures, and social norms vary by country.
D) the increasing loss of economies of scale.

Question 64

In France, fine dressmaking and tailoring have been a tradition predating Queen Marie Antoinette. Cloth manufacturers, design schools, craft apprenticeship programs, modeling agencies, and so forth, all exist to supply the clothing industry. This is an example of the ____ in Porter's model.

A) strategy, structure, and rivalry among firms
B) related and supporting industries
C) demand conditions
D) factors of production

Question 65

Which of the following is NOT a factor pressuring companies for local responsiveness?

A) Differences in employment laws
B) Customization due to cultural differences
C) Government pressure for firms to use local sources for procurement
D) Availability of low labor costs

Question 66

Raymond Vernon states that the classic rationale for international diversification is to:

A) pre-emptively dominate world markets before foreign companies can establish dominance.
B) avoid domestic governmental regulation.
C) extend the product's life cycle.
D) avoid international governmental regulation.

Question 67

A fundamental reason for a country's development of advanced and specialized factors of production is often its:
?

A) lack of basic resources.
B) monetary wealth.
C) small workforce.
D) protective tariffs.

Question 68

The increased pressures for global integration of operations have been driven mostly by:

A) new low-cost entrants.
B) increasing demand for similar products.
C) increased levels of joint ventures.
D) the rise of governmental regulation.

Question 69

Which pair of industries would NOT be considered as "related and supporting" under Porter's diamond model?

A) Japanese cameras and copiers
B) Italian leather-processing and shoes
C) U.S. computers and software
D) highway systems and the supply of debt capital

Question 70

U.S. cola companies entered the global market because of:

A) limited growth opportunities in their domestic market.
B) lower labor costs in the emerging markets.
C) economies of scale that offset research and development costs.
D) an increase in the return on investment from their U.S. bottling plants.

Question 71

Firms with core competencies that can be exploited across international markets are able to:

A) achieve synergies and produce high-quality goods at lower costs.
B) enter new markets more quickly.
C) enhance their market image and brand loyalty among local consumers.
D) meet local government requirements more quickly than their international competitors.

Question 72

Working in multiple international markets can provide firms with __________ perhaps even in terms of __________.

A) location advantages; larger markets
B) research and development activities; larger markets
C) new learning opportunities; research and development activities
D) economies of scale and learning; larger markets

Question 73

In Porter's model, if a country has both ________ and __________ production factors, it is likely to serve an industry well by spawning strong home-country competitors that can also be successful global competitors.

A) basic; advanced
B) advanced; generalized
C) basic; generalized
D) advanced; specialized

Question 74

Factors of production in Porter's model of international competitive advantage include all of the following EXCEPT:

A) labor.
B) capital.
C) infrastructure.
D) technology.

Question 75

Firms able to standardize the processes used to produce, sell, distribute, and service their products across country borders enhance their ability to:

A) learn how to continuously reduce costs while increase the value of their products.
B) increase investment in research and development.
C) access to a low-cost labor force in the host market.
D) mitigate cultural differences.

Question 76

Which of the following is NOT an incentive for firms to become multinational?

A) To gain access to consumers in emerging markets
B) To gain easier access to raw materials
C) To avoid high domestic taxation on corporate income
D) Opportunities to integrate operations on a global scale

Question 77

The benefits of expanding into international markets include each of the following opportunities EXCEPT:

A) increasing the size of the firm's potential markets.
B) economies of scale and learning.
C) location advantages.
D) favorable tax concessions and economic incentives by home-country governments.

Question 78

The location advantages associated with locating facilities in other countries can include all of the following EXCEPT:

A) low-cost labor.
B) access to critical supplies.
C) access to customers.
D) evasion of host country governmental regulations.

Question 79

A large domestic market can provide the country's industries a chance at dominating the world market because:

A) they have been able to develop economies of scale at home.
B) they have access to abundant and inexpensive factors of production.
C) the related and supporting industries will have been developed.
D) the nation's culture and educational system will be adapted to producing the labor force needed for the industry.

Question 80

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT:

A) factors of production.
B) demand conditions.
C) political and economic institutions.
D) related and supporting industries.