Theories of the international firm Ch.2 Exam Questions

Chapter 2

Test Bank

Type: multiple choice question

Title: Chapter 02 Question 01

1) Globalisation of production generally provides opportunities for firms to _______

Feedback: With globalisation firm are likely to enjoy both access to lower cost resources and improved quality (access to specialist suppliers). Times to market could increase if more distant or remote locations are used.

A-head reference: 2.4 Core principles of the global factory concept

a. access lower cost resources

b. improve product quality

c. reduce lead times to markets

d. Both a and b

Type: multiple choice question

Title: Chapter 02 Question 02

2) A firm invests in the experience of its management by involving them in cross-national project teams. Internal research shows that this increases productivity and employee retention. As a result the firm has created _______

Feedback: Investment by the firm in a proprietary advantage (unique to that single firm) creates a firm-specific advantage.

A-head reference: 2.2 Theories of multinational firm: an evolution in thinking

a. a country specific advantage

b. a firm-specific advantage

c. a transaction specific advantage

d. a location specific advantage

Type: multiple choice question

Title: Chapter 02 Question 03

3) Outsourcing means _______

Feedback: Outsourcing means externalise production via subcontracting to independent manufacturers

A-head reference: 2.4 Core principles of the ‘global factory’ concept

a. Subcontracting to independent manufacturers

b. Going international

c. Export to a third country

d. Distribute company’ products

Type: true-false

Title: Chapter 02 Question 04

4) MNEs exploits an internally transferable intangible public good such as knowledge

a. True

Feedback: MNEs manage knowledge flow monopolised by the firm and usually protected by a brand

A-head reference: 2.4 Core principles of the ‘global factory’ concept

b. False

Type: multiple choice question

Title: Chapter 02 Question 05

5) Global factory’s main strategy is characterised by _______

Feedback: Focal firms have decreased their ownership of productive capacity and increased the focus on high value-added activity such as intangible assets

A-head reference: 2.4 Core principles of the ‘global factory’ concept

a. Focus on regionalisation

b. Focus on export

c. Focus on quality production

d. Focus on intangible assets and decreased emphasis on productive capacity

Type: true-false

Title: Chapter 02 Question 06

6) Global factory adopts a balance of global and local strategy

a. True

Feedback: this strategy is also called Glocal

A-head reference: 2.4 Core principles of the ‘global factory’ concept

b. False

Type: multiple choice question

Title: Chapter 02 Question 07

7) Firm-, or ownership specific advantages _______

Feedback: Ownership advantages are always proprietary or unique to a single firm. Clearly b is wrong and a and d may be true in some cases, but c is always the case.

A-head reference: 2.2 Theories of multinational firm: an evolution in thinking

a. are always based on natural resources

b. can also be present within competitor firms

c. are always a proprietary capability of the firm

d. are always the result of government favouritism

Type: true-false

Title: Chapter 02 Question 08

8) By utilising an international pool of suppliers, multinational enterprises can lower production costs.

a. True

Feedback: The statement is likely to be true because specialist suppliers may have access to lower-cost resources, greater scale or innovative technology. If they did not offer a cost advantage the buyer is likely to undertake the activity itself (internalise it).

A-head reference: 2.2 Theories of multinational firm: an evolution in thinking

b. False

Type: true-false

Title: Chapter 02 Question 09

9) Outsourcing and offshoring are synonymous

a. True

b. False

Feedback: outsourcing involves ‘buy’ rather than ‘make, while offshoring involves externalisation in a foreign country

A-head reference: 2.4 Core principles of the ‘global factory’ concept

Type: true-false

Title: Chapter 02 Question 10

10) Intellectual property is property that is the product of intellectual activity.

a. True

Feedback: The statement is true as intellectual property is the result of applied intellectual activity such as creativity.

A-head reference: 2.4 Core principles of the ‘global factory’ concept

b. False

Type: true-false

Title: Chapter 02 Question 11

11) GVCs thinking conceptualises global production as a set of inter country agreements to regulate the system of production

a. True

b. False

Feedback: GVC are a set of inter-firm networks that provide the connections along a cross-border value chain

A-head reference: 2.3 Global value chains

Type: true-false

Title: Chapter 02 Question 12

12) Global factory and GVC are two different frameworks describing the same phenomenon from different perspectives.

a. True

Feedback: This is a correct and precise statement.

A-head reference: 2.3 Global value chains

b. False

Type: true-false

Title: Chapter 02 Question 13

13) Flexibility is a competitive advantage of the global factory

a. True

Feedback: The ability to allocate resources quickly and smoothly is a competitive advantage of the global factory

A-head reference: 2.5 Competitive advantage of the global factory

b. False

Type: true-false

Title: Chapter 02 Question 14

14) Resilience refers to the ability to avoid external shocks

a. True

b. False

Feedback: Resilience refers to the ability to absorb external shocks

A-head reference: 2.5 Competitive advantage of the global factory

Type: true-false

Title: Chapter 02 Question 15

15) A global factory will pursue internalization where market inefficiencies result in unacceptably high transactions costs.

a. True

Feedback: True, high costs of using markets encourages the firm to bypass the market by internalising transactions. This creates a multinational enterprise when those transactions cross borders.

A-head reference: 2.2 Theories of multinational firm: an evolution in thinking

b. False

Type: true-false

Title: Chapter 02 Question 16

16) The main effect of liberalisation is that the ‘ripple’ effects of shocks travel farther and wider than before.

a. True

Feedback: The statement is correct

A-head reference: 2.5 Competitive advantage of the global factory

b. False

Type: true-false

Title: Chapter 02 Question 17

17) Coordination and control include fine-slice activities

a. True

Feedback: the statement is correct as fine slicing represent one of the most important elements of managing the global factory

A-head reference: 2.5 Competitive advantage of the global factory

b. False

Type: true-false

Title: Chapter 02 Question 18

18) A global value chain comprises the interrelated organizations, resources, and processes that create and deliver products and services to end customers.

a. True

Feedback: This is a correct definition of what is meant by a global supply chain.

A-head reference: 2.3 Global value chains

b. False

Type: true-false

Title: Chapter 02 Question 19

19) Knowledge spillovers are considered externalities

a. True

Feedback: Investments in knowledge creation (for example by R&D) by one party create knowledge spillovers with positive externality effects when such knowledge can be captured by others at no cost.

A-head reference: 2.4 Core principles of the ‘global factory’ concept

b. False

Type: true-false

Title: Chapter 02 Question 20

20) The main challenge of VUCA world is that it brings random and unanticipated effects into deterministic models

a. True

Feedback: The statement is true since changes in technology, regulations, policies and increased pressure of the civil society (sustainability, fairness, equity) interact and increase the volatility of the business environment.

A-head reference: 2.6 Evolution of the global factory and new challenges

b. False