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.

Accepted Answer

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

Question 2

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.

Accepted Answer

This is true because products and services that are affordable for one country or income level may not be affordable or feasible for another. This can create challenges for businesses looking to expand globally and cater to a diverse customer base.

Question 3

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 lowerquality.

Accepted Answer

Levitt advocated global product and brand strategies based on three assumptions:customer needs and interests are becoming increasingly homogeneous worldwide; people around the world are willing to sacrifice preferences in features, design, and the like for lower prices at high quality; substantial economies of scale in production and marketing can be achieved through supplying global markets.

Question 4

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.

Accepted Answer

This statement is true. As the middle class in countries like India and China grow, there is an increased demand for products and services, and international firms are trying to tap into this market by increasing their marketing efforts in these countries.

Question 5

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.

Accepted Answer

Physical distance is not the only factor that affects the true distance between countries. There are several cultural, economic, and political factors that can impact the success of a business in a particular country.

Question 6

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

Accepted Answer

Joint ventures involve shared control and risk between two or more parties, while franchising involves a franchisee operating under the control and guidelines of a franchisor. Therefore, joint ventures usually involve more control and risk than franchising.

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.

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 8

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 productthat appeals to the largest number of consumers in every market.

Accepted Answer

A multidomestic strategy focuses on adapting products and marketing strategies to each local market, which can actually limit economies of scale. It also prioritizes meeting the unique needs and preferences of each market, rather than delivering a middle-of-the-road product. A global or transnational strategy would be more focused on achieving economies of scale across markets.

Question 9

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

Accepted Answer

The need to attain economies of scale encourages multinational firms to operate under a global strategy, as it allows them to standardize their products and processes across markets, reducing costs and increasing efficiency. Multidomestic strategy, on the other hand, emphasizes local responsiveness and customization, and may lead to higher costs due to duplication of efforts and resources in different markets.

Question 10

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

Accepted Answer

The statement is false. Investing in other countries does not necessarily result in greater autonomy or independence. In fact, it can lead to interdependence and interconnectedness between nations.

Question 11

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

Accepted Answer

There are two opposing forces that firms face when they expand into global markets:cost reduction and adaptation to local markets.

Question 12

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

Accepted Answer

The Michael Porter Diamond of National Advantage includes four key factors: factor endowments, demand conditions, related and supporting industries, and firm strategy, structure and rivalry. Therefore, it is not limited to just factor endowments and demand conditions.

Question 13

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

Accepted Answer

The trend towards worldwide markets actually makes it harder to predict where competitors will spring up, as businesses now have access to a global pool of potential competitors.

Question 14

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).

Accepted Answer

Industries that add more value in upstream activities (such as manufacturing, raw material extraction, and production) are more likely to benefit from a global strategy because it allows them to optimize their supply chain and production processes, access the best inputs and technology, and reduce costs. On the other hand, industries that add more value downstream (such as retail, distribution, and services) are more affected by local market conditions and customer preferences, and may require more customization and localization in their business model.

Question 15

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

Accepted Answer

In its simplest form, arbitrage involves buying something from where it is cheap and selling it somewhere where it commands a higher price. A big part of the Walmart success can be attributed to its expertise in arbitrage. The possibilities for arbitrage are not necessarily confined to simple trading opportunities. It can be applied to virtually any factor of production and every stage of the value chain.

Question 16

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

Accepted Answer

A franchise can have varying expiration dates depending on the agreement between the franchisor and franchisee, while a license can also have an expiration date or term limit. However, licenses can also be designed to last into perpetuity, as can certain types of franchises.

Question 17

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

Accepted Answer

Extensive analysis of the distribution data of sales across different countries and regions led Alan Rugman and Alain Verbeke to conclude that there is a strong case to be made that most companies today are regional or bi-regional, not global.

Question 18

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 dobusiness.

Accepted Answer

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

Question 19

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 20

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

Accepted Answer

Trading blocs and free trade zones actually promote international expansion by reducing trade barriers and increasing economic cooperation between member countries. This can lead to increased trade and investment flows, which can ultimately benefit both individual countries and the global economy.

Quiz 7: International Strategy Creating Value in Global Markets