Question 1

There are risks associated with the Bottom of the Pyramid strategy. One of them is that the new low-cost products that are developed may cannibalize the sales of the core products of the company using the strategy.

Accepted Answer

Firms need to actively manage the risks that accompany BOP strategies. These include concerns about the image of the firm if they are perceived as exploiting underprivileged customers by providing them with substandard products or selling them something they do not need or cannot afford. Second, there is a risk that a low-end version of a brand may detract from the overall attractiveness of the brand. Third, the new low-cost products they develop may cannibalize the sales of their core products. Finally, firms employing a BOP strategy need to be aware of the entrenched competitors they may face.

Question 2

According to The Economist article explained in Exhibit 7.1 in the textbook, the rate of GDP growth is the highest in the European Union and the United States.

Accepted Answer

This rapid rise in global capitalism has dramatic effects on the growth in different economic zones. As shown in Exhibit 7.1, the growth experienced by developed economies in the first decade of the 2000s was anemic, while the growth in developing economies was robust. This has resulted in a dramatic shift in the structure of the global economy. Over half the world's output now comes from emerging markets. This is leading to a convergence of living standards across the globe and is changing the face of business. According to the textbook Exhibit 7.1, Japan has the smallest GDP growth rate, followed by the European Union and the United States.

Question 3

By 2015, it is predicted that trade within nations will exceed trade across nations.

Accepted Answer

The trade among nations has increased dramatically in recent years and it is estimated that by 2015, the trade across nations will exceed the trade within nations.

Question 4

Countries with a strong supplier base benefit by adding efficiency to downstream activities.

Accepted Answer

Related and supporting industries enable firms to manage inputs more effectively. Countries with a strong supplier base benefit by adding efficiency to downstream activities. A competitive supplier base helps a firm obtain inputs using cost-effective, timely methods, thus reducing manufacturing costs.

Question 5

The Indian software industry has become one of the leading global markets for software. The industry has grown to over 60 billion USD, and Indian IT firms provide software and services to over half the Fortune 500 firms. This success is being driven by related and supporting industries such as a large network of public and private educational institutions.

Accepted Answer

Related and supporting industries enable firms to manage inputs more effectively.

Question 6

The shift in the global automobile market over the past several years, in which China supplanted the U.S. at the largest market for automobiles in 2009, is an example of how the structure of the global economy is unchanging.

Accepted Answer

This rapid rise in global capitalism has dramatic effects on the growth in different economic zones. As shown in Exhibit 7.1, the growth experienced by developed economies in the first decade of the 2000s was anemic, while the growth in developing economies was robust. This has resulted in a dramatic shift in the structure of the global economy. Over half of the output in the world now comes from emerging markets. This is leading to a convergence of living standards across the globe and is changing the face of business. One example of this is the shift in the global automobile market. China supplanted the United States as the largest market for automobiles in 2009.

Question 7

The factor endowments of a country are inherited and cannot be created.

Accepted Answer

Classical economics suggests that factors of production such as land, labor, and capital are the building blocks that create usable consumer goods and services. However, companies in advanced nations seeking competitive advantage over firms in other nations create many of the factors of production, such as skilled human resources.

Question 8

The Indian software industry has become one of the leading global markets for software. The industry has grown to over 60 billion USD, and Indian IT firms provide software and services to over half the Fortune 500 firms. This success is being driven by factor endowments such as a large, growing market with sophisticated customers.

Accepted Answer

Factor endowments are production, such as skilled labor or infrastructure, necessary to compete in a given industry. Demand conditions refer to the demands that consumers place on an industry for goods and services.

Question 9

The Michael Porter Diamond of National Advantage is a framework that explains why countries foster successful multinational corporations based on factor endowments and demand conditions only.

Accepted Answer

The Porter Diamond of National Advantage is a framework for explaining why countries foster successful multinational corporations, consisting of four factors: factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry.

Question 10

High levels of environmental awareness in Denmark have led to a decline in Danish industrial competitiveness in the international marketplace.

Accepted Answer

Countries with demanding consumers drive firms in that country to meet high standards, upgrade existing products and services, and create innovative products and services. Denmark is known for its environmental awareness. Demand from consumers for environmentally safe products has spurred Danish manufacturers to become leaders in water pollution control equipment which it exports successfully.

Question 11

The trend towards worldwide markets makes it easier to predict where competitors will spring up.

Accepted Answer

The rise of globalization, meaning the rise of market capitalism around the world, means competitors can now come from just about anywhere.

Question 12

Multinational companies, like GE, take advantage of globalization to tap into talent around the world in order to build products.

Accepted Answer

The GE wind energy business benefits by tapping into talent around the world. The firm has built research centers in China, Germany, India, and the U.S. CEO Jeffrey Immelt explains that they do this in order to access the best brains everywhere in the world. All four centers have played a key role in GEs development of huge 92-ton turbines.

Question 13

Because many countries are investing in countries other than their own, each country is becoming more autonomous and independent.

Accepted Answer

Globalization, which is on the rise, has two meanings. One is the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information. The second is the growing similarity of laws, rules, norms, values, and ideas across countries.

Question 14

Globalization is a term used to mean the growing dissimilarity of laws, rules, norms, values and ideas across countries.

Accepted Answer

Globalization is a term that has two meanings: (1) the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information; (2) the growing similarity of laws, rules, norms, values, and ideas across countries.

Question 15

Typically, intense rivalry in domestic markets does not force firms to look outside their national boundaries for new markets.

Accepted Answer

Domestic rivalry provides a strong impetus for firms to innovate and find new sources of competitive advantage. This intense rivalry forces firms to look outside their national boundaries for new markets, setting up the conditions necessary for global competitiveness.

Question 16

Emerging markets are growing slower than developed markets, thus shifting the structure of the global economy.

Accepted Answer

The growth experienced by developed economies in the first decade of the 2000s was anemic, while the growth in developing economies was robust. This trend is continuing, with emerging markets growing 4 percent faster than developed markets in 2011 and 2012. This has resulted in a dramatic shift in the structure of the global economy. As of 2013, over half the world output will come from emerging markets.

Question 17

With regard to factor conditions, the pool of resources that a firm (or nation) has is much more important than the speed and efficiency with which these resources are deployed.

Accepted Answer

The pool of resources is less important than the speed and efficiency with which these resources are deployed. Thus, firm-specific knowledge and skills created within a country that are rare, valuable, difficult to imitate, and rapidly and efficiently deployed are the factors of production that ultimately lead to competitive advantage for the nation.

Question 18

Rivalry is particularly intense in nations with conditions of strong consumer demand, strong supplier bases, and high new-entrant potential from related industries.

Accepted Answer

Rivalry is particularly intense in nations with conditions of strong consumer demand, strong supplier bases, and high new-entrant potential from related industries.

Question 19

Demanding domestic consumers tend to push firms to move ahead of companies in other countries where consumers are less demanding and more complacent.

Accepted Answer

Countries with demanding consumers drive firms in that country to meet high standards, upgrade existing products and services, and create innovative products and services. Denmark is known for its environmental awareness. Demand from consumers for environmentally safe products has spurred Danish manufacturers to become leaders in water pollution control equipment which it exports successfully.

Question 20

Increasing international exchange in goods and services can run into the difficulty of having one offer that meets the needs of customers at differing income levels.

Accepted Answer

One of the challenges with globalization is determining how to meet the needs of customers at very different income levels. In many developing economies, distributions of income remain much wider than they do in the developed world, leaving many impoverished even as the economies grow.

Quiz 7: International Strategy: Creating Value in Global Markets

There are risks associated with the Bottom of the Pyramid strategy. One of them is that the new low-cost products that are developed may cannibalize the sales of the core products of the company using the strategy.

According to The Economist article explained in Exhibit 7.1 in the textbook, the rate of GDP growth is the highest in the European Union and the United States.

By 2015, it is predicted that trade within nations will exceed trade across nations.

Countries with a strong supplier base benefit by adding efficiency to downstream activities.

The shift in the global automobile market over the past several years, in which China supplanted the U.S. at the largest market for automobiles in 2009, is an example of how the structure of the global economy is unchanging.

The factor endowments of a country are inherited and cannot be created.

The Michael Porter Diamond of National Advantage is a framework that explains why countries foster successful multinational corporations based on factor endowments and demand conditions only.

High levels of environmental awareness in Denmark have led to a decline in Danish industrial competitiveness in the international marketplace.

The trend towards worldwide markets makes it easier to predict where competitors will spring up.

Multinational companies, like GE, take advantage of globalization to tap into talent around the world in order to build products.

Because many countries are investing in countries other than their own, each country is becoming more autonomous and independent.

Globalization is a term used to mean the growing dissimilarity of laws, rules, norms, values and ideas across countries.

Typically, intense rivalry in domestic markets does not force firms to look outside their national boundaries for new markets.

Emerging markets are growing slower than developed markets, thus shifting the structure of the global economy.

With regard to factor conditions, the pool of resources that a firm (or nation) has is much more important than the speed and efficiency with which these resources are deployed.

Rivalry is particularly intense in nations with conditions of strong consumer demand, strong supplier bases, and high new-entrant potential from related industries.

Demanding domestic consumers tend to push firms to move ahead of companies in other countries where consumers are less demanding and more complacent.

Increasing international exchange in goods and services can run into the difficulty of having one offer that meets the needs of customers at differing income levels.