Dyer Ch.9 Full Test Bank International Strategy

Package Title: Chapter 9, Testbank

Course Title: Dyer, SM 2e

Chapter Number: 9

Question type: Multiple Choice

1) Blue Corp., a car manufacturing company, reaches its five-year goal of becoming market leader in the domestic market. Upon reaching saturation in the local market, it decides to expand its market globally in order to increase its profits. Which of the following is likely to be the primary reason for Blue to enter the global market?

a) Lower-cost resources

b) Longer product life

c) Sales growth

d) Product differentiation

Difficulty: Hard

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Application

Standard 1 : AACSB || Analytic

2) Leo Inc., a U.S.-based firm, decides to enter a foreign market through offshoring. Which of the following is likely to be the primary reason for Leo to enter the new market?

a) The new market is ideal to dump Leo’s excess products that cannot be sold in the United States.

b) The new market has facilities for research and development that are not available in the United States.

c) Leo is likely to have reached saturation in terms of sales growth in the domestic market.

d) Labor and raw materials are available at a lower cost in the new market than in the United States.

Difficulty: Hard

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Application

Standard 1 : AACSB || Analytic

3) Karl Jahaz Corp., an automobile company, has many business units across the globe. Although the company has reached saturation in the domestic market, it continues to generate substantial revenue by selling its old-model, light commercial vehicles in a few countries. In this case, which of the following is achieved by the globalization of the company?

a) Extension of product’s life cycle

b) Deduction of production costs

c) Higher profits by lowering prices

d) Greater economies of scale

Difficulty: Hard

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Application

Standard 1 : AACSB || Analytic

4) In which of the following circumstances can a firm best achieve economies of scale?

a) When the firm is able to spread the costs of investments in plant across many sales

b) When the firm creates better quality products due to higher quality equipment

c) When the firm is able to reap the benefit of investing in research through higher customer satisfaction

d) When the firm creates highly customized products for a niche audience in the market

Difficulty: Medium

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

5) Two marketing students, Fiona and Sayid, discuss the strategies of Star Seven Inc., a leading firm in the United States. Fiona believes that Star Seven entered a foreign market for the sake of efficiency, while Sayid argues that it entered for the purpose of expanding knowledge. Which of the following weakens Fiona’s argument?

a) Star Seven aims to spread the costs of investments in plant and equipment across more sales in the new market.

b) Star Seven aims to serve multiple types of customers in the new market to gain new insights about its products.

c) Star Seven aims to sell products produced in excess at lower prices in the new market.

d) Star Seven aims to outsource some of its functions to reduce the labor and production costs.

Difficulty: Hard

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Analysis

Standard 1 : AACSB || Reflective Thinking

6) Nina, a marketing student, studies how people from different countries accept ambiguity or follow rules and laws. When she focuses on this specific trait while studying the distance between a domestic and foreign market, she is likely to be focusing on the markets’ __________.

a) administrative distance

b) geographic distance

c) legal distance

d) cultural distance

Difficulty: Hard

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Application

Standard 1 : AACSB || Analytic

7) With respect to distance between a foreign and a domestic market, administrative distance is likely to be more when the new market _________.

a) uses the common law system used in the Anglo sphere

b) has not been part of the colonizer/colony network

c) uses the same currency as the domestic market

d) does not belong to a different trade bloc

Difficulty: Medium

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

8) The industries most affected by economic distance are those for which ________.

a) the demand for products is very elastic

b) the supply for products is very stable

c) the geographic distance is the highest

d) the administrative distance is the lowest

Difficulty: Medium

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

9) Dave is a research analyst at Geo Corp., a U.S.-based firm, specializing in organic farm produce. Since the management is considering entering a foreign market, Dave begins to study the risks associated with this move. After gathering sufficient data regarding the internal factors of the new market, he categorizes the risks based on the type. Which of the following is most likely to be considered a political risk?

a) Marketers of Geo standardizing products based on local market needs

b) Distribution costs being higher in the market than that in the United States

c) Laws prohibiting foreign ownership of local firms in the new market

d) Consumers preferring local goods to foreign products in the new market

Difficulty: Hard

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Application

Standard 1 : AACSB || Analytic

10) Which of the following is most likely to be categorized as a market risk associated with entering a new market?

a) The local government introducing tariffs on foreign products

b) The local government requiring a certain percentage of managers to be locals

c) The currencies of countries fluctuating significantly when compared to the U.S. dollar

d) The distribution process being different from that in the United States

Difficulty: Medium

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

11) Which of the following is true of costs in terms of how firms compete internationally?

a) Adapting operations to fit local circumstances is cheap.

b) The more tailored a product is, the higher the cost.

c) Higher costs ensure risks are lowered or negated.

d) Firms achieve economies of scale by avoiding standardization.

Difficulty: Medium

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

12) Ryuuku Inc., a cloth manufacturing company, enters a foreign market. It tailors its products and distribution strategies to meet the needs of the local market. Modifying the products and operations to fit local customer requirements results in high cost to the company; however, the revenue was higher than that in the domestic market. In this case, the competing pressure addressed by Ryuuku is __________.

a) global standardization

b) local responsiveness

c) licensing requirements

d) mass customization

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

13) Score Ink Corp., a publishing firm, decides to enter a new market. It changes its strategy from standardization to local responsiveness in order to meet the needs of the new market. However, in order to execute this strategy, it had to increase production and distribution expenses. Which of the following is adopted by Score Ink?

a) A multidomestic strategy

b) A global strategy

c) An arbitrage strategy

d) A standardization strategy

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

14) Tokef Inc., a U.S.-based firm, adopts a multidomestic strategy to enter the Japanese market. Which of the following is likely to be true in this case?

a) It is likely to focus on local responsiveness over standardization.

b) It is likely to focus on economies of scale over local responsiveness.

c) It is likely to focus on global standardization over local responsiveness.

d) It is likely to focus on standardization over mass customization.

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

15) Which of the following statements is true about multidomestic strategy?

a) It tailors products and operations to individual markets.

b) It prefers to standardize products to achieve economies of scale.

c) It does not allow regional managers to make decisions on their own.

d) It enables firms to easily develop a worldwide competitive advantage.

Difficulty: Medium

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

16) Wale Inc., an electronics manufacturer, adopts a multidomestic strategy to enter the global market. It centers on tailoring products and operations to individual markets. However, the cost pressure becomes too intense. In order to manage high costs, it manages the variation by concentrating only on air conditioners in a specific country. Which of the following is being exemplified in this case?

a) Focus adaptations

b) Externalize adaptations

c) Design adaptability

d) Global adaptations

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

17) Nate, the CEO of Venus Corp., decides to make some changes to the strategies adopted to operate in global market. Although he still remains with the multidomestic strategy, he decides to manage the variations and the costs incurred through it by allowing a local firm to take up a franchise. This ensures that Venus does not have to work on adapting the product to the local needs. Which strategy has Nate adopted to manage the variations?

a) Focus adaptations

b) Externalize adaptations

c) Design adaptability

d) Market adaptability

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

18) Jade Inc., an automobile company, manages the costs of localization by mass producing standard core components such as the engine. However, it makes these components in such a way that they can be adapted to modified external components that are customized to specific local markets. This ensures a certain extent of economies of scale. Which of the following is exemplified in this case?

a) Focus adaptations

b) Externalize adaptations

c) Design adaptability

d) Market adaptability

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

19) Slate-E Corp., an industrial equipment manufacturer, engages in design adaptability in order to manage the costs of variations. Which of the following is likely to be true in this case?

a) Slate-E’s is likely to mass produce machinery that are standard across the globe.

b) Slate-E’s cranes are likely to have the exact same external features in every market.

c) Slate-E’s factory machines are likely to have standard core components across the globe.

d) Slate-E’s is likely to create highly customized equipment from scratch for every individual customer.

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

20) The Purple Lace Inc., a home furnishing company, emphasizes standardization over local culture and needs of the specific market. It maintains consistency of operations across the different countries that the firm operates in. Which of the following is being exemplified in this scenario?

a) A multidomestic strategy

b) A global strategy

c) An arbitrage strategy

d) A customization strategy

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

21) Which of the following statements is true about a firm that adopts a global strategy?

a) It tailors its products and operations to individual markets.

b) It focuses on customer needs and preferences rather than standardization.

c) It focuses on economies of scale and leveraging firm capabilities.

d) It uses a different strategy in each of the countries where it competes.

Difficulty: Medium

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

22) Trosome Petroleum Corp. opens new plants in Sopintry. In order to gain economies of scale, it centralizes its products and operations. Decisions regarding operations in Sopintry are made at the central headquarters. Which of the following primary strategies is used by the company to do business internationally?

a) A multidomestic strategy

b) A global strategy

c) An arbitrage strategy

d) A local responsiveness strategy

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

23) An automobile manufacturing company has its production units and sales units in two different locations. The production units are situated in geographical areas that offer cheap labor and easy resource availability. On the other hand, the sales units are located in places where there is a high demand for the products. Which of the following strategies is best exemplified in this scenario?

a) A multidomestic strategy

b) A global strategy

c) An arbitrage strategy

d) A standardization strategy

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

24) A multinational footwear company believes in capitalizing on differences in the cost of stocks by acquiring the stocks where they are less expensive. In this scenario, which of the following arbitrage strategies is adopted by the company?

a) An economic arbitrage

b) A cultural arbitrage

c) An administrative arbitrage

d) A capital arbitrage

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

25) Although there are a number of alternative treatments available across the globe, herbal products produced in Brazil are sold at a premium. The ancient Brazilian recipes for wellness are considered the main reason for the premium price. This is an example of a(n) __________ arbitrage.

a) economic

b) cultural

c) administrative

d) capital

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

26) Kitsch Along Inc., a cloth manufacturer, raises funds in a country where interest rates are lower than the United States. In this case, the type of arbitrage strategy adopted by the company is primarily __________.

a) linguistic

b) cultural

c) administrative

d) capital

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

27) Neon Inc. considers two foreign markets for expansion. The first market has lesser taxes compared to the second along with more lenient trade regulations. Thus, Neon chooses the first market despite it being more distinct in terms of language and tradition. By choosing the first market, Neon exhibits a(n) __________.

a) economic arbitrage

b) cultural arbitrage

c) administrative arbitrage

d) capital arbitrage

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

28) Neferent Inc., a finance company, incorporates itself in the Notre Islands because of low corporate tax rates there. In this case, the strategy adopted by Neferent is to gain a(n) __________.

a) economic arbitrage

b) cultural arbitrage

c) administrative arbitrage

d) capital arbitrage

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

29) Shondura Inc. focuses on both local responsiveness and standardization in global business. The company typically begins with a strong emphasis in a single strategy and then works to minimize the downsides associated with that strategy as much as possible as they begin to implement the second strategy. Which of the following is best exemplified in this case?

a) A multidomestic strategy

b) A global strategy

c) An arbitrage strategy

d) A transnational strategy

Difficulty: Hard

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Application

Standard 1 : AACSB || Analytic

30) Petick Inc., an electronic goods manufacturer, produces its products in the domestic unit. These products are sold in foreign markets across the globe. In this case, which of the following modes of international market entry is adopted by Petick?

a) Exporting

b) Licensing

c) Joint ventures

d) Wholly owned subsidiaries

Difficulty: Hard

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Application

Standard 1 : AACSB || Analytic

31) Which of the following is a disadvantage of exporting as a mode for entering a foreign market?

a) It increases the cost of selling in the foreign market.

b) It does not work when the product adaptation required is minimal.

c) It cannot work with distribution networks in the foreign market.

d) It involves heavy investment in the foreign country.

Difficulty: Medium

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

32) Vactin Motors, an automobile company, is a well-recognized brand. It does not have the capital and capabilities to set up manufacturing units abroad, although it is keen to have its products made in the foreign market. It decides to have the products produced and sold under its brand name. In this case, which of the following modes of international market entry should be adopted by Vactin?

a) Exporting

b) Franchising

c) Joint venture

d) Wholly owned subsidiaries

Difficulty: Hard

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Application

Standard 1 : AACSB || Analytic

33) In the context of modes of international market entry, which of the following statements is true of licensing and franchising?

a) It offers the highest amount of control of all the various modes of entry.

b) It is easy to extract knowledge for use in other locations through this mode.

c) It can increase the cost of selling in a foreign market.

d) It involves the risk of a local firm in alliance to become a competitor.

Difficulty: Medium

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

34) A healthcare company deals with significant management challenges. The production units are based in various geographic locations, which results in cultural and linguistic barriers. Operations require relying on a local firm to adapt the products to meet the needs of the local market. In this case, the company is likely to be engaging in __________.

a) Exporting

b) Importing

c) Offshoring

d) Alliances

Difficulty: Hard

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Application

Standard 1 : AACSB || Analytic

35) Which of the following statements is true of alliances as a means of entering international markets?

a) It is a favored way to enter markets that are close to the home market.

b) It allows the alliance to be perceived by both government and consumers as local.

c) It avoids sharing resources, risks, and rewards.

d) It offers the least amount of control of all the various modes of entry.

Difficulty: Medium

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

36) In the context of modes of international market entry, which of the following statements is true of a joint venture?

a) It is a favored way to enter markets that are close to the home market.

b) It involves cultural barriers that increase the difficulty of operations.

c) It avoids sharing resources, risks, and rewards.

d) It offers the least amount of control of all the various modes of entry.

Difficulty: Medium

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

37) Which of the following statements is true of wholly owned subsidiaries as means of entering international markets?

a) It requires the least investment for market entry.

b) It avoids sharing resources, risks, and rewards.

c) It overcomes trade and transportation barriers by producing locally.

d) It offers the least amount of control of all the various modes of entry.

Difficulty: Medium

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

38) Hats Corp., a firm headquartered in Boston, enters India through a wholly owned subsidiary. It has already franchised a few units to Nepal and China. Which of the following is likely to be true in this case?

a) Hats faces lesser risk through the wholly owned subsidiary than the franchises it holds in Nepal.

b) Hats invests lesser in the wholly owned subsidiary in India than the franchise it holds in China.

c) Hats appears more local through a wholly owned subsidiary than a franchise.

d) Hats overcomes trade and transportation barriers better through a franchise than a wholly owned subsidiary.

Difficulty: Hard

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Application

Standard 1 : AACSB || Analytic

39) A U.S.-based insurance firm purchases a company in Germany. The purchase allows the U.S. firm to acquire local resources, knowledge, and expertise while still maintaining control through 100 percent ownership. This process of purchasing a local firm is called __________.

a) acquisition

b) licensing

c) franchising

d) authorization

Difficulty: Hard

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Application

Standard 1 : AACSB || Analytic

40) Maria and Sasha, researchers at Gem Corp., discuss the best method for their firm to enter a foreign market with wholly owned subsidiaries. Maria believes that greenfield investments would be more suitable, while Sasha believes that acquiring a local firm is a better option. Which of the following weakens Maria’s argument?

a) Gem requires high level of control right from production to marketing in the new market.

b) Gem has the capabilities and resources required to set up a unit from scratch.

c) Gem finds integration to be very difficult because of the cultural differences with the host country.

d) Gem needs to enter the new market at the earliest to gain advantage of the product cycle.

Difficulty: Hard

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Analysis

Standard 1 : AACSB || Reflective Thinking

41) Which of the following factors affects the success of international strategies?

a) Variation in environmental factors

b) Public preference for local firms

c) Variations in the strength of supporting industries

d) High trade barriers

Difficulty: Medium

Section Reference 1: The Globalization of Business

Learning Objective 1: Explain why firms choose to expand internationally.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

42) Firms choose to compete in international markets to ________.

a) find high-value expensive resources

b) raise profits by lowering cost

c) improve sales in the home market

d) extend the lifespan of their machinery

Difficulty: Medium

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Explain why firms choose to expand internationally.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

43) Identify an advantage of competing in international markets.

a) It can help firms identify unmet needs in multiple areas.

b) It can help firms find high-value resources for a premium cost.

c) It helps firms lower a product's life cycle.

d) It helps firms attain diseconomies of scale.

Difficulty: Medium

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Explain why firms choose to expand internationally.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

44) Competing in multiple markets allows firms to __________.

a) avoid economies of scope

b) avoid economies of scale

c) increase their average cost of production in the long run

d) spread their costs across more units in many product categories

Difficulty: Medium

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Explain why firms choose to expand internationally.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

45) Which of the following statements is true about globalization?

a) It refers to the direct investment in production or business in one country by a business from another country.

b) It is the degree of difference between the cultures of two nations.

c) It is the spread of businesses across national borders.

d) It refers to the stages a product or service goes through during its lifespan.

Difficulty: Medium

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Explain why firms choose to expand internationally.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

46) Administrative distance refers to __________.

a) distance in miles, or kilometers, between two countries

b) a firm’s adjustments to products, services, and processes

c) differences in the legal, political, and regulatory institutions between countries

d) differences in language and culture, the way people live and think about the world

Difficulty: Medium

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

47) Identify a true statement about administrative distance.

a) Low administrative distance can increase the rate of entry by foreign firms into a country.

b) High administrative distance can decrease the effect of geographical distance.

c) Low administrative distance can keep foreign firms from entering a new country to expand business.

d) High administrative distance lowers both transportation and communication costs.

Difficulty: Medium

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

48) Among which countries is administrative distance low?

a) Countries that use the same currency

b) Countries that have different legal systems

c) Countries that have never been colonized

d) Countries that are from different trading blocs

Difficulty: Medium

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

49) Identify a true statement about local responsiveness.

a) Adapting products and operations to fit local circumstances is inexpensive.

b) The more a company tailors a product to a local market, the higher the cost.

c) Companies with higher costs can beat their competition through lower prices.

d) Firms achieve economies of scale by producing products with variations.

Difficulty: Medium

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

50) Firms that use a multidomestic strategy to do business internationally emphasize ________.

a) economies of scale over local responsiveness

b) local responsiveness over standardization

c) country-comparative advantages

d) global standardization

Difficulty: Medium

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

51) Which of the following is a limitation of a global strategy?

a) It is typically a low-cost strategy.

b) It uses differentiated processes in its value chain.

c) Standardized products may not meet the needs of customers in particular countries.

d) Global firms may improve sales by not being responsive.

Difficulty: Medium

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

52) Identify a true statement about an arbitrage strategy.

a) It involves tailoring products or services to local markets.

b) It involves buying where costs are low and selling where they are high.

c) It involves selling standardized products using standardized processes around the world.

d) It involves a combination of both local responsiveness and standardization.

Difficulty: Medium

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

53) Which of the following statements best describes global integration?

a) It is a strategy that involves tailoring products or services to local markets.

b) It involves making products and/or processes consistent across different units within a firm.

c) It refers to the standardization of processes within a single business in different locations around the world.

d) It refers to a firm’s adjustments to products, services, and processes in order to account for local culture and needs.

Difficulty: Medium

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

54) Which of the following statements is true of exporting?

a) It involves very high investments.

b) It allows for lesser economies of scale across countries.

c) It is the least risky of the modes of international market entry.

d) It works well when high differentiation of a product is required.

Difficulty: Medium

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

55) Which of the following is true of a firm’s choice of entry mode?

a) It is based on a firm's product.

b) It is based on a firm's international experience.

c) It is based on a firm's operational practices.

d) It is based on a firm's in-house production experience.

Difficulty: Medium

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

Question type: Text Entry

56) The spread of businesses across national borders is called ___.

Difficulty: Easy

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

57) The stages a product or service goes through during its lifespan refers to a(n) ___.

Difficulty: Easy

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

58) ___ distance is usually measured as per capita gross domestic product.

Difficulty: Easy

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

59) ___ is the need to tailor an organization’s products, marketing, and distribution strategies to the local customers in a foreign country.

Difficulty: Easy

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

60) Granting another business the permission to use or sell a firm’s product, technology, or process is called ___.

Difficulty: Easy

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Question type: Essay

61) Explain why firms choose to compete in international markets.

Difficulty: Easy

Section Reference 1: Why Firms Expand Internationally

Learning Objective 1: Describe different kinds of distance and how they affect the likelihood of a successful international expansion. Explain how this affects the choice of where firms should go when they expand internationally.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: These are the primary reasons for firms to compete in international markets.

Growth: The need to grow sales is one of the biggest reasons that firms expand internationally. Some firms have saturated their home markets, and entering foreign markets is the only way for them to sustain growth.

Efficiency: Many firms enter additional markets in order to become more efficient. Efficiency takes a number of forms, including obtaining lower-cost resources, extending the lifespan of products, and achieving economies of scale and scope.

Managing risks: Operating in more than one country can also provide firms with a measure of protection against disaster, both economic and natural.

Knowledge: Another reason for expanding into other countries is to generate more knowledge, the basis for innovation. When a firm sells in different countries, to people with different tastes and needs, it often gains new insights about its products and services. Serving multiple types of customers can help a firm to identify unmet needs in multiple markets. Those insights can be valuable for increasing sales in many locations.

Responding to customers: Last, but not least, firms may expand internationally in response to either customers or competitors. This is particularly true of business-to-business (B2B) firms that perform intermediate steps of the value chain for large customers.

62) Write a note on cultural distance.

Difficulty: Easy

Section Reference 1: Where Firms Should Expand

Learning Objective 1: Discuss where firms should go when they expand.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: Cultural distance refers to differences in language and culture, the way people live and think about the world. People in another country might hold different beliefs about a host of significant issues, including how people should interact and how business should be conducted. They might have very different worldviews about human nature and the role of individuals and companies in society. All of these can add up to a very foreign environment that makes it difficult for firms to understand their customers and local employees.

Although it is only one aspect of culture, the issue of language is influential. Firms are 42 percent less likely to do business in a country with a different language. Language differences are relatively easy to fix, but potential problems increase rapidly when companies move into countries with deeper, more difficult to overcome types of cultural distance.

These may include differences in:
• Religion
• Ethnicity
• Trust for outsiders
• How genders are expected to behave
• The degree to which the culture is focused on individuality or collective action
• How people accept ambiguity or follow rules and laws
• The degree to which people allow abuses of political or market power

Many of these types of cultural differences can be subtle but still have a significant impact on consumer behavior and shape the market demand for foreign products.

63) What are the three primary strategies that firms can use to do business internationally?

Difficulty: Easy

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: There are three primary strategies firms can use to do business internationally:
i) Multidomestic strategy—emphasizes local responsiveness over standardization.
ii) Global strategy—emphasizes global standardization and economies of scale over local responsiveness.
iii) Arbitrage strategy—takes advantage of country-comparative advantages—sources of low cost (e.g., cheap labor) or unique resources (e.g., skilled workers).

64) Explain the ways to manage variation and successfully pursue a multidomestic strategy.

Difficulty: Easy

Section Reference 1: How Firms Compete Internationally

Learning Objective 1: Explain the three primary types of international strategy. Be able to use the international strategy triangle to determine which international strategy is right for a specific firm.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: Firms can manage variation in three major ways to successfully pursue a multidomestic strategy:

i) Focus adaptations: Some firms manage the variation by tightly focusing on a particular product, customer segment, or geographic area. Such highly focused firms still tailor their products, but the amount of variety they face is more manageable by maintaining a tight focus.

ii) Externalize adaptations: Some firms externalize the work of adapting the product for local needs, generally by arranging for local customers to do it. Methods of externalization include franchising and alliances, which are discussed later in this chapter.

iii) Design adaptability: A third method for managing the costs of localization involves designing a product so that it can be adapted while still maintaining some economies of scale. Some companies design for cheap adaptation by investing in flexible manufacturing that reduces the costs of short manufacturing runs. Others modularize their product, creating a set of standard interfaces that allow many different types of alternatives to plug into one another.

65) Explain the four different modes of international market entry.

Difficulty: Easy

Section Reference 1: How a Firm Gets Into a Country: Modes of Entry

Learning Objective 1: Explain when a firm should use each of four major ways to enter a foreign market.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: The four different modes of international market entry are: exporting; licensing and franchising; joint ventures and alliances; wholly owned subsidiaries.

Exporting involves producing goods in a single location and selling them in foreign markets.

Licensing and franchising both involve selling the rights to produce a firm’s products or services.

Alliances involve sharing resources, risks, and rewards. They are an increasingly favored way to enter markets that are distant (i.e., more risky) from the home market.

Wholly owned subsidiaries are local units owned outright by the entering firm. This type of entry requires the most investment and creates the most risk, as the firm has to put up all of the capital itself. Wholly owned subsidiaries can, however, overcome trade and transportation barriers by producing locally. They may also allow a foreign firm to appear more local to host-country governments and consumers.