4700- Chapter 10

Because keeping cost low is critical to IKEA’s value innovation, it switched from a(n)

A.
transnational strategy to a multidomestic strategy.

B.
transnational strategy to a global-standardization strategy.

C.
international strategy to a multidomestic strategy.

D.
international strategy to a global-standardization strategy.

D. international strategy to a global-standardization strategy.

Although demand for IKEA’s low-cost furnishings has increased, its annual store growth has slowed to fewer than ten new stores a year. Why has this happened?

A.
IKEA has failed to hire top designers for its furniture.

B.
IKEA’s global supply chain has become bottlenecked.

C.
IKEA has had a revolving door of CEOs for the past 20 years.

D.
IKEA’s holding companies are all located in Sweden.

B. IKEA’s global supply chain has become bottlenecked.

As a result of globalization, the

A.
economies around the world are becoming more independent.

B.
cultural distance between countries is increasing.

C.
cost of doing business around the world is increasing.

D.
world’s market economies are becoming more integrated.

D. world’s market economies are becoming more integrated.

Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm’s shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a

A.
nonprofit organization.

B.
nationalized firm.

C.
sole proprietorship.

D.
multinational enterprise.

D. multinational enterprise.

European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it is employing this strategy?

A.
to take advantage of the high labor costs in the southern United States

B.
to take advantage of the high cost of living in the southern United States

C.
to take advantage of the low impact of globalization in the United States

D.
to take advantage of lower taxes in the southern United States

D. to take advantage of lower taxes in the southern United States

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved

A.
exporting goods.

B.
making foreign direct investments.

C.
making foreign institutional investments.

D.
licensing production and distribution.

A. exporting goods.

Which of the following is an observable feature in the Globalization 3.0 stage?

A.
Knowledge flow between the local replicas of the multinational enterprises and their U.S. headquarters is limited.

B.
Only sales and distribution functions of a multinational enterprise are located in a few key countries.

C.
Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.

D.
Firms have reorganized from a global enterprise with different centers of expertise to a multinational company with self-contained operations in a few selected countries.

C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.

Which of the following is a feature of the Globalization 2.0 stage?

A.
Huge investments in fiber-optic cable networks around the world enabled companies to operate as global-collaboration networks.

B.
Only sales and distribution operations took place overseas, while all the important business functions were located in the home country.

C.
Two-way knowledge flow between the local subsidiaries and their U.S. headquarters was strong.

D.
Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

A trend observed during the Globalization 3.0 stage involves

A.
countries around the globe becoming more self-sufficient and independent.

B.
multinational companies organizing as global-collaboration networks.

C.
privately-owned firms getting nationalized.

D.
world’s market economies becoming less integrated.

B. multinational companies organizing as global-collaboration networks.

How will an increase in coordinated economic and political integration between countries affect the world economy?

A.
The world’s market economies will become self-sufficient and independent.

B.
There will be gains in social welfare and living standards across the globe.

C.
The cost of labor will further decline in emerging economies.

D.
There will be a movement away from global-collaboration networks among multinational enterprises (MNEs).

B. There will be gains in social welfare and living standards across the globe

How has China been affected by its one-child-per-family policy and appreciation of its currency?

A.
The purchasing power of its workforce has reduced.

B.
The value added to production has reduced.

C.
The standard of living within the economy has lowered.

D.
The country’s advantage in low-cost manufacturing has reduced.

D. The country’s advantage in low-cost manufacturing has reduced.

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer

A.
higher quality for lower costs for international routes.

B.
higher quality for similar costs for U.S domestic routes.

C.
similar quality for lower costs for international routes.

D.
similar quality for lower costs for U.S domestic routes.

A. higher quality for lower costs for international routes.

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?

A.
benefits from lower labor costs in manufacturing and services

B.
access to low-cost raw materials such as lumber and iron ore

C.
low levels of economic growth in emerging economies

D.
inefficient infrastructure in countries like China, which have brought down setting-up costs

A. benefits from lower labor costs in manufacturing and services

India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because

A.
it has emerged as a manufacturing powerhouse.

B.
of an efficient infrastructure and high labor costs.

C.
it has an abundance of uneducated workers who are highly trainable.

D.
of an abundance of well-educated, English-speaking young people.

D. of an abundance of well-educated, English-speaking young people.

Unilever’s new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm’s latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of

A.
location economies.

B.
economies of scope.

C.
learning races.

D.
network effects.

A. location economies.

Ridemore Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Ridemore Autos Inc. is reaping the benefits of

A.
economies of scope.

B.
location economies.

C.
resource immobility.

D.
resource ambiguity.

B. location economies.

A firm is said to be pursuing a polycentric innovation strategy when

A.
its research facility is situated in the headquarters and all other business activities are located around the world.

B.
it draws from multiple, equally important research facilities located throughout the world.

C.
it restricts its innovation to Western economies and production to developing markets.

D.
its knowledge flow takes a one-way path—from its headquarters to the subsidiaries.

B. it draws from multiple, equally important research facilities located throughout the world.

Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself successfully in the country of Zevar, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Silca Electronics Inc. incurs huge financial losses in Zevar. In this scenario, Silca Electronics Inc.’s failure to establish itself successfully in Zevar occurs most likely because

A.
it overestimates its need to protect its intellectual property.

B.
it underestimates its liability of foreignness when entering the Zevar market.

C.
it underestimates its dwindling reputation before it enters the Zevar market.

D.
it overestimates the geographic and cultural distance between Pelo and Zevar.

B. it underestimates its liability of foreignness when entering the Zevar market.

Which of the following statements accurately explains the primary reason behind Walmart’s failure in Germany?

A.
inability to implement its trademark focused-differentiation strategy in the German market

B.
significant differences between its U.S. personnel policies and Germany’s culture

C.
Germany’s unfamiliarity with retail discount powerhouses

D.
Metro’s hostile takeover of Walmart in Germany

B. significant differences between its U.S. personnel policies and Germany’s culture

Japanese and European engineering companies entered China to participate in building the world’s largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint-venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners’ advanced technology to create their own, next-generation high-speed trains. This example best highlights the _____ that firms can experience when expanding overseas.

A.
threat of new entrants

B.
liability of foreignness

C.
loss of reputation

D.
intellectual property exposure

D. intellectual property exposure

Which of the following is part of Geert Hofstede’s cultural dimensions?

A.
locus of control

B.
self-efficacy

C.
span of control

D.
power distance

D. power distance

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with

A.
differences in climates and time zones.

B.
the absence of a trading bloc.

C.
physical remoteness.

D.
the lack of connective ethnic and social networks.

B. the absence of a trading bloc.

United Nerumbia and Fernsland are two neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of

A.
food processed in Fernsland.

B.
movies and TV shows produced in United Nerumbia.

C.
iron ore extracted in Fernsland.

D.
luxury items manufactured in United Nerumbia.

D. luxury items manufactured in United Nerumbia.

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ______ distance.

A.
political

B.
geographic

C.
administrative

D.
cultural

D. cultural

SmallWorld Inc. is a global Internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries. SmallWorld Inc. is most likely doing this to

A.
reduce its geographical distance from the other countries.

B.
increase its administrative distance from the other countries.

C.
increase its economic distance from the other countries.

D.
reduce its cultural distance from the other countries.

D. reduce its cultural distance from the other countries.

A greater cultural distance between two trading countries

A.
increases linguistic similarities between the two countries.

B.
increases the liability of foreignness.

C.
reduces the uncertainty of doing business.

D.
reduces the transaction costs associated with business.

B. increases the liability of foreignness.

Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance?

A.
Olax, which has the same wealth and per capita income as Zeda

B.
Jordax, which has a very profitable economy and where people speak Jordaxian

C.
Segar, where people speak English and have a low standard of living

D.
Terra, which is located close to Zeda and is easily accessible by road

C. Segar, where people speak English and have a low standard of living

How has the administrative and political distance between Canada, Mexico, and the United States been reduced?

A.
by adopting similar national cultures

B.
by lowering the disparities between their per capita incomes

C.
by establishing the North American Free Trade Agreement (NAFTA)

D.
by reducing their linguistic differences

C. by establishing the North American Free Trade Agreement (NAFTA)

The administrative and political distance between two trading countries reduces when

A.
there are FDI restrictions in the host country.

B.
there is no independent central bank in the host country.

C.
there are tariffs and trade quotas in the host country.

D.
there is a well-functioning capital market in the host country.

D. there is a well-functioning capital market in the host country.

For which of the following companies will geographic distance be the most relevant factor in deciding whether or not to trade with a target country?

A.
a firm that manufactures cell phone batteries

B.
a firm that extracts and exports iron ore

C.
a firm that produces movies

D.
a firm that sells wristwatches

B. a firm that extracts and exports iron ore

Which of the following factors is the most important determinant of economic distance?

A.
the wealth and per capita income of consumers

B.
the ethnicity and religion of consumers

C.
the presence of legal institutions in a country

D.
the topography of a country

A. the wealth and per capita income of consumers

Which of the following statements is true with regard to international trade between countries?

A.
Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies.

B.
Colony-colonizer relationships have a strong negative effect on bilateral trade between countries.

C.
Wealthy countries engage in relatively more cross-border trade than poorer ones.

D.
Political integrations decrease the expected trade intensity between two countries.

C. Wealthy countries engage in relatively more cross-border trade than poorer ones.

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India?

A.
because of the political differences between India and U.S.

B.
because NAFTA prohibits Walmart from investing in countries outside North America

C.
because of the large economic distance between U.S. and India

D.
because Walmart’s low-cost strategy has not been accepted by Indian consumers

C. because of the large economic distance between U.S. and India

Plethora Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in United Bejukistan, which has been recognized as one of the less-developed nations in the world. How will this strategic move most likely affect Plethora Inc.?

A.
It will be able to benefit from economic arbitrage.

B.
It will be able to successfully leverage its competitive advantage from economies of standardization.

C.
It will be able to replicate its existing business model easily.

D.
It will be able to easily sell products for which demand varies by income.

A. It will be able to benefit from economic arbitrage.

Which of the following modes of entering a foreign market allows for the lowest level of control?

A.
greenfield ventures

B.
exporting

C.
joint ventures

D.
acquisitions

B. exporting

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode?

A.
They are easy to initiate and terminate.

B.
They require low amounts of investments in terms of capital.

C.
They reduce a firm’s exposure to loss of reputation.

D.
They are based on contracts rather than ownership.

C. They reduce a firm’s exposure to loss of reputation.

Octa Autos Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though it may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.?

A.
exporting

B.
franchise agreement

C.
acquisition

D.
licensing

C. acquisition

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another?

A.
greenfield operations

B.
brownfield operations

C.
exporting

D.
crowdsourcing

C. exporting

Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.?

A.
greenfield operation

B.
export

C.
joint venture

D.
acquisition

A. greenfield operation

Which of the following types of organizations comparatively requires the lowest levels of investment and control?

A.
joint ventures

B.
franchising

C.
acquisition

D.
greenfield operations

B. franchising

Which of the following is not included within the types of strategic alliances?

A.
joint ventures

B.
franchising

C.
acquisitions

D.
licensing

C. acquisitions

Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the

A.
globalization hypothesis.

B.
upper-echelons theory.

C.
real-options perspective.

D.
global scaling theory.

A. globalization hypothesis.

For a multinational enterprise (MNE), applying the globalization hypothesis would mean

A.
being highly responsive to the heterogeneous needs and preferences of consumers globally, without focusing on cost reduction.

B.
customizing each product sold by an enterprise to differentiate it from its competitors.

C.
manufacturing products on international platforms and slightly modifying them to meet local tastes and standards.

D.
pursuing a focused differentiation strategy instead of a cost-leadership strategy to gain a competitive advantage.

C. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards.

Which of the following statements best describes local responsiveness?

A.
the process of producing goods in one country and selling them in another

B.
the need to tailor product and service offerings to fit native consumer preferences and host-country requirements

C.
the belief that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous

D.
the additional costs of doing business in an unfamiliar culture and economic environment, and of coordinating across geographic distances

B. the need to tailor product and service offerings to fit native consumer preferences and host-country requirements

When a firm pursues a(n) _____, it sells the same products or services in both domestic and foreign markets.

A.
domestic strategy

B.
international strategy

C.
differentiation strategy

D.
localization strategy

B. international strategy

Which of the following is one of the features of an international strategy?

A.
It is characterized by limited local responsiveness.

B.
It is one of the newest types of global strategies.

C.
It is characterized by cost-leadership as a preferred business strategy.

D.
It is often used successfully by firms with relatively small domestic markets.

A. It is characterized by limited local responsiveness.

Opula Inc., a luxury car company, sells the same cars and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Opula Inc. most likely pursue?

A.
a multidomestic strategy

B.
a transnational strategy

C.
a global-standardization strategy

D.
an international strategy

D. an international strategy

Which of the following statements is true of an international strategy?

A.
It enables firms to leverage their home-based core competencies in foreign markets.

B.
It is advantageous when firms face high pressures for both local responsiveness and cost reductions.

C.
It relies on joint ventures to reap economies of scale by accessing a larger market.

D.
It effectively protects a firm from exchange rate fluctuations.

A. It enables firms to leverage their home-based core competencies in foreign markets.

Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy?

A.
They cannot leverage their home-based core competencies in foreign markets.

B.
They are highly affected by exchange rate fluctuations.

C.
They have to be highly responsive to local needs and preferences.

D.
They cannot reap the benefits of economies of scale due to their highly customized products.

B. They are highly affected by exchange rate fluctuations.

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because

A.
they pursue a cost-leadership strategy in their respective industries.

B.
they are highly responsive to the local needs and preferences of customers in the host countries.

C.
they offer the same products or services in all their stores throughout the world.

D.
they attempt to combine benefits of localization and standardization strategies simultaneously.

C. they offer the same products or services in all their stores throughout the world

In which of the following situations is pursuing an international strategy advisable?

A.
when a firm manufactures products related to national and religious identity

B.
when a firm operates in an industry where the pressure to keep the costs low is extremely high

C.
when a firm wants to be perceived as a domestic company by the host-country consumers

D.
when a firm enjoys a large domestic market, strong reputation, and brand name

D. when a firm enjoys a large domestic market, strong reputation, and brand name

A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it

A.
is pursued in response to low pressure for local responsiveness and low pressure for cost reduction.

B.
attempts to reap significant economies of scale by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost.

C.
attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company.

D.
operates on the assumptions made in the globalization hypothesis in order to lower costs.

…

A(n) _____ arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions.

A.
international strategy

B.
transnational strategy

C.
global-standardization strategy

D.
multidomestic strategy

D. multidomestic strategy

Which of the following statements is true of a multidomestic strategy?

A.
Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets.

B.
The multidomestic strategy is one of the main strategies companies pursued in the Globalization 1.0 stage.

C.
Companies pursuing a multidomestic strategy generally follow a cost-leadership strategy at the business level.

D.
The multidomestic strategy effectively protects firms from the risk of intellectual property appropriation.

A. Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets.

Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement?

A.
a multidomestic strategy

B.
an international strategy

C.
a global-standardization strategy

D.
a one-product strategy

A. a multidomestic strategy

For which of the following types of industries is a multidomestic strategy most common?

A.
machine-tool industries

B.
genetic industries

C.
food industries

D.
capital goods industries

C. food industries

Fragra Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. SaveMart Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?

A.
Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements.

B.
Fragra Inc. will pursue a differentiation strategy at the business level, whereas SaveMarket Inc. will pursue a cost-leadership strategy at the business level.

C.
Fragra Inc. will be better protected from exchange rate fluctuations when compared to SaveMarket Inc.

D.
Fragra Inc. will not be able to leverage its home-based core competencies in foreign markets as much as SaveMarket Inc.

A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements.

A firm following a multidomestic strategy

A.
is highly efficient.

B.
lacks local responsiveness.

C.
faces a greater risk of intellectual property (IP) appropriation.

D.
requires exposing explicit knowledge because products are manufactured locally.

C. faces a greater risk of intellectual property (IP) appropriation.

Which of the following is a drawback of pursuing a multidomestic strategy?

A.
The strategy allows for the lowest possible local responsiveness.

B.
The strategy lowers the differentiation of a firm’s product and service offerings.

C.
The strategy exposes a firm to greater exchange rate fluctuation when compared to an international strategy.

D.
The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

D. The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

After testing its products in foreign markets by pursuing an international strategy, GR Foods Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the company?

A.
The company’s operations will become more cost-efficient.

B.
The company’s exposure to exchange rate fluctuations will reduce.

C.
The company will be able to reap greater benefits from economies of scale.

D.
The company will be exposed to a lower risk of intellectual property appropriation.

B. The company’s exposure to exchange rate fluctuations will reduce.

McDonald’s uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of the following strategies is the fast-food chain pursuing?

A.
multidomestic strategy

B.
focused differentiation strategy

C.
global-standardization strategy

D.
international strategy

A. multidomestic strategy

Food Works Inc. is a multinational fast-food chain that follows a multidomestic strategy. Which of the following statements most likely holds true for the company?

A.
The company’s competitive advantage lies in leveraging its home-based core competencies in foreign markets.

B.
Each country unit owned by the company will tend to be highly autonomous.

C.
Majority of the value creation for the company will take place in its home country.

D.
The company will not face any operational inefficiency as the key business functions do not have to be duplicated.

B. Each country unit owned by the company will tend to be highly autonomous.

Some multinational enterprises (MNEs) attempt to reap significant economies of scale and location economies by pursuing an international division of labor based on wherever best-of-class capabilities reside at the lowest cost. This is known as a(n) _____ strategy.

A.
international

B.
multidomestic

C.
global-standardization

D.
localization

C. global-standardization

The global-standardization strategy arises out of the combination of

A.
high pressure for cost reductions and low pressure for local responsiveness.

B.
high pressure for local responsiveness and low pressure for cost reductions.

C.
low pressure for both local responsiveness and cost reductions.

D.
high pressure for both local responsiveness and cost reductions.

A. high pressure for cost reductions and low pressure for local responsiveness.

Jade Mobiles Inc., a cell phone manufacturing company, has its product development centers located in the U.S. and South Korea. The manufacturing units are located in China and Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its cell phones. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Jade Mobiles Inc. most likely pursue?

A.
international strategy

B.
multidomestic strategy

C.
global-standardization strategy

D.
localization strategy

C. global-standardization strategy

For a firm pursuing a global-standardization strategy, which of the following bases of competition becomes its primary weapon?

A.
product differentiation

B.
superior customer service

C.
local responsiveness

D.
price

D. price

To keep track of the latest developments in computing, Lenovo’s research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company’s manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets?

A.
a transnational strategy

B.
a multidomestic strategy

C.
a localization strategy

D.
a global-standardization strategy

D. a global-standardization strategy

Which of the following products are generally manufactured by multinational enterprises (MNEs) pursuing a global-standardization strategy?

A.
products with a high value-to-weight ratios like luxury goods

B.
commodity products like computer hardware

C.
consumer products related to national and/or religious identity like food

D.
products that carry country-specific quality associations like wine

B. commodity products like computer hardware

Which of the following is a feature of a multinational company pursuing a global-standardization strategy?

A.
Its key business functions are located at the home country headquarters.

B.
Its business-level strategy tends to be cost-leadership.

C.
Its competitive advantage lies in its high local responsiveness.

D.
Its core competency lies in its strong product differentiation.

C. Its competitive advantage lies in its high local responsiveness.

Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy?

A.
The firm customizes products and services to better suit local requirements.

B.
The firm reaps significant economies of scale and location economies.

C.
The firm follows a differentiation strategy at the business level.

D.
The firm has all its key business functions located in the home country.

B. The firm reaps significant economies of scale and location economies.

Stop n’ Save Inc., a supermarket chain, is implementing a multidomestic strategy. SunLife Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other?

A.
Stop n’ Save Inc. will focus more on cost-reduction than SunLife Inc.

B.
Stop n’ Save Inc. will have its business functions spread across the world; SunLife Inc.’s business functions will be highly centralized.

C.
Unlike SunLife Inc., Stop n’ Save Inc. will be able to pursue a differentiation strategy at the business level.

D.
Unlike SunLife Inc., Stop n’ Save Inc. will be able to reap significant economies of scale and location economies.

C. Unlike SunLife Inc., Stop n’ Save Inc. will be able to pursue a differentiation strategy at the business level.

Marc Works Inc., a reputed brand for fine writing instruments, is implementing an international strategy in its firms. Torque Inc., a laptop brand, is pursuing a global-standardization strategy in its firms. Which of the following statements most likely holds true in this scenario?

A.
While Marc Works Inc.’s competitive advantage lies in its high local responsiveness, Torque Inc. will lack such capabilities.

B.
Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc.

C.
Torque Inc.’s business functions are highly centralized, whereas Marc Works Inc. organizes its activities worldwide.

D.
Torque Inc. is exposed to greater risks of exchange rate fluctuations.

B. Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc.

In which of the following stages of globalization did firms organize as networks to pursue a global-standardization strategy?

A.
Globalization 1.0

B.
Globalization 2.0

C.
Globalization 3.0

D.
Globalization 4.0

C. Globalization 3.0

Why did the American MTV network cable channel fail when pursuing a global-standardization strategy?

A.
because MTV failed to understand that music videos were a commodity product

B.
because the globalization hypothesis holds true for the music industry

C.
because cultural distance most affects products with high linguistic content

D.
because an international strategy was more suitable for the music industry

C. because cultural distance most affects products with high linguistic content

A(n) _____ strategy arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions.

A.
transnational

B.
multidomestic

C.
international

D.
global-standardization

A. transnational

Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost?

A.
a multidomestic strategy

B.
an international strategy

C.
a global-standardization strategy

D.
a transnational strategy

D. a transnational strategy

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally?

A.
international strategy

B.
global-standardization strategy

C.
transnational strategy

D.
focused-differentiation strategy

C. transnational strategy

Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50 countries and employs over 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Shine Enterprises Inc. most likely use?

A.
an international strategy

B.
a focused-differentiation strategy

C.
a multidomestic strategy

D.
a transnational strategy

D. a transnational strategy

Which of the following is a benefit of the transnational strategy?

A.
It facilitates global learning and harnesses economies of location.

B.
It completely eliminates a firm’s risk of intellectual property expropriation.

C.
It helps to create a matrix global structure, which is cost-effective and easy to implement.

D.
It helps a firm pursue a cost-leadership strategy by minimizing the need for local responsiveness.

A. It facilitates global learning and harnesses economies of location.

A firm pursuing a transnational strategy would believe that

A.
key business functions should be located in its home country headquarters.

B.
local-responsiveness is more important than cost-reductions for competitive advantage.

C.
best practices, ideas, and innovations should be diffused throughout the world.

D.
the majority of the value creation should take place in the home country.

C. best practices, ideas, and innovations should be diffused throughout the world.

Which of the following is a drawback of pursuing a transnational strategy?

A.
It creates bottlenecks for global learning.

B.
It exposes a firm to diseconomies of scale and location.

C.
It requires a global matrix structure, which is difficult to implement.

D.
It involves locating all key business activities in the home country headquarters.

C. It requires a global matrix structure, which is difficult to implement.

GreenThings Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. TransGold Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario?

A.
While TransGold Inc.’s competitive advantage will lie in its high local responsiveness, GreenThings Inc. will lack such competencies.

B.
GreenThings Inc. will face greater pressure for cost-reductions than TransGold Inc. due to its strategy choice.

C.
Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries.

D.
While GreenThings Inc. will require a global matrix structure, TransGold Inc. will require a traditional headquarters model.

C. Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries.

For which of the following products is an international strategy most suitable?

A.
for luxury goods that can be shipped across the globe

B.
for products with low value-to-weight ratios such as steel

C.
for food products that are specific to certain cultures

D.
for products with high linguistic content

A. for luxury goods that can be shipped across the globe

The _____ states that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally.

A.
death-of-distance hypothesis

B.
local-responsiveness hypothesis

C.
real options framework

D.
dynamic capabilities framework

A. death-of-distance hypothesis

Some of the best engineering and car companies are in Germany. Thus, it can be concluded that Germany has a _____ in the automobile industry.

A.
capital gain

B.
trade surplus

C.
national competitive advantage

D.
liability of foreignness

C. national competitive advantage

United Borova Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country

A.
is a world leader in the pharmaceutical industry.

B.
has nationalized the pharmaceutical industry.

C.
has low levels of competition, providing other multinational companies with an opportunity to take over the pharmaceutical industry.

D.
is a potential foreign market for multinational pharmaceutical companies to sell their products.

A. is a world leader in the pharmaceutical industry.

Which of the following factors pertaining to national competitive advantage enabled Nokia, a multinational company from Finland, to become an early leader in cell phones?

A.
the competitive intensity in the cell phone industry of Finland

B.
the huge demand for high-quality wireless services in Finland

C.
the abundance of natural resources in Finland

D.
the related and supporting industries present in Finland

B. the huge demand for high-quality wireless services in Finland

Due to dense urban living conditions, hot and humid summers, and high energy costs, it is not surprising that Japanese customers want small, quiet, and energy-efficient air conditioners. Which feature of Porter’s diamond framework does this scenario best exemplify?

A.
factor conditions

B.
complementor availability

C.
competitive intensity

D.
demand conditions

D. demand conditions

Which of the following statements best explains how the presence of top-notch complementors within a firm’s industry affects the focal firm’s business?

A.
It weakens the national competitive advantage enjoyed by the focal firm.

B.
It improves the factor conditions in the focal firm’s domestic market.

C.
It increases the value of the focal firm’s offering from a customer’s perspective.

D.
It reduces the economic contribution created by the focal firm.

C. It increases the value of the focal firm’s offering from a customer’s perspective.

Hans is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Hans consider while choosing his strategy?

A.
He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.

B.
He should rely on his firm’s business-level strategy as a clue to possible strategies pursued globally.

C.
He should remember that he has only one framework at his disposal to make global strategy decisions.

D.
He must remember that higher levels of control and a lower likelihood of any loss in reputation go along with less investment-intensive foreign entry modes.

A. He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.

_____ is a process of closer integration and exchange between different countries and peoples worldwide.

A.
Diversification

B.
Globalization

C.
Standardization

D.
Modification

B. Globalization

Which of the following is most likely an accurate statement?

A.
The multinational enterprise PanDigital benefited from advances in communications technology.

B.
The multinational enterprise TransEuropa was hindered by falling investments barriers.

C.
The multinational enterprise ShopWorld benefited from rising trade barriers.

D.
The multinational enterprise GeoPlus was hindered by reduced transportation costs.

A. The multinational enterprise PanDigital benefited from advances in communications technology.

Which of the following describes a firm in the Globalization 1.0 stage?

A.
Robinson Inc. has a large office in New York, which is one cog in a global network.

B.
Robinson Inc. has a large office in New York, which functions with other large offices in Europe and Asia.

C.
Robinson Inc. has a base office in New York and a replica office in Amsterdam.

D.
Robinson Inc. has a base office in New York and distributes some of its products overseas.

D. Robinson Inc. has a base office in New York and distributes some of its products overseas.

Which of the following will most likely harm a MNE’s reputation?

A.
Principal-agent problems cause a MNE to merge with another MNE.

B.
Increased competition causes a MNE to close a factory in a developing country.

C.
Wages for workers in a factory owned by a MNE increase, causing profits to decline.

D.
A sweatshop owned by a MNE has an explosion that kills hundreds of workers.

D. A sweatshop owned by a MNE has an explosion that kills hundreds of workers.

Which of the following is a primary reason why firms pursue a global strategy?

A.
to improve their reputation

B.
to enhance their competitive advantage

C.
to expand their research capabilities

D.
to gain more political influence

B. to enhance their competitive advantage

Which of the following will most likely increase geographic distance between two countries?

A.
lack of adequate transportation between the two countries

B.
differences in consumer incomes between the two countries

C.
lack of human resources available in the two countries

D.
different knowledge base in the two countries

A. lack of adequate transportation between the two countries

Allgreva Inc. is located in Movaria near the nation of Clozame. Allgreva is considering expanding into Clozame. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, Movaria rules this land. Which of the following would most likely prevent Allgreva from expanding into Clozame?

A.
geographic distance

B.
economic distance

C.
political distance

D.
cultural distance

C. political distance

Which of the following countries has a high geographic distance but a low cultural distance from the United States?

A.
Canada

B.
Mexico

C.
Australia

D.
France

C. Australia

Which of the following entry modes was used extensively in Globalization 1.0 stage?

A.
strategic alliances

B.
acquisitions

C.
greenfield operations

D.
exports

D. exports

Global Frontier Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Global Frontier wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm?

A.
joint ventures

B.
acquisitions

C.
greenfield operations

D.
exports

A. joint ventures

Which of the following accurately describes what the integration-responsiveness framework does?

A.
By juxtaposing the pressures a multinational company faces for export tariffs and foreign responsiveness, it devises four strategies to gain and sustain competitive advantage.

B.
By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage.

C.
By juxtaposing the pressures a multinational company faces for export tariffs and local-responsiveness, it devises two strategies to gain and sustain competitive advantage.

D.
By juxtaposing the pressures a multinational company faces for cost-reduction and foreign responsiveness, it devises two strategies to gain and sustain competitive advantage.

B. By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage.

ChocoNuts Inc. produces an inexpensive candy bar that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has ChocoNuts performed poorly in?

A.
cost-reduction

B.
local-responsiveness

C.
global-standardization

D.
transnational strategy

B. local-responsiveness

Swiss-based Nestlé, the largest food company in the world, is well-known for customizing its product offerings to suit local preferences, tastes, and requirements. By doing this, Nestlé is pursuing a(n)

A.
multidomestic strategy.

B.
international strategy.

C.
global-standardization strategy.

D.
transnational strategy.

A. multidomestic strategy.

The risk of intellectual property appropriation increases when companies follow a multidomestic strategy because products are

A.
difficult to differentiate.

B.
complex to produce.

C.
exported long distances.

D.
manufactured locally.

D. manufactured locally.

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n)

A.
multidomestic strategy.

B.
international strategy.

C.
global-standardization strategy.

D.
transnational strategy.

D. transnational strategy.

The transnational strategy is similar to a(n) _____ strategy because they both focus on product differentiation and low costs.

A.
liquidation

B.
product diversification

C.
international

D.
blue ocean

D. blue ocean

Michael Porter’s diamond framework is used to explain

A.
national value creation.

B.
domestic value creation.

C.
national competitive advantage.

D.
domestic competitive advantage.

C. national competitive advantage.

In Michael Porter’s diamond framework, _____ describe a country’s endowments in terms of natural, human, and other resources.

A.
market conditions

B.
factor conditions

C.
demand conditions

D.
supply conditions

B. factor conditions

Fierce domestic competition in Lobekistan makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, Lobekistan’s motorcycles have a competitive advantage in the global market. According to Porter’s diamond framework, this scenario shows the influence of competitive intensity in

A.
a peripheral industry.

B.
a focal industry.

C.
supportive complementors.

D.
related complementors.

B. a focal industry.

Toyota’s global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota’s quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of

A.
factor conditions.

B.
competitive intensity in a focal industry.

C.
demand conditions.

D.
related and supporting industries/complementors.

D. related and supporting industries/complementors.