Deck 7: International Strategy: Creating Value in Global Markets

Question 1

Reverse innovation occurs when a company develops a product that meets the needs of a developed country and then adapts it to the needs of the developing country.

Answer 1

False
Explanation:Many leading companies are discovering that developing products specifically for emerging markets can pay off in a big way. In the past, multinational companies typically developed products for their rich home markets and then tried to sell them in developing countries with minor adaptations. However, as growth slows in rich nations and demand grows rapidly in developing countries such as India and China, this approach becomes increasingly inadequate. Instead, companies like GE have committed significant resources to developing products that meet the needs of developing nations, products that deliver adequate functionality at a fraction of the cost. These products have subsequently found considerable success in value segments in wealthy countries as well. Hence, this process is referred to as reverse innovation, a new motivation for international expansion.

Question 2

Typically,joint ventures involve less control and risk than franchising.

Answer 2

False
Explanation:A joint venture has a higher degree of ownership (both investment and risk) and control than does franchising.

Question 3

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

Answer 3

True
Explanation: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.

Question 4

In addition to responding to pressures to lower costs,managers must strive to be responsive to global pressures to tailor their products to the demand of the local market in which they do business.

Question 5

Trading blocs and free trade zones erode the rise of international expansion.

Question 6

A franchise generally expires after a few years,whereas a license is designed to last into perpetuity.

Question 7

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.

Question 8

Theodore Levitt,a marketing strategist,argued that people around the world are willing to sacrifice preferences in product features,functions,and design for lower prices and lower quality.

Question 9

According to studies by Rugman and Verbeke,most of the 500 largest companies in the world are global.

Question 10

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

Question 11

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.

Question 12

A U.S.firm expands into China and Canada at exactly the same sales volume.The physical distance is the only factor that affects the true distance between the countries.

Question 13

Arbitrage opportunities are simple trading opportunities and therefore account for little of the success Walmart experiences.

Question 14

The need to attain economies of scale encourages multinational firms to operate under a multidomestic strategy.

Question 15

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

Question 16

Industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy than those in which more value is added downstream (closer to the customer).

Question 17

Two opposing pressures that managers face when they compete in foreign markets are cost reduction and adaptation to foreign markets.

Question 18

Many international firms are increasing their efforts to market their products and services to countries such as India and China as the ranks of their middle class continue to increase.

Question 19

A multidomestic strategy is the most appropriate strategy for international operations because it drives economies of scale as far as possible and provides a middle-of-the-road product that appeals to the largest number of consumers in every market.

Question 20

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

Question 21

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

A) weak; weak; high
B) strong; strong; low
C) weak; weak; low
D) strong; strong; high

Question 22

When the GE wind energy business tapped into world-wide talent,it was able to expand using a(n)________ strategy.

A) focus
B) diversification
C) unrelated
D) generic

Question 23

In Fortune's annual list of the 500 biggest companies in the world,156 firms were from emerging markets in 2015 compared to 18 in 1996,owing to

A) the lower living standards throughout the world.
B) traditional purchasing habits.
C) a rapid rise in global capitalism.
D) a divergence in world living standards.

Question 24

In Euromoney magazine's 2017 semi-annual "Country Risk Rating" evaluating political,economic,and other risks that entrants to international markets potentially face,which of the following countries has the highest overall country rating for risk?

A) Norway
B) Hong Kong
C) Bahrain
D) Argentina

Question 25

Which of the factors below has not made the software services industry in India extremely competitive on a global scale?

A) large pool of skilled workers
B) large, growing market and sophisticated customers
C) tax and antitrust legislation that protects the dominant players in the industry
D) large network of public and private educational institutions

Question 26

Which of the following is not a risk normally associated with bottom-of-the-pyramid strategies?

A) A low-end version of a brand may detract from the overall brand attractiveness.
B) The new low-cost products they develop may cannibalize the sales of their core products.
C) Entrenched competitors can impact the ability of the new firm to enter the market successfully.
D) New products may be perceived as exploiting the privileged customer with substandard products.

Question 27

The rise of ________ capitalism around the world creates tremendous business opportunities for multinational corporations.

A) social
B) multinational
C) market
D) democratic

Question 28

Globalization opens the doors for companies to attract new customers.One of the challenges is to determine how to meet the needs of these customers who have

A) different income levels.
B) low income levels.
C) high income levels.
D) steady income levels.

Question 29

According to the textbook,globalization involves international exchange.Included in this exchange is trade in goods and services as well as the exchange of ________,________,and ________ across countries.

A) habits; values; ideas
B) traditions; legal systems; history
C) money; ideas; information
D) statistics; personnel; purchasing power

Question 30

In Euromoney magazine's 2017 semi-annual "Country Risk Rating" evaluating political,economic,and other risks that entrants to international markets potentially face,which of the following countries have the next to the highest country economic risk?

A) South Africa and Russia
B) Singapore and China
C) Argentina and Bahrain
D) Kazakhstan and Colombia

Question 31

Statistics indicate that over half of the world output now comes from emerging markets.This is leading to a(n)________ of living standards across the globe and is changing the face of business.

A) divergence
B) convergence
C) expansion
D) contraction

Question 32

In reviewing the Indian software industry and the diamond of national advantage,which of the following is a relatively weak set of factors in the national competitive advantage in this industry?

A) U.S. demand conditions
B) factor endowments
C) domestic rivalry
D) domestic demand conditions

Question 33

In Euromoney magazine's 2017 semi-annual "Country Risk Rating" evaluating political,economic,and other risks that entrants to international markets potentially face,which of the following countries have the next to the lowest country political risk?

A) Libya and Argentina
B) Singapore and Hong Kong
C) Norway and Canada
D) China and Bahrain

Question 34

Related industries create the probability that new companies will enter the market.This ________ competition and forces existing firms to improve ________.

A) decreases; innovation
B) decreases; efficiency
C) increases; efficiency
D) decreases; sales

Question 35

According to Michael Porter,firms that have experienced intense domestic competition are

A) unlikely to have the time or resources to compete abroad.
B) more likely to demand protection from their governments.
C) most likely to design strategies aimed primarily at the domestic market.
D) more likely to design strategies that will allow them to successfully compete abroad.

Question 36

Which of the following is not a motivation for a company to pursue international expansion?

A) It wishes to increase the size of the potential markets for its products and services.
B) It wishes to take advantage of arbitrage opportunities to increase profit.
C) It wishes to optimize value-chain activities to enhance performance, reduce costs, and reduce risk.
D) It wishes to increase foreign market penetration by developing products for the home market.

Question 37

In the Porter diamond-of-national-advantage framework,which of the following factors does not affect competitiveness of a nation?

A) the position of the nation in factors of production necessary to compete in a given industry
B) the presence or absence in the nation of internationally competitive supplier industries
C) the conditions in the nation governing the nature of foreign rivalry
D) the nature of home-market demand of the products or services of the industry

Question 38

Multinational firms are constantly faced with the decision of choosing between ________ adaptation and ________ integration.

A) local; local
B) local; global
C) global; local
D) global; global

Question 39

Which of these points on the Porter diamond of national advantage is the strongest indicator of global competitive success?

A) foreign rivalry
B) domestic rivalry
C) global rivalry
D) international rivalry

Question 40

Countries with demanding consumers,like environmentally-concerned Denmark,drive ________ to meet the demand.

A) worldwide innovation
B) in-country innovation
C) foreign manufacturing
D) global exchange

Question 41

In Euromoney's 2017 semi-annual "Country Risk Rating" evaluating political,economic,and other risks that entrants to international markets potentially face,which of the following countries have the next to the highest country financial system risk?

A) South Africa and Canada
B) Singapore and China
C) Argentina and Bahrain
D) Kazakhstan and Russia

Question 42

For years O.R.T.Technologies resisted moving any operations outside Israel.However,when faced with a sharp rise in the value of the shekel,the maker of specialized software for managing gas stations froze all local hiring and decided to transfer some developmental work to Eastern Europe.This is an example of ________ risk.

A) political
B) economic
C) currency
D) management

Question 43

A report issued by the World Trade Organization described the production of a particular U.S.car.The study showed that 30 percent of the car value goes to Korea for assembly,17.5 percent to Japan for components and advanced technology,7.5 percent to Germany for design,4 percent to Taiwan and Singapore for minor parts,2.5 percent to U.K.for advertising and marketing services,and 1.5 percent to Ireland and Barbados for data processing.This is an example of

A) outsourcing and offshoring.
B) outsourcing and on-shoring.
C) insourcing and offshoring.
D) insourcing and outsourcing.

Question 44

Which of the following is a source of economic risk in many countries?

A) good intellectual property law
B) counterfeiting
C) good enforcement of property rights
D) political unrest

Question 45

When the U.S.dollar appreciates against other currencies,U.S.goods can be ________ to consumers in foreign countries but can have ________ implications for American companies with branch operations overseas.

A) less expensive, positive
B) more expensive, negative
C) less expensive, negative
D) more expensive, positive

Question 46

Greeks reacted negatively to Coca-Cola advertising using Coke bottles as pillars for the Parthenon.This is a form of ________ risk.

A) currency
B) management
C) economic
D) environmental

Question 47

Exemplifying the phenomenon of ________,companies like GE have committed significant resources to developing products that meet the needs of developing nations,products that deliver adequate functionality at a fraction of the cost.Interestingly,these products have subsequently found considerable success in value segments in wealthy countries as well.

A) total wage costs and indirect costs
B) risk reduction
C) reverse innovation
D) the optimization of value-chain activity locations

Question 48

________ occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house.

A) Offshoring
B) A global strategy
C) Outsourcing
D) A transnational strategy

Question 49

When firms expand into global markets,they are faced with the choice of reducing costs and/or adapting to the local market.When high pressures exist to lower costs,companies should choose a(n)________ strategy or ________ strategy in order to compete in the global marketplace.

A) global; transnational
B) global; multidomestic
C) international; multidomestic
D) international; transnational

Question 50

According to Euromoney's 2017 semi-annual "Country Risk Rating," which one of the following countries has the highest economic risk?

A) South Korea
B) China
C) Colombia
D) Argentina

Question 51

L'Oreal acquired two U.S.firms that developed and sold hair care products to African-American customers.This permitted it to build a new ethnic hair care division in Europe and Africa.This represents an advantage of international expansion using

A) arbitrage.
B) optimization of the location of value-chain activities.
C) performance enhancement.
D) learning opportunities.

Question 52

Wages in developing markets can be volatile and spike dramatically.The United States can be ________ on a wage basis if its average wages decline.

A) less competitive
B) more competitive
C) more risky
D) more volatile

Question 53

When firms expand into global markets,they are faced with the choice of reducing costs and/or adapting to the local market.When high pressures exist to adapt locally,companies should choose a(n)________ strategy or ________ strategy in order to compete in the global marketplace.

A) global; transnational
B) global; multidomestic
C) international; global
D) transnational; multidomestic

Question 54

In considering the decision to offshore,which of the following generally is not one of the hidden costs?

A) total wage costs and indirect costs
B) wage deflation
C) reduction in intellectual property rights
D) increased inventory and coordination costs

Question 55

Renault paid 1 billion USD to acquire a 25 percent ownership stake in the Russian automaker AvtoVAZ in 2008.Just one year later,Russian Prime Minister Vladimir Putin threatened to dilute the Renault ownership stake unless it contributed more money to prop up AvtoVAZ,which was then experiencing a significant slide in sales.This is an example of ________ risk.

A) currency
B) economic
C) political
D) management

Question 56

The sale of Boeing commercial aircraft and Microsoft operating systems in many countries enables these companies to benefit from

A) higher prices in their domestic markets.
B) reducing their exposure to currency risks.
C) economies of scale.
D) optimizing the location for many activities in their value chain.

Question 57

If the U.S.dollar appreciates relative to foreign currency,what is likely to be the result for the U.S.company that has branches abroad?

A) Profits will increase, when measured in U.S. dollars.
B) Profits will decrease, when measured in U.S. dollars.
C) Foreign exports to the United States will decrease.
D) Foreign demand for U.S. goods and services will decrease.

Question 58

Which one of the following is one of the Theodore Levitt assumptions supporting a pure global strategy?

A) Consumers are willing to pay more for specific product features.
B) Customer needs and interests are becoming more dissimilar.
C) MNCs can successfully compete globally by aggressively pricing products at the sacrifice of product features.
D) If the world markets are treated as heterogeneous, substantial economies of scale are easily achieved.

Question 59

If a company is considering optimizing the physical location for every activity in the value chain,which of the following is not a possible strategic advantage for that decision?

A) performance enhancement
B) cost reduction
C) political risk reduction
D) life-cycle enhancement

Question 60

Which of the following is not a source of political risk in many countries?

A) the presence of social unrest
B) the presence of the rule of law
C) the presence of military turmoil
D) the presence of violent conflict

Question 61

Which of the following types of international firms are most likely to benefit from a global strategy as opposed to a multidomestic strategy?

A) firms that compete in industries in which consumer preferences vary substantially in each country
B) firms in industries that are expanding very rapidly
C) firms in industries that have value added by sales and marketing departments
D) firms in industries that have much value added in research and design or manufacturing

Question 62

Which one of the following is not a strength of transnational strategies?

A) ability to attain economies of scale
B) ability to adapt to local markets
C) ability to locate activities in optimal locations
D) ability to decrease knowledge flows and learning

Question 63

To be responsive to local pressures,companies must ________ their offerings and strategies from country to country to reflect local consumer preferences.

A) internationalize
B) globalize
C) differentiate
D) standardize

Question 64

Industries in which proportionally more value is added in ________ activities are more likely to benefit from a global strategy.

A) downstream
B) upstream
C) marketing
D) sales

Question 65

To meet market needs companies sometimes change product names so that the name in the local language is culturally meaningful.This is an example of a company using ________ strategy.

A) an international
B) a multidomestic
C) a single country
D) a transnational

Question 66

Firms following a global strategy strive to offer ________ products and services as well as locate manufacturing,research and development,and marketing activities in a limited number of locations.

A) widely differentiated
B) more expensive local
C) internationally differentiated
D) standardized

Question 67

Panasonic entered the market in China and found that it needed to balance global integration with local adaptation.It set up a Lifestyle Research Center in China to interpret data on customer wants and needs.This is an example of a company using ________ strategy.

A) an international
B) a multidomestic
C) a single country
D) a transnational

Question 68

Which of the following is not a risk associated with a global strategy?

A) A firm with only one manufacturing location must export its product, sometimes at great distance from the operation.
B) The geographic concentration of any activity may also tend to isolate that activity from the targeted markets.
C) Concentrating an activity in a single location makes the rest of the firm dependent on that location.
D) The pressures for local adaptation may elevate the cost structure of the firm.

Question 69

As in the case of Siebel Systems (now part of Oracle),elements of a global strategy may facilitate the competitive advantage of differentiation by

A) increased freedom of individual business units to adapt to local tastes.
B) the creation of a worldwide network to achieve consistent service regardless of location.
C) flexibility in applying research and development to meet country-specific needs.
D) tailoring products to meet country-specific needs.

Question 70

Which of the following is a reason for the rise in regional expansion?

A) increase in the number of trading blocs and free trade zones
B) decrease in the number of trading blocs and free trade zones
C) increasing national trade restrictions
D) increasing local taxes and tariffs

Question 71

Which one of the following explains why so few firms are global?

A) Culture, language, and religion are similar between countries.
B) Legal and political systems are similar between countries.
C) Governments are increasing trade restrictions in general.
D) Geographic distance is multiplied by distance in culture, language, religion, and legal and political systems.

Question 72

Which one of the following is not a limitation of a global strategy?

A) limited ability to adapt to local markets
B) the ability to locate activities in optimal locations
C) the concentration of activities may increase dependence on a single facility
D) single locations may lead to higher tariffs and transportation costs

Question 73

In the quest to achieve competitive advantage in global markets,competitive pressures require that firms do what they can to ________ unit costs so that consumers will not perceive their product and service offerings as too expensive.

A) raise
B) decentralize
C) define
D) lower

Question 74

Limitations of transnational strategies include all the following except

A) unique challenges in determining optimal locations of activities to ensure cost .
B) unique managerial challenges in fostering knowledge transfer.
C) unique ability to adapt to local markets.
D) unique challenges in determining optimal locations of activities to ensure quality.

Question 75

In considering the transnational strategy,Nestle evaluates the limits of decentralization.The closer they are to the consumer in activities such as branding and pricing,the more they tend to decentralize.The more they deal with production and logistics,the more they centralize decision-making.The production and logistics decisions involve ________ activities.

A) upstream
B) in its infrastructure
C) downstream
D) midstream

Question 76

High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy?

A) global strategy
B) multidomestic strategy
C) transnational strategy
D) overall cost leadership strategy

Question 77

Which would be the appropriate strategy for companies to use to compete in the global marketplace if both the pressures to lower costs and adapt locally are low?

A) international strategy
B) global strategy
C) multidomestic strategy
D) transnational strategy

Question 78

Trends that might lead managers of multinational corporations (MNCs)to adopt a more decentralized strategy for their operations would include all of the following except

A) customer needs, interests, and tastes becoming increasingly homogenized.
B) consumers around the world increasingly willing to trade preferences in product features for lower price.
C) manufacturing trends allowing a decline in the minimum volume required to reach acceptable levels of production efficiency.
D) fluctuating exchange rates.

Question 79

Green tea Oreos in China,chocolate and peanut butter Oreos in Indonesia,and banana dulce de leche Oreos in Argentina are examples of Kraft using ________ strategy.

A) an international
B) a multidomestic
C) a single country
D) a transnational

Question 80

When differentiating products and services to local markets,strategies and tactics are likely to ________ company costs.

A) decrease
B) increase
C) obliterate
D) decentralize