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Essentials of Strategic Management, 3rd Edition Chapter 6
Strategy in the Global Environment
Name: ______Date: ______
1.T F Rivalry for any company is understood by examining what happens only within the boundaries of its home country.
ANS: False PTS: 1 REF: 146
NAT: AACSB Analytic | AACSB Strategy
2.T F Global strategy affects firms only at the corporate level.
ANS: False PTS: 1 REF: 147
NAT: AACSB Analytic | AACSB Strategy
3.T F The globalization of production has been increasing as companies take advantage of lower barriers to international trade and investment to disperse important parts of their production process around the globe.
ANS: True PTS: 1 REF: 147
NAT: AACSB Analytic | AACSB Strategy
4.T F Many believe that the world's economic system is moving toward a system in which national markets are merging into one huge global marketplace.
ANS: True PTS: 1 REF: 147
NAT: AACSB Analytic | AACSB Strategy
5.T F Expanding globally can enable a company to increase its profitability and grow its profits more rapidly.
ANS: True PTS: 1 REF: 146
NAT: AACSB Analytic | AACSB Strategy
6.T F The average tariff rate on manufactured goods traded between advanced nations has fallen from around 40 percent to under 4 percent.
ANS: True PTS: 1 REF: 146
NAT: AACSB Analytic | AACSB Strategy
7.T F The volume of world merchandise trade has grown slower than the world’s economy since 1950.
ANS: False PTS: 1 REF: 146
NAT: AACSB Analytic | AACSB Strategy
8.T F The trend toward the globalization of production and markets is on the rise because industry boundaries do not stop at national borders.
ANS: True PTS: 1 REF: 147
NAT: AACSB Analytic | AACSB Strategy
9.T F The shift from national to global markets has intensified competitive rivalry in industry after industry.
ANS: True PTS: 1 REF: 147
NAT: AACSB Analytic | AACSB Strategy
10.T F A company can increase it growth rate by taking goods or services developed at home and selling them internationally.
ANS: True PTS: 1 REF: 148
NAT: AACSB Analytic | AACSB Strategy
11.T F The success of many multinational companies is based only upon the goods or services they sell in foreign nations.
ANS: False PTS: 1 REF: 148
NAT: AACSB Analytic | AACSB Strategy
12.T F Proctor & Gamble's global success was based only on its portfolio of consumer goods.
ANS: False PTS: 1 REF: 148
NAT: AACSB Analytic | AACSB Strategy
13.T F Walmart opened its first stores in Mexico in 1993.
ANS: False PTS: 1 REF: 150
NAT: AACSB Analytic | AACSB Strategy
14.T F Location economics benefits arise from performing a value creation activity in the location optimal for that activity, wherever in the world that might be.
ANS: True PTS: 1 REF: 149
NAT: AACSB Analytic | AACSB Strategy
15.T F Companies that compete in the global marketplace typically face two types of competitive pressures, cost reductions and expanding globally.
ANS: False PTS: 1 REF: 152
NAT: AACSB Analytic | AACSB Strategy
16.T F Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical.
ANS: True PTS: 1 REF: 154
NAT: AACSB Analytic | AACSB Strategy
17.T F Responding to pressures to be locally responsive requires that a company differentiate its products and marketing strategy.
ANS: True PTS: 1 REF: 154
NAT: AACSB Analytic | AACSB Strategy
18.T F Companies pursuing a low-cost strategy on a global scale are following a global standardization strategy.
ANS: True PTS: 1 REF: 156
NAT: AACSB Analytic | AACSB Strategy
19.T F A transnational strategy makes the most sense when there are strong pressures for cost reductions and demand for local responsiveness is minimal.
ANS: False PTS: 1 REF: 159
NAT: AACSB Analytic | AACSB Strategy
20.T F A localization strategy involves manufacturing global output in a limited number of centralized locations to realize scale economies.
ANS: False PTS: 1 REF: 157
NAT: AACSB Analytic | AACSB Strategy
21.T F A localization strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense.
ANS: True PTS: 1 REF: 157
NAT: AACSB Analytic | AACSB Strategy
22.T F In companies following a transnational strategy, the flow of skills and product offerings moves in one direction—from the home company to foreign subsidiaries.
ANS: True PTS: 1 REF: 159
NAT: AACSB Analytic | AACSB Strategy67
23.T F Companies that pursue a global standardization strategy are trying to develop a business model that simultaneously achieves low costs and differentiates the product offering across geographic markets.
ANS: False PTS: 1 REF: 156
NAT: AACSB Analytic | AACSB Strategy
24.T F Through transnational strategy a firm tries to achieve low costs, product differentiation across geographic markets, and foster skills among different subsidiaries.
ANS: True PTS: 1 REF: 159
NAT: AACSB Analytic | AACSB Strategy
25.T F An international strategy may not be viable in the long term, and to survive, companies that are able to pursue it might ultimately need to shift towards a global standardization strategy.
ANS: True PTS: 1 REF: 160
NAT: AACSB Analytic | AACSB Strategy
26.T F An international strategy is appropriate when firms face high cost pressures and low pressures for local responsiveness.
ANS: False PTS: 1 REF: 159
NAT: AACSB Analytic | AACSB Strategy
27.T F Companies pursuing an international strategy tend to centralize product development functions, such as R&D at home.
ANS: True PTS: 1 REF: 160
NAT: AACSB Analytic | AACSB Strategy
28.T F Companies following an international strategy avoid any attempt at local customization of product offering.
ANS: False PTS: 1 REF: 160
NAT: AACSB Analytic | AACSB Strategy
29.T F A problem with the international strategy is that over time, competitors inevitably emerge, and if managers do not take pro-active steps to reduce their cost structure, their company may be rapidly out-flanked by efficient global competitors.
ANS: True PTS: 1 REF: 160
NAT: AACSB Analytic | AACSB Strategy
30.T F MTV is a good example of a company that has had to pursue a localization strategy by varying its programming to match the demands of viewers in different nations.
ANS: True PTS: 1 REF: 158
NAT: AACSB Analytic | AACSB Strategy
31.T F Most manufacturing companies begin their global expansion via international licensing.
ANS: False PTS: 1 REF: 162
NAT: AACSB Analytic | AACSB Strategy
32.T F One advantage of exporting is that it avoids the cost of establishing manufacturing operations in the host country.
ANS: True PTS: 1 REF: 161
NAT: AACSB Analytic | AACSB Strategy
33.T F Sony came to dominate the global television market via franchising.
ANS: False PTS: 1 REF: 161
NAT: AACSB Analytic | AACSB Strategy
34.T F International licensing is an arrangement whereby a foreign licensee buys the rights to produce a company's product in the licensee's country for a negotiated fee.
ANS: True PTS: 1 REF: 162-163
NAT: AACSB Analytic | AACSB Strategy
35.T F When a company licenses its technology, it can quickly lose control over it.
ANS: True PTS: 1 REF: 163
NAT: AACSB Analytic | AACSB Strategy
36.T F One advantage of joint ventures is that a company may benefit from a local partner's knowledge of the many dimensions of a host country.
ANS: True PTS: 1 REF: 164
NAT: AACSB Analytic | AACSB Strategy
37.T F Establishing a wholly owned subsidiary is generally the least costly method of serving a foreign market.
ANS: False PTS: 1 REF: 165
NAT: AACSB Analytic | AACSB Strategy
38.T F Franchising is a specialized form of licensing in which the franchiser sells the franchisee intangible property (normally a trademark) and insists that the franchisee agree to abide by strict rules about how it does business.
ANS: True PTS: 1 REF: 163
NAT: AACSB Analytic | AACSB Strategy
39.T F Many of the issues that arise in the case of technological know-how do not arise in the case of management know-how.
ANS: True PTS: 1 REF: 167
NAT: AACSB Analytic | AACSB Strategy
40.T F The greater the pressures for cost reduction are, the more likely it is that a company will want to pursue some combination of exporting and wholly owned subsidiaries.
ANS: True PTS: 1 REF: 167
NAT: AACSB Analytic | AACSB Strategy
41.The globalization of production has allowed firms to
a)increase their market share.
b)lower their cost structure.
c)respond to individual market segments.
d)avoid international competition.
e)meet all of these goals.
ANS: B PTS: 1 REF: 147
NAT: AACSB Analytic | AACSB Strategy
42.Which of the following is not an implication of the globalization of production and markets for competition within an industry?
a)Industry boundaries do not stop at national borders so managers must understand what is happening globally.
b)Increasing competitive rivalry in numerous industries
c)Creation of significant opportunities
d)Profit potential of any company rests on their international strategy.
e)All of these are implications of the globalization of production and markets.
ANS: D PTS: 1 REF: 146-147
NAT: AACSB Analytic | AACSB Strategy
43.Global expansion
a)is feasible only for large companies.
b)can enable companies to increase their profitability and grow their profits more rapidly.
c)allows domestic companies in the mature stage of the industry life cycle to maintain profits but not to increase them.
d)requires locating facilities in foreign countries.
e)makes sense for manufacturing firms, but not for service firms.
ANS: B PTS: 1 REF: 148
NAT: AACSB Analytic | AACSB Strategy
44.Which of the following is not one of the ways in which expanding globally can enable companies to increase their profitability and grow their profits more rapidly?
a)Leveraging existing products in new markets.
b)Realizing economies of scale.
c)Locating in foreign countries with significant trade barriers.
d)Realizing location economies.
e)Leveraging skills created within subsidiaries applying them to other operations.
ANS: C PTS: 1 REF: 148-152
NAT: AACSB Analytic | AACSB Strategy
45.When a company increases its growth rate by taking goods or services developed at home and selling them internationally it is
a)leveraging its existing products.
b)taking the path of least resistance.
c)engaging in product positioning.
d)realizing cost economies from global expansion.
e)realizing location economies.
ANS: A PTS: 1 REF: 148
NAT: AACSB Analytic | AACSB Strategy
46.When a company expands its sales volume through international expansion it can realize cost savings from economies of scale through all of the following except
a)spreading fixed costs over its global sales volume.
b)utilizing its production facilities more intensely.
c)increased bargaining power with its suppliers.
d)improved customer responsiveness.
e)all of these are ways that a company can realize cost savings from economies of scale.
ANS: D PTS: 1 REF: 149
NAT: AACSB Analytic | AACSB Value of Creation
47.When a company performs a value creation activity in the optimal location for that activity, wherever in the world that might be, they are trying to capitalize on
a)location economies
b)economies of scope.
c)the transnational strategy.
d)economies of scale.
e)their localization strategy.
ANS: D PTS: 1 REF: 151
NAT: AACSB Analytic | AACSB Value of Creation
48.When Dell opened a service call center in India to take advantage of an educated, English-speaking workforce and lower its costs, it was realizing which of the following benefits of global expansion?
a)Economies of scale
b)Leveraging organizational skills
c)Leveraging competencies
d)Location economies
e)None of these
ANS: E PTS: 1 REF: 153
NAT: AACSB Analytic | AACSB Value of Creation
49.Responding to pressures for cost reductions requires that a company try to minimize its ______.
a)overhead costs.
b)tangible asset costs.
c)unit costs.
d)intangible asset costs.
e)none of the above.
ANS: C PTS: 1 REF: 152
NAT: AACSB Analytic | AACSB Value of Creation
50.Which of the following does not allow a company to reduce unit costs?
a)Outsourcing some functions to low-cost foreign suppliers
b)Customizing the product to meet local requirements
c)Realizing location economies
d)Pushing its suppliers to outsource some functions to low-cost foreign suppliers
e)Performing an activity at the lowest-cost location
ANS: B PTS: 1 REF: 152
NAT: AACSB Analytic | AACSB Value of Creation
51.Which of the following factors increases pressures for cost reductions?
a)Differences in distribution channels between home and foreign markets are modest.
b)Increasing national wealth is expanding the market.
c)The product has great transportation needs.
d)The product has high switching costs.
e)Differentiation on nonprice factors is difficult, and price is the main competitive weapon in a market.
ANS: E PTS: 1 REF: 154
NAT: AACSB Analytic | AACSB Value of Creation
52.Which of the following factors increases pressures for local responsiveness?
a)Differences in customer tastes and preferences
b)Persistent excess capacity
c)Low-cost competitors
d)Powerful buyers
e)High international trade barriers
ANS: A PTS: 1 REF: 154
NAT: AACSB Analytic | AACSB Value of Creation
53.When toy maker Mattel sells Barbie dolls in the Middle East, it changes the doll's shape to one that is a more accurate portrayal of a female body. Mattel does this in order to
a)create a commodity-type product.
b)transfer technological know-how.
c)respond to differences in local tastes.
d)realize experience curve effects.
e)increase product standardization
ANS: C PTS: 1 REF: 155
NAT: AACSB Analytic | AACSB Value of Creation
54.Differences in tastes and preferences
a)increase pressures for cost reductions.
b)reduce profit potential.
c)prevent a company from pursuing a licensing strategy
d)reduce pressures from the host government.
e)increase pressures for local responsiveness.
ANS: E PTS: 1 REF: 154
NAT: AACSB Analytic | AACSB Value of Creation
55.Host government demands generally
a)discourage foreign companies from operating in the home country.
b)increase pressures for cost reductions.
c)increase pressures for local responsiveness.
d)impede a company's ability to minimize its transaction costs.
e)impede a company's ability to differentiate its product offering across national borders.\
ANS: C PTS: 1 REF: 155
NAT: AACSB Analytic | AACSB Value of Creation
56.In which of the following circumstances does a global standardization strategy make the most sense?
a)Global market standardization is not possible, and there are no significant economies of scale to be realized from centralizing global manufacturing.
b)Global market standardization is possible, but there are no significant economies of scale to be realized.
c)Global market standardization is not possible, but there are significant economies of scale to be realized from centralizing global manufacturing.
d)Consumer tastes and preferences differ among national markets, and economies of scale are insubstantial.
e)Global market standardization is possible, and there are significant economies of scale and location economies to be realized.
ANS: E PTS: 1 REF: 156-157
NAT: AACSB Analytic | AACSB Strategy
57.A global standardization strategy is most appropriate in an industry in which pressures for cost reductions are ______and pressures for local responsiveness are ______.
a)low; high
b)high; high
c)low; low
d)high; low
e)variable; high
ANS: D PTS: 1 REF: 157
NAT: AACSB Analytic | AACSB Strategy
58.A company with a business-level strategy of cost leadership should pursue which of the following global expansion strategies?
a)Localization
b)Global standardization
c)International
d)Transnational
e)Simple
ANS: B PTS: 1 REF: 156
NAT: AACSB Reflective Thinking | AACSB Strategy
59.A commodity oil producer would probably achieve the highest level of profitability with a(n) ______strategy.
a)global standardization
b)international
c)localization
d)transnational
e)focus
ANS: A PTS: 1 REF: 156
NAT: AACSB Reflective Thinking | AACSB Strategy
60.A localization strategy is most appropriate in an industry in which pressures for cost reductions are ______and pressures for local responsiveness are ______.
a)high; high
b)high; low
c)low; low
d)low; high
e)variable; high
ANS: D PTS: 1 REF: 157
NAT: AACSB Analytic | AACSB Strategy
61.A localization strategy is based on which of the following ideas?
a)There is a convergence in the tastes of consumers in different nations of the world.
b)There are substantial economies of scale to be realized from centralizing global production.
c)Consumer tastes and preferences differ among national markets.
d)There are cost advantages associated with manufacturing a standard product for global consumption.
e)Competitive strategy should be centralized at the world head office.
ANS: C PTS: 1 REF: 157
NAT: AACSB Analytic | AACSB Strategy
62.If a company wishes to achieve high local customization and it can charge higher prices for this customization, a company should pursue a(n) ______strategy.
a)transnational
b)global standardization
c)international
d)localization
e)simple
ANS: D PTS: 1 REF: 157
NAT: AACSB Analytic | AACSB Strategy
63.All of the following are consistent for a company pursuing a transnational strategy except
a)achieve low costs.
b)differentiate the product offering across geographic markets.
c)increasing profitability.
d)foster a flow of skills.
e)focus on leveraging subsidiary skills.
ANS: C PTS: 1 REF: 159
NAT: AACSB Analytic | AACSB Strategy
64.Pursuing an international strategy includes all of the following except
a)centralize product development at home.
b)establish manufacturing functions in each major country.
c)international licensing
d)establish marketing functions in each major country.
e)All of the above
ANS: C PTS: 1 REF: 160
NAT: AACSB Analytic | AACSB Strategy
65.A telecommunications firm develops new wireless cellular phones, a technology in which foreign competition is low and the need for local responsiveness is low. What is the most appropriate short-term strategy for this firm?
a)Global standardization
b)International
c)Localization
d)Transnational
e)Forming a joint venture
ANS: B PTS: 1 REF: 160
NAT: AACSB Analytic | AACSB Strategy
66.Which of the following is not a drawback to licensing?
a)A company does not have tight control over operations in foreign countries.
b)Licensing limits a company's ability to coordinate strategy.
c)A company may lose control of technological know-how.
d)A company's brand could become damaged if the licensee does not perform up to established standards.
e)All of these are drawbacks to licensing.
ANS: D PTS: 1 REF: 162-163
NAT: AACSB Analytic | AACSB Strategy