lOMoARcPSD|15703194
Chapter 08 International Strategy
Strategic Management (Carleton University)
Studocu is not sponsored or endorsed by any college or university
Downloaded by Linh B?o (baolinhsjk@gmail.com)
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
True / False
1. In place of relatively stable and predictable domestic markets, firms across the globe find that they are competing in
relatively unstable and unpredictable global markets.
a. True
b. Fals
e
ANSWER: True
2. After a firm decides to compete internationally, it must select its strategy and choose a mode of entry into international
markets.
a. True
b. Fals
e
ANSWER: True
3. Because there are still several industrial and consumer markets in which only domestic firms compete, many firms do
not have to be able to compete internationally.
a. True
b. Fals
e
ANSWER: Fals
e
4. One reason why firms pursue international opportunities is to extend the product's life cycle.
a. True
b. Fals
e
ANSWER: True
5. A reason that firms use international strategies is to secure needed resources, especially minerals and energy.
a. True
b. Fals
e
ANSWER: True
6. In some industries, technology drives globalization because the economies of scale necessary to reduce costs cannot be
met by competing in domestic markets alone.
a. True
b. Fals
e
ANSWER: True
7. A major incentive for the use of international strategy by French-based Carrefour Group is the potential for large
demand for goods and services from emerging markets such as China and India.
a. True
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 1
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
b. Fals
e
ANSWER: True
8. The three basic benefits of international strategies are 1) increased market size; 2) increased economies of scale and
learning; and 3) development of competitive advantages through location.
a. True
b. Fals
e
ANSWER: True
9. Rivals Airbus and Boeing have multiple manufacturing facilities and outsource activities partly for the purpose of
developing economies of scale as a source of being able to create value for customers.
a. True
b. Fals
e
ANSWER: True
10. As an indication of the importance of economies of scale, Ford Motor Company runs a single global business
developing cars and trucks that can be built and sold through the world.
a. True
b. Fals
e
ANSWER: True
11. Coca Cola and PepsiCo are examples of firms that have found it unnecessary to aggressively pursue international
strategies because of extensive growth opportunities available in the U.S. market.
a. True
b. Fals
e
ANSWER: Fals
e
12. Multinational firms have many opportunities to learn from their experiences in international markets, but they must
have a strong R&D system to absorb the knowledge.
a. True
b. Fals
e
ANSWER: True
13. Cultural differences affect location advantages in that business transactions are less difficult for a firm to complete
when there is a strong match among the cultures with which the firm is involved.
a. True
b. Fals
e
ANSWER: True
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 2
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
14. Location advantages are influenced by costs of production, access to natural resources and critical supplies, as well as
the needs of customers, but not culture.
a. True
b. Fals
e
ANSWER: Fals
e
15. The three corporate-level international strategies are cost leadership, differentiation, and focus.
a. True
b. Fals
e
ANSWER: Fals
e
16. When a firm initially pursues an international business-level strategy, the resources and capabilities established in the
home country frequently allow the firm to pursue the strategy into markets located in other countries.
a. True
b. Fals
e
ANSWER: True
17. Michael Porter's Determinants of National Advantage describe factors associated with the firm's domestic
environment that contribute to its dominance in a particular global industry.
a. True
b. Fals
e
ANSWER: True
18. Both the size and the nature of a country's domestic demand for a particular industry's good or service are important in
Porter's determinants of national advantage.
a. True
b. Fals
e
ANSWER: True
19. Having substantial supplies of critical basic natural resources is a necessary condition for a country to support
businesses that can successfully compete in international markets.
a. True
b. Fals
e
ANSWER: Fals
e
20. South Korea's success in international markets is primarily a result of its abundant natural resources.
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 3
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
a. True
b. Fals
e
ANSWER: Fals
e
21. Italy has become the leader in the shoe industry because of related and supporting industries such as a well-established
leather-processing industry that provides the leather needed to construct shoes and related products.
a. True
b. Fals
e
ANSWER: True
22. A firm based in a country with a national competitive advantage is not guaranteed success as it implements its chosen
international business-level strategy. Instead, the actual strategic choices managers make may be the most compelling
reasons for success or failure.
a. True
b. Fals
e
ANSWER: True
23. A multi-domestic strategy is an international strategy in which a firm's home office determines the strategies business
units are to use in each region.
a. True
b. Fals
e
ANSWER: Fals
e
24. A major advantage of multi-domestic strategies is the ability to customize products and services for the specific
market, although this sacrifices economies of scale.
a. True
b. Fals
e
ANSWER: True
25. The firm using a global strategy seeks to develop economies of scale as it produces the same or virtually the same
products for distribution to customers throughout the world who are assumed to have similar needs.
a. True
b. Fals
e
ANSWER: True
26. The global strategy offers greater opportunities to take innovations developed at the corporate level or in one market
and apply them to other markets.
a. True
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 4
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
b. Fals
e
ANSWER: True
27. Research suggests that the performance of the global strategy is enhanced if it deploys in areas where regional
integration across countries is occurring.
a. True
b. Fals
e
ANSWER: True
28. A transnational strategy is an international strategy in which the firm seeks to achieve both global efficiency and local
responsiveness.
a. True
b. Fals
e
ANSWER: True
29. A transnational strategy is difficult to use because of its conflicting goals.
a. True
b. Fals
e
ANSWER: True
30. Even if effectively implemented, the transnational strategy often produces lower performance than does the
implementation of either the multi-domestic or global strategies.
a. True
b. Fals
e
ANSWER: Fals
e
31. The growing number of global competitors heightens the requirements to keep costs down and there is the desire for
more specialized products to meet customer needs. These two pressures make transnational strategies increasingly
necessary.
a. True
b. Fals
e
ANSWER: True
32. A company that chooses a truly global corporate-level strategy assumes that the liability of foreignness will be
minimal.
a. True
b. Fals
e
ANSWER: True
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 5
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
33. Four types of distances are associated with the liability of foreignness: cultural, administrative, geographic, and
economic.
a. True
b. Fals
e
ANSWER: True
34. The "regionalization" environmental trend means that firms can focus on a region (customization) but also have some
standardization or sharing within the region.
a. True
b. Fals
e
ANSWER: True
35. By choosing a region where markets are more similar, the firm may be able to better understand those markets and
cater to their needs, but also achieve economies through sharing of resources.
a. True
b. Fals
e
ANSWER: True
36. International associations such as the European Union, the Organization of American States, and the North American
Free Trade Association encourage regionalization of competition rather than globalization.
a. True
b. Fals
e
ANSWER: True
37. Exporting and licensing are the most appropriate ways for smaller firms to first enter international markets.
a. True
b. Fals
e
ANSWER: True
38. The high cost of transportation, expense of tariffs, and loss of control are three disadvantages of exporting.
a. True
b. Fals
e
ANSWER: True
39. Evidence suggests that, in general, using an international cost leadership strategy when exporting to developed
countries has the most positive effect on firm performance while using an international differentiation strategy with larger
scale when exporting to emerging economies leads to the greatest amounts of success.
a. True
b. Fals
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 6
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
e
ANSWER: True
40. Because of the lack of protection of intellectual property in some foreign countries, licensing arrangements are one of
the best ways for a firm to protect its technology from being appropriated by potential competitors.
a. True
b. Fals
e
ANSWER: Fals
e
41. Although licensing is the least costly method to enter a foreign market, its disadvantages include high costs of
transportation and low control over the marketing and distribution of goods.
a. True
b. Fals
e
ANSWER: Fals
e
42. Strategic alliances tend to increase the risk associated with international expansion for the U.S. partner because of the
greater dependence on the foreign firm.
a. True
b. Fals
e
ANSWER: Fals
e
43. Establishing a wholly-owned subsidiary provides the quickest access to a new market.
a. True
b. Fals
e
ANSWER: Fals
e
44. Research suggests that wholly owned subsidiaries and expatriate staff are inappropriate for service industries because
those industries require close contact with customers, high levels of professional skills, specialized know-how, and
customization.
a. True
b. Fals
e
ANSWER: Fals
e
45. The greenfield venture option is useful when control of proprietary technology is important in an international
expansion.
a. True
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 7
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
b. Fals
e
ANSWER: True
46. When the country risk is high, firms prefer to enter with a greenfield investment rather than a joint venture.
a. True
b. Fals
e
ANSWER: Fals
e
47. While there are multiple means of entering new international markets, firms should use one method consistently with
all of its various products and across its different markets in order to reduce administrative complexity.
a. True
b. Fals
e
ANSWER: Fals
e
48. Export, licensing, and the strategic alliance entry modes are all appropriate for early market development.
a. True
b. Fals
e
ANSWER: True
49. Acquisitions, greenfield ventures, and sometimes joint ventures are appropriate when firms want to establish a strong
presence in an international market.
a. True
b. Fals
e
ANSWER: True
50. International diversification can help to reduce a firm's overall risk through the stabilization of returns.
a. True
b. Fals
e
ANSWER: True
51. Research has shown that, as international diversification increases, firms' returns decrease initially but then increase
quickly as firms learn to manage international expansion.
a. True
b. Fals
e
ANSWER: True
52. International diversification is a strategy through which a firm expands the sale of its goods and services across
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 8
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
borders of global regions and countries into a potentially large number of geographic locations of markets. Instead of
entering one or a few markets, international diversification means that the firm enters multiple markets.
a. True
b. Fals
e
ANSWER: True
53. The chief risks in the international environment are political and cultural.
a. True
b. Fals
e
ANSWER: Fals
e
54. Fluctuation in the value of different currencies is a major economic risk associated with international diversification.
a. True
b. Fals
e
ANSWER: True
55. A U.S. manufacturer of pigments for household paint that exports about 40 percent of its production to European
markets will find its sales will be harmed by a weak dollar.
a. True
b. Fals
e
ANSWER: Fals
e
56. An increase in the value of the U.S. dollar is an example of an economic risk in that it can reduce the value of U.S.
multinational firms' international assets and earnings in other countries.
a. True
b. Fals
e
ANSWER: True
57. Some of the costs incurred by firms pursuing international diversification may derive from higher coordination
expenses, trade barriers, and lack of familiarity with local cultures.
a. True
b. Fals
e
ANSWER: True
58. Although leaders in Russia have tried to reassure potential investors about their property rights, political risks in the
form of weak laws and commonplace government corruption make firms leery of investing in Russia.
a. True
b. Fals
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 9
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
e
ANSWER: True
59. The amount of diversification in a firm's international operations that can be managed varies from company to
company and is affected by managers' abilities to deal with ambiguity and complexity.
a. True
b. Fals
e
ANSWER: True
Multiple Choice
60. International strategy refers to a(n):
a. action plan pursued by American companies to compete against foreign companies
operating in the United States.
b.strategy through which the firm sells products in markets outside the firm's domestic
market.
c. political and economic action plan developed by businesses and governments to cope
with global competition.
d.strategy American firms use to dominate international markets.
ANSWER: b
61. Raymond Vernon states that the classic rationale for international diversification is to:
a. pre-emptively dominate world markets before foreign companies can establish
dominance.
b. avoid domestic governmental regulation.
c. extend the product's life cycle.
d. avoid international governmental regulation.
ANSWER: c
62. Which of the following is NOT an incentive for firms to become multinational?
a. To gain access to consumers in emerging markets
b. To gain easier access to raw materials
c. To avoid high domestic taxation on corporate income
d. Opportunities to integrate operations on a global
scale
ANSWER: c
63. The increased pressures for global integration of operations have been driven mostly by:
a. new low-cost entrants.
b. increasing demand for similar
products.
c. increased levels of joint ventures.
d. the rise of governmental regulation.
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 10
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
ANSWER: b
64. The benefits of expanding into international markets include each of the following opportunities EXCEPT:
a. increasing the size of the firm's potential markets.
b. economies of scale and learning.
c. location advantages.
d. favorable tax concessions and economic incentives by home-country
governments.
ANSWER: d
65. U.S. companies moving into the international market need to be sensitive to the need for local country or regional
responsiveness because of:
a. increasing rejection of American culture across much of the world.
b. the sophistication of the international consumer because of the Internet.
c. consumer needs, political and legal structures, and social norms vary by country.
d. the increasing loss of economies of scale.
ANSWER: c
66. Which of the following is NOT a factor pressuring companies for local responsiveness?
a. Differences in employment laws
b. Customization due to cultural differences
c. Government pressure for firms to use local sources for
procurement
d. Availability of low labor costs
ANSWER: d
67. U.S. cola companies entered the global market because of:
a. limited growth opportunities in their domestic market.
b. lower labor costs in the emerging markets.
c. economies of scale that offset research and development costs.
d. an increase in the return on investment from their U.S. bottling
plants.
ANSWER: a
68. Moving into international markets is a particularly attractive strategy to firms whose domestic markets:
a. demand a differentiation strategy for success.
b. are limited in opportunities for growth.
c. have developed unfriendly business attitudes toward the industry.
d. have too much regulation.
ANSWER: b
69. Working in multiple international markets can provide firms with __________ perhaps even in terms of __________.
a. location advantages; larger markets
b. research and development activities; larger markets
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 11
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
c. new learning opportunities; research and development
activities
d. economies of scale and learning; larger markets
ANSWER: c
70. Firms able to standardize the processes used to produce, sell, distribute, and service their products across country
borders enhance their ability to:
a. learn how to continuously reduce costs while increase the value of their
products.
b. increase investment in research and development.
c. access to a low-cost labor force in the host market.
d. mitigate cultural differences.
ANSWER: a
71. Firms with core competencies that can be exploited across international markets are able to:
a. achieve synergies and produce high-quality goods at lower costs.
b. enter new markets more quickly.
c. enhance their market image and brand loyalty among local consumers.
d. meet local government requirements more quickly than their international
competitors.
ANSWER: a
72. The location advantages associated with locating facilities in other countries can include all of the following EXCEPT:
a. low-cost labor.
b. access to critical supplies.
c. access to customers.
d. evasion of host country governmental
regulations.
ANSWER: d
73. Factors of production in Porter's model of international competitive advantage include all of the following EXCEPT:
a. labor.
b. capital.
c. infrastructure
.
d. technology.
ANSWER: d
74. In Porter's model, if a country has both ________ and __________ production factors, it is likely to serve an industry
well by spawning strong home-country competitors that can also be successful global competitors.
a. basic; advanced
b. advanced;
generalized
c. basic; generalized
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 12
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
d. advanced; specialized
ANSWER: d
75. Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up
local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national
advantage?
a. Factors of production
b. Demand conditions
c. Related and supporting industries
d. Firm strategy, structure, and rivalry
ANSWER: a
76. A fundamental reason for a country's development of advanced and specialized factors of production is often its:
a. lack of basic
resources.
b. monetary wealth.
c. small workforce.
d. protective tariffs.
ANSWER: a
77. The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT:
a. factors of production.
b. demand conditions.
c. political and economic institutions.
d. related and supporting industries.
ANSWER: c
78. Which pair of industries would NOT be considered as "related and supporting" under Porter's diamond model?
a. Japanese cameras and copiers
b. Italian leather-processing and shoes
c. U.S. computers and software
d. highway systems and the supply of debt
capital
ANSWER: d
79. In France, fine dressmaking and tailoring have been a tradition predating Queen Marie Antoinette. Cloth
manufacturers, design schools, craft apprenticeship programs, modeling agencies, and so forth, all exist to supply the
clothing industry. This is an example of the ____ in Porter's model.
a. strategy, structure, and rivalry among firms
b. related and supporting industries
c. demand conditions
d. factors of production
ANSWER: b
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 13
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
80. A large domestic market can provide the country's industries a chance at dominating the world market because:
a. they have been able to develop economies of scale at home.
b. they have access to abundant and inexpensive factors of production.
c. the related and supporting industries will have been developed.
d. the nation's culture and educational system will be adapted to producing the labor
force needed for the industry.
ANSWER: a
81. In addition to the four basic dimensions of Porter's "diamond" model, ____ may also contribute to the success or
failure of firms.
a. national work ethic
b. educational
requirements
c. government policy
d. national pride
ANSWER: c
82. All of the following are correct about what managers should know about firms based in a country with a national
competitive advantage EXCEPT:
a. success is not guaranteed as the firm implements its chosen international businesslevel strategy.
b. the actual strategic choices made are most compelling reasons for success or failure.
c. success is guaranteed as the firm implements its chosen international business-level
strategy.
d. the determinants of national competitive advantage provide a foundation for a firm's
competitive advantages.
ANSWER: c
83. All of the following are international corporate-level strategies EXCEPT the ____ strategy.
a. multidomestic
b. universal
c. global
d. transnational
ANSWER: b
84. International corporate-level strategy focuses on:
a. the scope of operations through both product and geographic
diversification.
b. competition within each country.
c. economies of scale.
d. sophistication of monitoring and controlling systems.
ANSWER: a
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 14
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
85. Effectively implementing the ________ international corporate-level strategy often produces higher performance than
does implementing either the _______ or _________ strategies.
a. multi-domestic; global;
transnational
b. global; multi-domestic;
transnational
c. cost leadership; differentation; focus
d. transnational; multi-domestic;
global
ANSWER: d
86. A multi-domestic corporate-level strategy is one in which:
a. a corporation chooses not to compete internationally but where there are a number of
international competitors in the firm's local marketplace.
b.the firm produces a standardized product, but markets it differently in each country in
which it competes.
c. the firm customizes the product for each country in which it competes.
d.the firm competes in a number of countries, but it is centrally coordinated by the home
office.
ANSWER: c
87. A multi-domestic corporate-level strategy has ____ need for global integration and ____ need for local market
responsiveness.
a. low; low
b. low; high
c. high; low
d. high;
high
ANSWER: b
88. A global corporate-level strategy differs from a multi-domestic corporate-level strategy in that in a global strategy:
a. competitive strategy is dictated by the home office.
b. competitive strategy is decentralized and controlled by individual strategic business
units.
c. products are customized to meet the individual needs of each country.
d. the firm sells in multiple countries.
ANSWER: a
89. A global corporate-level strategy emphasizes:
a. differentiated products.
b. economies of scale.
c. sensitivity to local product preferences.
d. decentralizing control and limited
monitoring.
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 15
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
ANSWER: b
90. A global strategy:
a. is easy to manage because of common operating decisions across borders.
b. achieves efficient operations without sharing resources across country boundaries.
c. increases risk because decision making is centralized at the home office.
d. lacks responsiveness to local markets.
ANSWER: d
91. A global corporate-level strategy assumes:
a. efficiency and customization can be achieved simultaneously.
b. a rise in income levels across the world.
c. increasing levels of cultural differences among nations.
d. more standardization of products across country markets.
ANSWER: d
92. The transnational strategy is becoming increasingly necessary to compete in international markets for all the following
reasons EXCEPT:
a. the growing number of competitors heightens the requirements to keep costs down.
b.the desire for specialized products to meet consumers' needs.
c. differences in culture and institutional environments also require firms to adapt their
products and approaches to local environments.
d.it is easy to use.
ANSWER: d
93. In China, Starbucks is standardizing its operations while simultaneously decentralizing some decision-making
responsibility to local levels to meet customers' tastes. Starbucks is following the __________ international corporatelevel strategy.
a. transnational
b. global
c. differentiation
d. multidomestic
ANSWER: a
94. Increasingly, customers worldwide are demanding emphasis on local requirements and companies require efficiency
as global competition increases. This has triggered an increase in the number of firms using the ____ strategy.
a. multidomestic
b. transnational
c. universal
d. global
ANSWER: b
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 16
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
95. The two important environmental trends that influence a firm's choice and use of international corporate-level
strategies are _________ and __________.
a. culture; geographic scope
b. cost; quality
c. regionalization; globalization
d. liability of foreignness;
regionalization
ANSWER: d
96. Disney suffered lawsuits in France at Disneyland Paris as a result of the lack of fit between its transferred personnel
policies and the French employees charged to enact them. This is an example of:
a. the effects of regionalization.
b. the risks of a multi-domestic strategy.
c. the liability of foreignness.
d. the effect of demand conditions.
ANSWER: c
97. _________ is the set of costs associated with unfamiliar operating environments; economic, administrative and
cultural differences; and the challenges of coordination over distances.
a. Transnational risk
b. Regionalization
c. Liability of
foreignness
d. International risk
ANSWER: c
98. Associations such as the European Union, Organization of American States, and the North American Free Trade
Association, encourage:
a. global strategies.
b. domestication.
c. regional
strategies.
d. nationalization.
ANSWER: c
99. A firm may narrow its focus to a specific region of the world:
a. because that market is most different from its domestic market and so represents an
unexploited "greenfield opportunity" for its products.
b.in order to obtain greater economies of scale.
c. so that it can better understand the cultures, legal and social norms, and other factors
that are important for effective competition in those markets.
d.to take advantage of limited protections of intellectual property so that it can
manufacture innovative products without restrictions.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 17
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
100. Skaredykat Inc. is considering initial expansion beyond its home market. The firm has decided not to enter markets
that differ greatly from its home market, instead expanding within the twelve-nation region that includes its home country.
Which one of these is true?
a. The firm is not engaging in international trade.
b. The firm is using a regional approach to international expansion.
c. The firm will not be able understand the cultures, legal, and social norms of this
market.
d. Skaredykat is too afraid to implement an international strategy.
ANSWER: b
101. Most firms enter international markets sequentially, introducing their ____ first.
a. most innovative products
b. largest and strongest lines of business
c. most generic products, which will be more likely to generate universal product
demand,
d. products customized to the region
ANSWER: b
102. A U.S. manufacturer of adaptive devices for persons with disabilities is considering expanding internationally. It is a
fairly small company, but it is looking for growth opportunities. This company should primarily consider the option of:
a. licensing.
b. exporting.
c. a strategic alliance.
d. a greenfield
venture.
ANSWER: b
103. The choices that a firm has for entering the international market include all of the following EXCEPT:
a. exporting.
b. licensing.
c. leasing.
d. acquisition
.
ANSWER: c
104. The problems associated with exporting include:
a. merging corporate cultures.
b. a partner's incompatibility.
c. difficulty in negotiating relationships.
d. high transportation costs and the expense of tariffs.
ANSWER: d
105. Which of the following is NOT a disadvantage associated with exporting?
a. Potential loss of proprietary technologies
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 18
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
b. High transportation costs
c. Loss of control over distribution activities
d. Tariffs imposed by local governments
ANSWER: a
106. A licensing agreement:
a. results in two firms agreeing to share the risks and the resources of a new venture.
b. is best way to protect proprietary technology from future competitors.
c. allows a foreign firm to purchase the rights to manufacture and sell a firm's products
within a host country.
d. can be greatly impacted by currency exchange rate fluctuations.
ANSWER: c
107. Which of the following is NOT a typical disadvantage of licensing?
a. Little control over the marketing of the products
b. Licensees may develop a competitive product after the license expires
c. Lower potential returns than the use of exporting or strategic
alliances
d. Incompatibility of the licensing partners
ANSWER: d
108. All of the following are reasons why firms use international strategic alliances EXCEPT:
a. sharing of risks and resources.
b. alliances facilitate the development of new capabilities.
c. learning new competencies particularly those related to technology.
d. strategic alliances are easy to manage.
ANSWER: d
109. One of the primary reasons for failure of cross-border strategic alliances is:
a. the incompatibility of the partners.
b. conflict between legal and business
systems.
c. security concerns and terrorism.
d. high debt financing.
ANSWER: a
110. If conflict in a strategic alliance or joint venture is not manageable, a(n) _______may be a better option.
a. licensing strategy
b. exporting strategy
c. acquisition
d. new wholly owned subsidiary
ANSWER: c
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 19
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
111. Which of the following is NOT a disadvantage of international acquisitions?
a. They are very expensive and often require debt financing.
b. The acquiring firm has to deal with the regulatory requirements of a host country.
c. Merging the acquired and acquiring firm is difficult.
d. It is the slowest way to enter a new market.
ANSWER: d
112. The means of entry into international markets that offers the greatest control is:
a. licensing.
b. acquisitions.
c. joint ventures.
d. greenfield
ventures.
ANSWER: d
113. Which of the following is an advantage associated with greenfield ventures?
a. Governmental support and subsidies in the host
country
b. The lower cost of this type of venture
c. The level of control over the firm's operations
d. The lower level of risks involved
ANSWER: c
114. If intellectual property rights in an emerging economy are not well-protected, the number of firms in the industry is
rapidly growing, and the need for global integration is high, ____ is the preferred entry mode.
a. exporting
b. strategic alliance
c. a joint venture or wholly owned
subsidiary
d. licensing
ANSWER: c
115. The decision of what entry mode to use is primarily based on all of the following factors EXCEPT:
a. the industry's competitive conditions.
b. the country's situation and government policies.
c. the worldwide economic situation.
d. the firm's unique set of resources, capabilities, and core
competencies.
ANSWER: c
116. When a firm INITIALLY becomes internationally diversified, its returns:
a. remain stable.
b. decrease.
c. become more variable.
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 20
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
d. increase.
ANSWER: b
117. An international diversification strategy is one in which a firm:
a. expands into nearby markets.
b. expands into a potentially large number of geographic locations and markets.
c. expands into one or a few markets.
d. acquires a firm in a foreign country.
ANSWER: b
118. Internationally diversified firms:
a. earn greater returns on their innovations through larger or more numerous markets.
b. are more likely to produce below-average returns for investors in the long run.
c. may need to decrease international activities when domestic profits are poor.
d. are generally unable to achieve high levels of synergy because of differences in
cultures.
ANSWER: a
119. Bunyan Heavy Equipment, a U.S. firm, is investigating expanding into Russia using a greenfield venture. The
committee researching this project has delivered a negative report. The MAIN concern of the committee is probably:
a. loss of intellectual property due to Russian piracy.
b. the fluctuation in the value of the ruble.
c. the numerous and conflicting legal authorities in Russia.
d. Russia's recent actions to gain state control of private firms'
assets.
ANSWER: d
120. Terrorism creates an economic risk for firms, which:
a. reduces the amount of investment foreign companies will make in a country perceived
to be terror-prone.
b.is created by governmental bans on doing business with terrorist regimes.
c. is offset by the above-average returns for firms that have learned how to operate in
such an environment.
d.is absorbed by firms that are highly geographically diversified and that operate in both
secure and insecure locations.
ANSWER: a
121. Arkadelphia Polymers, Inc., earns 60 percent of its revenue from exports to Europe and Asia. The CEO of the
company would be:
a. concerned if the value of the dollar strengthened.
b.pleased if the value of the dollar strengthened.
c. unconcerned about the fluctuation in the value of the dollar because the company is
widely diversified geographically.
d.likely to consider moving to international strategic alliances or acquisitions if the value
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 21
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
of the dollar fell and remained low.
ANSWER: a
122. The positive results associated with increasing international diversification have been shown to:
a. continue as the level of international diversification increases.
b. level off and become negative as diversification increases past some point.
c. become negative quickly.
d. be centered in only one or two industries.
ANSWER: b
123. All of the following complicate the implementation of an international diversification strategy EXCEPT:
a. widespread multilingualism.
b. increased costs of coordination between business
units.
c. cultural diversity.
d. logistical costs.
ANSWER: a
Essay
124. What are the incentives for firms to use international strategies? What are the three basic benefits firms can derive by
moving into international markets?
ANSWER One reason is to extend the life cycle of the firm's products. Gaining access to needed
:
and potentially scarce resources is another reason. There is also pressure for global
integration of operations, driven by growing universal product demand. Companies
also want to take advantage of opportunities to better use rapidly developing
technologies such as the Internet and mobile applications, which permit greater
integration of trade, capital, and culture. Finally, the potential of large demand for
goods and services for people in emerging markets is an important incentive.
When firms successfully move into international markets, they can experience:
increased market size, economies of scale and learning, and location advantages.
125. What are the three basic benefits of international strategies?
ANSWER Firms derive three basic benefits by successfully using international strategies: (1)
:
increased market size, (2) economies of scale and learning, and (3) advantages of
location. Increased market size is achieved by expansion beyond the firm's home
country. International expansion increases the number of potential customers a firm
may serve. Starbucks is a firm that has increased its market size through international
expansion (Opening Case). Other firms such as Coca Cola and PepsiCo have moved
into international markets primarily because of limited growth opportunities in their
domestic markets. Economies of scale and learning is a second benefit. Leveraging a
technology beyond the home country allows for more units to be sold and initial
investments recovered more quickly. Rivals Airbus and Boeing have multiple
manufacturing facilities and outsource some activities in order to gain scale
advantages. Lastly, advantages of location can be realized through internationalization.
These advantages include access to low-cost labor, critical resources, or customers.
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 22
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
126. Discuss the three international corporate-level strategies. On what factors are these strategies based?
ANSWER International corporate strategy focuses on the scope of a firm's operations through
:
both product and geographic diversification. The three basic international corporatelevel strategies vary on the need for local responsiveness to the market and the need for
global integration. The multi-domestic strategy focuses on competition within each
country in which the firm operates. Firms employing a multi-domestic strategy
decentralize strategic and operating decisions to the strategic business units operating
in each country so business units can customize their goods and services to the local
market. The use of global integration in this strategy is low. The global strategy
assumes more standardization of product demand across country boundaries.
Therefore, competitive strategy is centralized and controlled by the home office,
placing high emphasis on global integration of operations. The strategic business units
in each country are interdependent and the home office integrates these businesses. The
firm offers standardized products across country markets. It emphasizes economies of
scale and the opportunity to use innovations developed in one nation to other markets.
The transnational strategy seeks to achieve both global efficiency (through global
integration) and local responsiveness. This strategy is difficult to implement. One goal
requires global coordination while the other requires local flexibility. Flexible
coordination builds a shared vision and individual commitment through an integrated
network. The effective implementation of the transnational strategy often produces
higher performance than either of the other corporate-level strategies.
127. Identify and describe the modes of entering international markets. What are their advantages and disadvantages?
ANSWER Firms may enter international markets in any of five ways: exporting, licensing,
:
forming strategic alliances, making acquisitions, and establishing new, wholly owned
subsidiaries (greenfield ventures). Most firms, particularly small ones, begin with
exporting (marketing and distributing their products abroad). This involves high
transportation costs and possibly tariffs. An exporter has less control over the
marketing and distribution of the product than in other methods of entering the
international market. In addition, the exporter must pay the distributor or allow the
distributor to add to the product price in order to offset its costs and earn a profit. In
addition, the strength of the dollar against foreign currencies is a constant uncertainty.
But, the advantages are that the company does not have the expense of establishing
operations in the host countries. The Internet makes exporting easier than in previous
times. Licensing (selling the manufacturing and distribution rights to a foreign firm) is
also popular with smaller firms. The licenser is paid a royalty on each unit sold by the
licensee. The licensee takes the risks and makes the financial investments in
manufacturing and distributing the product. It is the least costly way of entering
international markets. It allows a firm to expand returns based on a previous
innovation. But there are disadvantages. Licensing provides the lowest returns, because
they must be shared between the licensee and the licensor. Licensing gives the licenser
less control over the manufacturing and marketing process. There is the risk that the
licensee will learn the technology and become a competitor when the original license
expires. If the licenser later wishes to use a different ownership arrangement, the
licensing arrangement make create some inflexibility. Strategic alliances involve
sharing risks and resources with another firm in the host country. The host country
partner knows the local conditions; the expanding firm has the technology or other
capabilities. Both partners typically enter an alliance in order to learn new capabilities.
The partnership allows the entering firm to gain access to a new market and avoid
paying tariffs. The host-country firm gains access to new technology and innovative
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 23
lOMoARcPSD|15703194
Name
:
Clas
s:
Dat
e:
Chapter 08: International Strategy
products. Equity-based alliances are more likely to produce positive gains. Alliances
work best in the face of high uncertainty and where cooperation is needed between
partners and strategic flexibility is important. But, many alliances fail due to
incompatibility and conflict between the partners. Cross-border acquisitions provide
quick access to a new market, but they are expensive and involve complex
negotiations. Cross-border acquisitions have all the problems of domestic acquisitions
with the complication of a different culture, legal system and regulatory requirements.
Acquisitions are expensive and usually involve debt-financing. The most expensive
and risky means of entering a new international market is through the establishment of
a new, wholly owned subsidiary or greenfield venture. Alternatively, it provides the
advantages of maximum control for the firm and, if successful, potentially the greatest
returns as well. This alternative is suitable for firms with strong intangible capabilities
and/or proprietary technology. The risks are high because of the challenges of operating
in an unfamiliar environment. The company must build new manufacturing facilities,
establish distribution networks, and learn and implement new marketing strategies.
128. Discuss the effect of international diversification on a firm's returns.
ANSWER Research shows that returns vary as the level of diversification increases. At first,
:
returns decrease, then as the firm learns to manage the diversification, returns increase.
But, as diversification increases past some point, returns level off and become negative.
Firms that are broadly diversified in international markets usually receive the most
positive stock returns, especially when they diversify geographically into core business
areas. International diversification can lead to economies of scale and experience,
location advantages, increased market size, and the potential to stabilize returns (which
reduces the firm's overall risk). International diversification improves a firm's ability to
increase returns from innovation before competitors can overcome the initial
competitive advantage. In addition, as firms move into international markets, they are
exposed to new products and processes that stimulate further innovation. The amount
of international diversification that can be managed varies from firm to firm and
according to the abilities of the firm's managers. The problems of central coordination
and integration are mitigated if the firm diversifies into more friendly countries that are
geographically and culturally close.
129. Identify and describe the major risks of international diversification.
ANSWER International diversification carries multiple risks. The major risks are political and
:
economic. Political risks are related to governmental instability and to war. Instability
in a government creates economic risks and uncertainty created by government
regulation. Governmental instability can result in the existence of many potentially
conflicting legal authorities, corruption, and the risk of nationalization of company
assets. Economic risks are related to political risks. Economic risks include the
increased trend of counterfeit products and the lack of global policing of these
products. Another economic risk is the perceived security risk of a foreign firm
acquiring firms that have key natural resources or firms that may be considered
strategic in regard to intellectual property. In addition, differences in and fluctuations of
the value of different currencies is another economic risk. The security risk created by
terrorism prevents U.S. firms from investing in some regions. The relative strength or
weakness of the dollar affects international firms' competitiveness in certain markets
and their returns.
Copyright Cengage Learning. Powered by Cognero.
Downloaded by Linh B?o (baolinhsjk@gmail.com)
Page 24