Strategies for Competing in International Markets
Multiple Choice Questions
1. 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 choices are correct.
2. 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 choices are correct.
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3. Which of the following is not a typical reason for a company to expand into the markets of foreign countries?
A. gaining access to new customers
B. strengthening its capability to employ offensive strategies, especially those that involve preemptive strikes
C. achieving lower costs and enhance the firm's competitiveness
D. capitalizing on company competencies and capabilities
E. spreading business risk across a wider geographic market base
4. Which one of the following is not a reason a company decides to enter foreign markets?
A. spreading business risk across a wider geographic market base
B. capitalizing on company competencies and capabilities
C. achieving lower costs and enhance the firm's competitiveness
D. building the profit sanctuary necessary to wage guerrilla offensives against global challengers endeavoring to invade its home market
E. gaining access to new customers
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.
6. Market size and growth rates in different countries can be influenced positively or 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 country differences.
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 choices are correct.
7. Factors surrounding the decision to enter into the markets of foreign countries do not include
A. market growth rates that vary from country to country.
B. country-by-country differences in consumer tastes and buying habits.
C. fluctuating exchange rates and country-by-country variations in host-government restrictions and requirements.
D. product designs that may be suitable for one country but inappropriate for another.
E. None of these choices are correct.
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8. 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 choices are correct.
9. Competing in the markets of foreign countries generally does not involve which of the following?
A. country-by-country differences in consumer buying habits, tastes, and preferences
B. country-by-country variations in host-government regulations, fluctuating exchange rates, and economic policies
C. choices to customize the company's offerings to each country market or to offer a primarily standardized product to all markets around the globe
D. choices to locate company operations on the basis of variations in wages rates, worker productivity, energy costs, tax rates, and distribution channels
E. crafting a multicountry strategy that can transform the world market into one big profit sanctuary
10. The advantages of manufacturing goods in a particular country
A. are not impacted by where production, distribution, and customer service activities are located.
B. are not affected by differences in operating costs and profitability due to wage rates and worker productivity.
C. are not affected by differences in energy costs, environmental regulations, tax rates, and inflation rates.
D. are not influenced by cheaper access to essential natural resources.
E. None of these choices are correct.
11. Competitive 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 eroded when the manufacturing country's home currency strengthens relative to the currencies of the foreign 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.
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12. Which of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?
A. Fluctuating exchange rates pose no significant risks to a company's competitiveness in foreign markets.
B. Competitive advantages of manufacturing goods in a particular country are largely unaffected by fluctuating exchange rates.
C. Exporters are advantaged when the currency of the country where goods are being manufactured grows stronger.
D. Exporters always gain in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak.
E. Exporters always lose in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak.
13. Government host policies are not likely to increase a country's political and economic risks when
A. the national government is unstable or weak.
B. incentives such as reduced taxes, low-cost loans, and site-development assistance are provided to companies agreeing to construct or expand production and distribution facilities.
C. there is distress in the country's monetary system.
D. there are threats from piracy and lack of protection for the company's intellectual property.
E. there is new onerous legislation or regulations on foreign-owned businesses.
14. 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 these choices are correct.
15. 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
16. 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 choices are correct.
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17. 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.
18. 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.
19. 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.
20. The advantages of using a franchising strategy to pursue opportunities in foreign markets include
A. franchisees bear most of the costs and risks of establishing foreign locations, and the franchisor is required to expend only the resources to recruit, train, and support foreign franchisees.
B. its being particularly well suited to the global expansion efforts of companies with multicountry strategies.
C. the ability to build multiple profit sanctuaries.
D. its being particularly well suited to companies that employ cross-market subsidization.
E. its being particularly well suited to the global expansion efforts of manufacturers.
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21. The disadvantages of using a franchising strategy to pursue opportunities in foreign markets do not include
A. maintaining quality control.
B. having to decide whether to allow foreign franchisees to modify the franchisor's product offering to better satisfy the tastes and expectations of local buyers.
C. foreign franchisees that do not always exhibit strong commitment to consistency and standardization.
D. franchisees bearing most of the costs and risks of establishing foreign locations, so a franchisor has to expend only the resources to recruit, train, support, and monitor franchisees.
E. the ability to build multiple profit sanctuaries.
22. Establishing a wholly owned 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 choices are correct.
23. Acquiring an existing firm operating in a foreign country rather than undertaking internal development 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, and integrating and redirecting activities into the acquiring firm's operation.
C. putting the acquiring firm's strategy into place.
D. accelerating efforts to build a strong market presence.
E. All of these choices are correct.
24. 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 choices are correct.
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25. Which is not one of the four conditions that make entry via an internally developed start-up strategy in a foreign country 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 choices are correct.
26. Which of the following is not a potential benefit of strategic alliances or other cooperative arrangements between foreign and domestic companies?
A. Obtaining 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
27. Which of the following is not one of the problems and risks of cross-border strategic alliances, that is, 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
28. When a company operates in the markets of two or more different countries, its foremost strategic decision 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. 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.
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29. 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.
30. 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 independently 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.
31. 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 these choices are correct.
32. 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. the difficulty in taking into account significant country-to-country differences in distribution channels and marketing methods.
C. the difficulty in and costs of being 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.
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33. Two major drawbacks of a think local, act local multidomestic strategy are
A. that it is especially vulnerable to fluctuating exchange rates and 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.
34. 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, and 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 these choices are correct.
35. 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-by-country differences are small enough to be accommodated within 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.
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36. 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.
37. 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 countryto-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.
38. When 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 or using cross-border coordination in ways a domestic-only competitor cannot.
E. employing a multidomestic strategy instead of a global strategy.
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39. 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.
40. 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 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.
41. 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 these choices are correct
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42. 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
43. 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. when 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); (2) supply interruptions (due to strikes, mechanical failures, or transportation delays); or (3) adverse political developments.
E. All of these choices are correct.
44. 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 choices are correct.
45. 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 where 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 choices are correct.
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46. 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.
47. 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 compared 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.
48. 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.
49. 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 choices are correct.
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50. Which of the following is not a strategic option companies should consider in tailoring their strategy to fit circumstances of emerging country markets?
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. Enter only those emerging markets that provide profit sanctuaries by offering opportunities for offensive strategies, such as preemptive strikes.
E. All of these choices are correct.
Short Answer Questions
51. Briefly identify the major reasons a company may choose to expand outside its domestic market.
52. What are the primary country differences that shape strategy choices in international markets?
53. Identify and briefly describe any three of the five strategic options for entering foreign markets.
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54. Briefly discuss why a domestic company desirous of entering foreign markets might see attractive advantages in forming strategic alliances with foreign companies.
55. What are the possible benefits and risks of using strategic alliances to try to enhance a company's ability to compete in foreign markets?
56. Discuss in some detail the difference between a localized multidomestic strategy and a global strategy, and give the pros and cons of each.
57. What circumstances call for use of a multidomestic strategy for competing in international markets?
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58. When is a global strategy "superior" to a multidomestic strategy?
59. A global strategy embraces the theme "think global, act global," whereas a multidomestic strategy relies more on a "think global, act local" mentality. True or false? Explain.
60. Explain the differences between a think global, act global strategy and a think global, act local strategy.
61. Identify and briefly explain two ways that multinational companies are able to use international operations to improve overall competitiveness.
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62. Explain under what circumstances it becomes necessary for a multinational company to concentrate internal processes in a few locations.
63. Under what circumstances is it advantageous for a company competing in foreign markets to disperse certain internal processes across many countries?
64. Explain the importance of competing in emerging markets.
65. List and discuss three strategy options for competing in emerging markets.
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Chapter 07 Strategies for Competing in International Markets Answer Key
Multiple Choice Questions
1. 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 choices are correct.
The world economy is globalizing at an accelerating pace as countries previously closed to foreign companies open their markets, as countries with previously planned economies embrace market or mixed economies, as information technology shrinks the importance of geographic distance, and as ambitious, growth-minded companies race to build stronger competitive positions in the markets of more and more countries.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-01 Develop an understanding of the primary reasons companies choose to compete in international markets.
Topic: Why Companies Expand into International Markets?
2. 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 choices are correct.
A company may opt to expand outside its home country for a variety of reasons, including: (1) the ability to gain access to new customers; (2) to achieve lower costs and enhance competitiveness; (3) to leverage core competencies in new markets; (4) to gain access to resources and capabilities (labor, resources, technology, distribution networks) in foreign markets; and (5) to spread business risk across a wider market base.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-01 Develop an understanding of the primary reasons companies choose to compete in international markets.
Topic: Why Companies Expand into International Markets?
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3. Which of the following is not a typical reason for a company to expand into the markets of foreign countries?
A. gaining access to new customers
B. strengthening its capability to employ offensive strategies, especially those that involve preemptive strikes
C. achieving lower costs and enhance the firm's competitiveness
D. capitalizing on company competencies and capabilities
E. spreading business risk across a wider geographic market base
Strengthening capability to employ offensive strategies is not one of the five principal reasons that companies choose to expand into foreign markets. A company may opt to expand outside its home country for a variety of reasons, including: (1) the ability to gain access to new customers;
(2) to achieve lower costs and enhance competitiveness; (3) to leverage core competencies in new markets; (4) to gain access to resources and capabilities (labor, resources, technology, distribution networks) in foreign markets; and (5) to spread business risk across a wider market base.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 07-01 Develop an understanding of the primary reasons companies choose to compete in international markets.
Topic: Why Companies Expand into International Markets?
4. Which one of the following is not a reason a company decides to enter foreign markets?
A. spreading business risk across a wider geographic market base
B. capitalizing on company competencies and capabilities
C. achieving lower costs and enhance the firm's competitiveness
D. building the profit sanctuary necessary to wage guerrilla offensives against global challengers endeavoring to invade its home market
E. gaining access to new customers
Building a profit sanctuary to wage guerilla offensives is not one of the five principal reasons that companies choose to expand into foreign markets. A company may opt to expand outside its home country for a variety of reasons, including: (1) the ability to gain access to new customers;
(2) to achieve lower costs and enhance competitiveness; (3) to leverage core competencies in new markets; (4) to gain access to resources and capabilities (labor, resources, technology, distribution networks) in foreign markets; and (5) to spread business risk across a wider market base.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 07-01 Develop an understanding of the primary reasons companies choose to compete in international markets.
Topic: Why Companies Expand into International Markets?
7-19
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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.
Companies operating in a global marketplace must wrestle with whether and how much to customize their offerings in each different country market to match the tastes and preferences of local buyers or whether to pursue a strategy of offering a mostly standardized product worldwide.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
6. Market size and growth rates in different countries can be influenced positively or 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 country differences.
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 choices are correct.
Differing population sizes, income levels, and other demographic factors give rise to considerable differences in market size and growth rates from country to country. Moreover, market growth can be limited by the lack of infrastructure or established distribution and retail networks in emerging markets.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
7-20
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
7. Factors surrounding the decision to enter into the markets of foreign countries do not include
A. market growth rates that vary from country to country.
B. country-by-country differences in consumer tastes and buying habits.
C. fluctuating exchange rates and country-by-country variations in host-government restrictions and requirements.
D. product designs that may be suitable for one country but inappropriate for another.
E. None of these choices are correct.
All of the above market conditions across countries influence a company's strategy choices in international markets: (1) buyer tastes, differing population sizes, income levels, market growth rates, and other demographic factors that influence product customization decisions; (2) wage rates, worker productivity, energy costs, environmental regulations, tax rates, and inflation rates that influence location choices; and (3) government policies, economic risk, and political risk that make a country's business climate attractive or unattractive.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
8. 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 choices are correct.
All of the above market conditions across countries influence a company's strategy choices in international markets: (1) buyer tastes, differing population sizes, income levels, market growth rates, and other demographic factors that influence product customization decisions; (2) wage rates, worker productivity, energy costs, environmental regulations, tax rates, and inflation rates that influence location choices; and (3) government policies, economic risk, and political risk that make a country's business climate attractive or unattractive.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
7-21
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
9. Competing in the markets of foreign countries generally does not involve which of the following?
A. country-by-country differences in consumer buying habits, tastes, and preferences
B. country-by-country variations in host-government regulations, fluctuating exchange rates, and economic policies
C. choices to customize the company's offerings to each country market or to offer a primarily standardized product to all markets around the globe
D. choices to locate company operations on the basis of variations in wages rates, worker productivity, energy costs, tax rates, and distribution channels
E. crafting a multicountry strategy that can transform the world market into one big profit sanctuary
All of the above market conditions across countries influence a company's strategy choices in international markets, except crafting a multicountry strategy: (1) buyer tastes, differing population sizes, income levels, market growth rates, and other demographic factors that influence product customization decisions; (2) wage rates, worker productivity, energy costs, environmental regulations, tax rates, and inflation rates that influence location choices; and (3) government policies, economic risk, and political risk that make a country's business climate attractive or unattractive.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
10. The advantages of manufacturing goods in a particular country
A. are not impacted by where production, distribution, and customer service activities are located.
B. are not affected by differences in operating costs and profitability due to wage rates and worker productivity.
C. are not affected by differences in energy costs, environmental regulations, tax rates, and inflation rates.
D. are not influenced by cheaper access to essential natural resources.
E. None of these choices are correct.
All of the above market conditions across countries influence a company's strategy choices in international markets: (1) buyer tastes, differing population sizes, income levels, market growth rates, and other demographic factors that influence product customization decisions; (2) wage rates, worker productivity, energy costs, environmental regulations, tax rates, and inflation rates that influence location choices; and (3) government policies, economic risk, and political risk that make a country's business climate attractive or unattractive.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
7-22
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
11. Competitive 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 eroded when the manufacturing country's home currency strengthens relative to the currencies of the foreign 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.
Fluctuating exchange rates impact companies that export goods to foreign countries. Companies always gain in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak. Exporters are disadvantaged when the currency of the country where goods are being manufactured grows stronger.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
12. Which of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?
A. Fluctuating exchange rates pose no significant risks to a company's competitiveness in foreign markets.
B. Competitive advantages of manufacturing goods in a particular country are largely unaffected by fluctuating exchange rates.
C. Exporters are advantaged when the currency of the country where goods are being manufactured grows stronger.
D. Exporters always gain in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak.
E. Exporters always lose in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak.
Fluctuating exchange rates impact companies that export goods to foreign countries. Companies always gain in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak. Exporters are disadvantaged when the currency of the country where goods are being manufactured grows stronger.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
7-23
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
13. Government host policies are not likely to increase a country's political and economic risks when
A. the national government is unstable or weak.
B. incentives such as reduced taxes, low-cost loans, and site-development assistance are provided to companies agreeing to construct or expand production and distribution facilities.
C. there is distress in the country's monetary system.
D. there are threats from piracy and lack of protection for the company's intellectual property.
E. there is new onerous legislation or regulations on foreign-owned businesses.
All of the choices, except for "incentives," tend to adversely increase a host country's political and economic risks.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
14. 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 these choices are correct.
The five general modes for entering foreign markets are: (1) exporting from a national base; (2) licensing foreign firms to produce and distribute goods and services abroad; (3) franchising involving local ownership; (4) establishing a subsidiary via acquisition or internal development; and (5) relying on strategic alliances, joint ventures, and other cooperative agreements with foreign companies.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
7-24
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
15. 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
A profit sanctuary strategy is not one of the five general modes for entering foreign markets. Strategy options for expanding into markets of foreign countries include: (1) exporting from a national base; (2) licensing foreign firms to produce and distribute goods and services abroad; (3) franchising involving local ownership; (4) establishing a subsidiary via acquisition or internal development; and (5) relying on strategic alliances, joint ventures, and other cooperative agreements with foreign companies.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
16. 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 choices are correct.
The five general modes for entering foreign markets are: (1) exporting from a national base; (2) licensing foreign firms to produce and distribute goods and services abroad; (3) franchising involving local ownership; (4) establishing a subsidiary via acquisition or internal development; and (5) relying on strategic alliances, joint ventures, and other cooperative agreements with foreign companies.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: 1 Easy Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
7-25
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
17. 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.
Using domestic plants as a production base for exporting goods to foreign markets is an excellent initial strategy for pursuing international sales. It is a conservative way to test the international waters.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
18. 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.
The amount of capital needed to begin exporting is often quite minimal, and existing production capacity may be sufficient to make goods for export. With an export-based entry strategy, a manufacturer can limit its involvement in foreign markets by contracting with foreign wholesalers experienced in importing to handle the entire distribution and marketing function in their countries or regions of the world.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
7-26
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
19. 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.
The advantages of a licensing entry strategy to participate in foreign markets accrue when: (1) a firm with valuable technical know-how or a unique patented product has neither the internal organizational capability nor the resources to enter foreign markets; (2) a firm wishes to avoid the risks of committing resources to country markets that are unfamiliar, politically volatile, economically unstable, or otherwise risky; and (3) a firm does not have to bear the costs and risks of entering foreign markets on its own, yet it is able to generate income from royalties.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
20. The advantages of using a franchising strategy to pursue opportunities in foreign markets include
A. franchisees bear most of the costs and risks of establishing foreign locations, and the franchisor is required to expend only the resources to recruit, train, and support foreign franchisees.
B. its being particularly well suited to the global expansion efforts of companies with multicountry strategies.
C. the ability to build multiple profit sanctuaries.
D. its being particularly well suited to companies that employ cross-market subsidization.
E. its being particularly well suited to the global expansion efforts of manufacturers.
Franchising has much the same advantages as licensing. The franchisee bears most of the costs and risks of establishing foreign locations, so a franchisor has to expend only the resources to recruit, train, support, and monitor franchisees.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
7-27
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
21. The disadvantages of using a franchising strategy to pursue opportunities in foreign markets do not include
A. maintaining quality control.
B. having to decide whether to allow foreign franchisees to modify the franchisor's product offering to better satisfy the tastes and expectations of local buyers.
C. foreign franchisees that do not always exhibit strong commitment to consistency and standardization.
D. franchisees bearing most of the costs and risks of establishing foreign locations, so a franchisor has to expend only the resources to recruit, train, support, and monitor franchisees.
E. the ability to build multiple profit sanctuaries.
Franchisees bear most of the costs and risks of establishing foreign locations, so a franchisor has to expend only the resources to recruit, train, support, and monitor franchisees, which is a major advantage of using franchising as a foreign market entry strategy.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
22. Establishing a wholly owned 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 choices are correct.
Companies that prefer direct control over all aspects of operating in a foreign market can establish a wholly owned subsidiary, either by acquiring a foreign company or by establishing operations from the ground up via internal development.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
7-28
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
23. Acquiring an existing firm operating in a foreign country rather than undertaking internal development 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, and integrating and redirecting activities into the acquiring firm's operation.
C. putting the acquiring firm's strategy into place.
D. accelerating efforts to build a strong market presence.
E. All of these choices are correct.
Acquisition of an existing firm operating in a foreign country may be the less risky and more costefficient than internal development when it comes to hurdling such entry barriers as gaining access to local distribution channels, building supplier relationships, and establishing working relationships with key government officials and other constituencies.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
24. 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 choices are correct.
Strategic alliances, joint ventures, and other cooperative agreements with foreign companies are a favorite and potentially fruitful means for entering a foreign market or strengthening a firm's competitiveness in world markets in order to: (1) strengthen a company's ability to gain a foothold in a desirable market; (2) capture economies of scale in production and/or marketing; (3) fill gaps in technical expertise and/or knowledge of local markets (buying habits and product preferences of consumers, local customs, and so on); (4) share distribution facilities and dealer networks to mutually strengthen access to buyers; (5) refocus energies away from competition between allies and instead toward teaming up to close the gap on leading companies; and (6) allow each partner to preserve its independence and avoid using perhaps scarce financial resources to fund acquisitions.
AACSB: Analytical Thinking
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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
7-29
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
25. Which is not one of the four conditions that make entry via an internally developed start-up strategy in a foreign country 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 choices are correct.
Entering a new foreign country via internal development and building a foreign subsidiary from scratch makes sense when: (1) a company already operates in a number of countries; (2) has experience in getting new subsidiaries up and running and overseeing their operations; (3) has a sufficiently large pool of resources and competencies to rapidly equip a new subsidiary; (4) an internal start-up is cheaper than making an acquisition; (5) adding new production capacity will not adversely impact the supply-demand balance in the local market; (6) a start-up subsidiary has the ability to gain good distribution access (perhaps because of the company's recognized brand name); and/or (7) a start-up subsidiary will have the size, cost structure, and resources to compete head-to-head against local rivals. Adding new production capacity that results in a supply-demand imbalance would tend to make an internally developed start-up in a foreign country unappealing.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
26. Which of the following is not a potential benefit of strategic alliances or other cooperative arrangements between foreign and domestic companies?
A. Obtaining 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
Even if the alliance becomes a win-win proposition for both parties, there is the danger of becoming overly dependent on foreign partners for essential expertise and competitive capabilities.
AACSB: Analytical Thinking
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Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
7-30
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27. Which of the following is not one of the problems and risks of cross-border strategic alliances, that is, 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
The risks of using strategic alliances include: (1) cross-border allies typically have to overcome language and cultural barriers, and figure out how to deal with diverse (or perhaps conflicting) operating practices; (2) communication, trust-building, and coordination costs are high in terms of management time; and (3) partners may discover they have conflicting objectives and strategies, deep differences of opinion about how to proceed, or important differences in corporate values and ethical standards. Increasing the difficulty of pursuing a multidomestic (versus global) strategy is not one of the inherent risks of cross-border strategic alliances.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 07-03 Gain familiarity with the five general modes of entry into foreign markets.
Topic: Strategy Options for Entering Foreign Markets
28. When a company operates in the markets of two or more different countries, its foremost strategic decision 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. 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.
Deciding upon the degree to vary its competitive approach to fit the specific market conditions and buyer preferences in each host country is perhaps the foremost strategic issue that must be addressed when operating in two or more foreign markets.
AACSB: Analytical Thinking
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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
7-31
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29. 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 lowcost 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.
A multidomestic strategy calls for varying a company's product offering and competitive approach from country to country in an effort to be responsive to significant cross-country differences in customer preferences, buyer purchasing habits, distribution channels, or marketing methods. Think local, act local strategy-making approaches are also essential when host-government regulations or trade policies preclude a uniform, coordinated worldwide market approach.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
30. 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 independently 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.
A multidomestic strategy calls for varying a company's product offering and competitive approach from country to country in an effort to be responsive to significant cross-country differences in customer preferences, buyer purchasing habits, distribution channels, or marketing methods. Think local, act local strategy-making approaches are also essential for matching a company's competitive approach to prevailing local market and competitive conditions or when hostgovernment regulations or trade policies preclude a uniform, coordinated worldwide market approach.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
7-32
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31. 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 these choices are correct.
A multidomestic strategy calls for varying a company's product offering and competitive approach from country to country in an effort to be responsive to significant cross-country differences in customer preferences, buyer purchasing habits, distribution channels, or marketing methods. Think local, act local strategy-making approaches are also essential when host-government regulations or trade policies preclude a uniform, coordinated worldwide market approach.
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Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
32. 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. the difficulty in taking into account significant country-to-country differences in distribution channels and marketing methods.
C. the difficulty in and costs of being 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.
Multidomestic think local, act local strategy-making approaches come with two major drawbacks:
(1) they hinder transfer of a company's competencies and resources across country boundaries because the strategies in different host countries can be grounded in varying competencies and capabilities; and (2) they do not promote building a single, unified competitive advantage, especially one based on low cost. Companies employing highly localized or multidomestic strategies also face big hurdles in achieving low-cost leadership unless they find ways to customize their products and still be in a position to capture scale economies and learning curve effects.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
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Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
33. Two major drawbacks of a think local, act local multidomestic strategy are
A. that it is especially vulnerable to fluctuating exchange rates and 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.
Multidomestic think local, act local strategy-making approaches come with two major drawbacks:
(1) they hinder transfer of a company's competencies and resources across country boundaries because the strategies in different host countries can be grounded in varying competencies and capabilities; and
(2) they do not promote building a single, unified competitive advantage, especially one based on low cost.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
7-34
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34. 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, and 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 these choices are correct.
A global strategy (think global, act global) approach utilizes predominantly the same basic competitive strategy in all countries: the company sells the same products under the same brand names everywhere, utilizes much the same distribution channels in all countries, and competes on the basis of the same capabilities and marketing approaches worldwide. Although the company's strategy or product offering may be adapted in very minor ways to accommodate specific situations in a few host countries, the company's fundamental competitive approach (low-cost, differentiation, or focused) remains very much intact worldwide, and local managers stick close to the global strategy.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
35. 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-by-country differences are small enough to be accommodated within 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.
While multidomestic strategies are best suited for industries where a fairly high degree of local responsiveness is important, global strategies are best suited for globally standardized industries; thus small country-by-country differences can be accommodated by a global strategy.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
7-35
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36. 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.
Transnational strategies (think global, act local) are approaches to accommodate cross-country variations in buyer tastes, local customs, and market conditions while also striving for the benefits of standardization. This middle-ground approach entails utilizing the same basic competitive theme (low-cost, differentiation, or focused) in each country but allows local managers the latitude to (1) incorporate whatever country-specific variations in product attributes are needed to best satisfy local buyers and (2) make whatever adjustments in production, distribution, and marketing are needed to respond to local market conditions and compete successfully against local rivals.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
7-36
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37. 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.
Transnational strategies (think global, act local) are approaches to accommodate cross-country variations in buyer tastes, local customs, and market conditions while also striving for the benefits of standardization. This middle-ground approach entails utilizing the same basic competitive theme (low-cost, differentiation, or focused) in each country but allows local managers the latitude to (1) incorporate whatever country-specific variations in product attributes are needed to best satisfy local buyers and (2) make whatever adjustments in production, distribution, and marketing are needed to respond to local market conditions and compete successfully against local rivals.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-04 Learn the three main options for tailoring a company's international strategy to cross-country differences in market conditions and buyer preferences.
Topic: International Strategy: The Three Principal Options
38. When 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 or using crossborder coordination in ways a domestic-only competitor cannot.
E. employing a multidomestic strategy instead of a global strategy.
To use location to build competitive advantage, a company must consider two issues: (1) whether to concentrate each internal process in a few countries or to disperse performance of each process to many nations and (2) in which countries to locate particular activities. A multinational firm can gain competitive advantage by expanding outside its domestic market in two important ways: it can use location to lower costs or help achieve greater product differentiation. That is, multinational companies can achieve a competitive advantage in world markets by locating their value chain activities in whichever nations prove most advantageous, by either concentrating activities in certain locations or dispersing internal processes across multiple locations.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness.
Topic: Using International Operations to Improve Overall Competitiveness
39. 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.
To use location to build competitive advantage, a company must consider two issues: (1) whether to concentrate each internal process in a few countries or to disperse performance of each process to many nations and (2) in which countries to locate particular activities.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness.
Topic: Using International Operations to Improve Overall Competitiveness
40. 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 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.
To use location to build competitive advantage, a company must consider two issues: (1) whether to concentrate each internal process in a few countries or to disperse performance of each process to many nations and (2) in which countries to locate particular activities.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
7-38
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness.
Topic: Using International Operations to Improve Overall Competitiveness
41. 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 these choices are correct.
Multinational companies should concentrate internal processes in a few locations in the following situations: (1) when the costs of manufacturing or other activities are significantly lower in some geographic locations than in others; (2) when there are significant scale economies; (3) when there is a steep learning curve associated with performing an activity; and/or (4) when certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages, such as a sophisticated production facility or highly trained local personnel.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness.
Topic: Using International Operations to Improve Overall Competitiveness
7-39
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42. 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
As opposed to concentrating activities in a certain location, dispersing an internal process across many countries is more advantageous in some situations. Buyer-related activities, such as distribution to dealers, sales and advertising, and after-sale service, usually must take place close to buyers, making it necessary to physically locate the capability to perform such activities in every country market where a global firm has major customers. Dispersing activities to many locations is also competitively important when high transportation costs, diseconomies of large size, and trade barriers make it too expensive to operate from a central location or to hedge against the risks of fluctuating exchange rates and adverse political developments.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness. Topic: Using International Operations to Improve Overall Competitiveness
43. 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. when 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); (2) supply interruptions (due to strikes, mechanical failures, or transportation delays); or (3) adverse political developments.
E. All of these choices are correct.
Dispersing an internal process across many countries is more advantageous in some situations. Buyer-related activities, such as distribution to dealers, sales and advertising, and after-sale service, usually must take place close to buyers, making it necessary to physically locate the capability to perform such activities in every country market where a global firm has major customers. Dispersing activities to many locations is also competitively important when high transportation costs, diseconomies of large size, and trade barriers make it too expensive to operate from a central location or to hedge against the risks of fluctuating exchange rates and adverse political developments.
AACSB: Analytical Thinking
7-40
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness.
Topic: Using International Operations to Improve Overall Competitiveness
44. 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 choices are correct.
Dispersing an internal process across many countries is more advantageous in some situations. Buyer-related activities, such as distribution to dealers, sales and advertising, and after-sale service, usually must take place close to buyers, making it necessary to physically locate the capability to perform such activities in every country market where a global firm has major customers. Dispersing activities to many locations is also competitively important when high transportation costs, diseconomies of large size, and trade barriers make it too expensive to operate from a central location or to hedge against the risks of fluctuating exchange rates and adverse political developments.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness.
Topic: Using International Operations to Improve Overall Competitiveness
7-41
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45. 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 where 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 choices are correct.
Cross-border coordination contributes to a competitive advantage for a global competitor by: (1) allowing production to be shifted from a plant in one country to a plant in another to take advantage of exchange rate fluctuations and to respond to changing wage rates, energy costs, or changes in tariffs and quotas; (2) allowing knowledge gained in one location to be transferred to operations in other countries; (3) shifting workloads from where they are unusually heavy to locations were personnel are underutilized; and (4) accelerating product development and enhancing innovation by globally linking and coordinating the scattered R&D departments of a multinational company.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness.
Topic: Using International Operations to Improve Overall Competitiveness
46. 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.
An example of cross-border coordination is shifting production from a plant in one country to a plant in another to take advantage of exchange rate fluctuations and to respond to changing wage rates, energy costs, or changes in tariffs and quotas.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-05 Understand how multinational companies are able to use international operations to improve overall competitiveness.
Topic: Using International Operations to Improve Overall Competitiveness
7-42
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47. 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 compared 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.
Companies racing for global leadership have to consider competing in developing-economy markets such as China, India, Brazil, Indonesia, Thailand, Poland, Russia, and Mexico countries where the business risks are considerable but where the opportunities for growth are huge.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-06 Gain an understanding of the unique characteristics of competing in developing-country markets. Topic: Strategies for Competing in the Markets of Developing Countries
48. 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.
Among the strategy options for tailoring a company's strategy to fit the sometimes unusual or challenging circumstances presented in developing-country markets are the following: (1) prepare to compete on the basis of low price, (2) modify aspects of the company's business model or strategy to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding), (3) try to change the local market to better match the way the company does business elsewhere, and (4) stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances. Given the need for patience, developing a short-term strategy in this situation is illogical and is not among the strategy options for competing in emerging economies.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 07-06 Gain an understanding of the unique characteristics of competing in developing-country markets. Topic: Strategies for Competing in the Markets of Developing Countries
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49. 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 choices are correct.
Among the strategy options for tailoring a company's strategy to fit the sometimes unusual or challenging circumstances presented in developing-country markets are the following: (1) prepare to compete on the basis of low price, (2) modify aspects of the company's business model or strategy to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding), (3) try to change the local market to better match the way the company does business elsewhere, and (4) stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-06 Gain an understanding of the unique characteristics of competing in developing-country markets. Topic: Strategies for Competing in the Markets of Developing Countries
50. Which of the following is not a strategic option companies should consider in tailoring their strategy to fit circumstances of emerging country markets?
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. Enter only those emerging markets that provide profit sanctuaries by offering opportunities for offensive strategies, such as preemptive strikes.
E. All of these choices are correct.
Among the strategy options for tailoring a company's strategy to fit the sometimes unusual or challenging circumstances presented in developing-country markets are the following: (1) prepare to compete on the basis of low price, (2) modify aspects of the company's business model or strategy to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding), (3) try to change the local market to better match the way the company does business elsewhere, and (4) stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-06 Gain an understanding of the unique characteristics of competing in developing-country markets. Topic: Strategies for Competing in the Markets of Developing Countries
7-44
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Short Answer Questions
51. Briefly identify the major reasons a company may choose to expand outside its domestic market.
Answers may vary.
Feedback: A company may opt to expand outside its home country for a variety of reasons, including: (1) the ability to gain access to new customers; (2) to achieve lower costs and enhance competitiveness; (3) to leverage core competencies in new markets; (4) to gain access to resources and capabilities (labor, resources, technology, distribution networks) in foreign markets; and (5) to spread business risk across a wider market base.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 07-01 Develop an understanding of the primary reasons companies choose to compete in international markets.
Topic: Why Companies Expand into International Markets?
52. What are the primary country differences that shape strategy choices in international markets?
Answers may vary.
Feedback: Heterogeneous market conditions across countries influence a company's strategy choices in international markets. These conditions include: (1) buyer tastes, differing population sizes, income levels, market growth rates, and other demographic factors that influence product customization decisions; (2) wage rates, worker productivity, energy costs, environmental regulations, tax rates, and inflation rates that influence location choices; and (3) government policies, economic risk, and political risk that make a country's business climate attractive or unattractive.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-02 Learn why and how differing market conditions across countries influence a company's strategy choices in international markets.
Topic: Factors that Shape Strategy Choices in International Markets
7-45
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