International Business: The Challenges of Globalization, 9e (Wild)
Chapter 15 Managing International Operations
1) Which of the following terms refers to the decision of whether to produce a component
internally or to outsource it from another company?
A) buyer decision process
B) decision problem
C) per curiam decision
D) make-or-buy decision
2) The process of assessing a company’s ability to produce enough output to satisfy market
demand is called ________.
A) capacity planning
B) lean production
C) process management
D) product structure modeling
3) Kathleen, a manager at Parker Airline, has the responsibility of deciding how many
passengers Parker Airline can serve at a given time. Kathleen is most likely involved with
________.
A) operations management
B) services production planning
C) capacity planning
D) service operations management
4) The make-or-buy decision primarily relates to ________.
A) reducing production
B) acquiring components
C) forming joint ventures
D) obtaining foreign facilities
5) ________ refers to the concentration of production facilities in one location.
A) Lean production
B) Continuous production
C) Centralized production
D) Horizontal integration
6) ________ refers to a situation in which facilities are spread over several locations, with one
facility for each national business environment in which the company markets its products.
A) Continuous production
B) Decentralized production
C) Vertical integration
D) Lean production
7) A British toy company manufactures all of its product lines in a single facility in Europe.
Which of the following is the company demonstrating?
A) continuous production
B) lean production
C) centralized production
D) horizontal integration
8) An Asian jewelry company maintains production facilities in South Korea, Vietnam, and
Malaysia. Which of the following is the company exemplifying?
A) lean production
B) decentralized production
C) vertical integration
D) continuous production
9) A company that sells undifferentiated products in all their markets and do not need to locate
near their markets in order to stay on top of changes in buyer preferences use ________.
A) vertical integration
B) centralized production
C) lean production
D) continuous production
10) The decentralization of production facilities is a typical policy for companies that pursue
________.
A) a multinational strategy
B) a global strategy
C) mass customization
D) vertical integration
11) The centralization of production facilities is a typical policy for companies that pursue
________.
A) horizontal integration
B) product differentiation
C) a global strategy
D) a multinational strategy
12) Companies with decentralized production facilities are often pursuing ________ strategies.
A) low-cost
B) differentiation
C) retrenchment
D) combination
13) Deciding the sequence of operations a company will use to create its product is called
________.
A) product planning
B) capacity planning
C) location economies
D) process planning
14) Which of the following determines the process that a company will use to create its product?
A) a firm’s multinational strategy
B) a firm’s global strategy
C) a firm’s corporate-level strategy
D) a firm’s business-level strategy
15) Which of the following will a company that is pursuing a low-cost leadership strategy most
likely use for creating its product?
A) implement handcrafted artisanship
B) manufacture in large production batches
C) manufacture components in-house
D) customize products for each customer
16) Deciding the spatial arrangement of production processes within production units is called
________.
A) facilities layout planning
B) capacity planning
C) process planning
D) location economies
17) Which of the following factors has the least effect on facilities layout planning?
A) supply of land in a nation
B) cost of land in a nation
C) a firm’s production process
D) age of the company
18) The board plans to examine Wilson’s ability to produce enough bags to satisfy their
customers’ demands. This evaluation is known as ________.
A) capacity planning
B) process planning
C) lean production
D) product structure modeling
19) If Wilson Industries selects a new area for its production units, the company will be
implementing ________.
A) capacity planning
B) process planning
C) facilities location planning
D) product structure modeling
20) The board will also examine new production techniques the company could use to create its
product. This examination is a part of ________.
A) capacity planning
B) process planning
C) facilities location planning
D) centralized production
21) If the board discusses the spatial arrangement of production processes within Wilson’s
production facilities, they will be engaging in ________.
A) capacity planning
B) facilities location planning
C) process planning
D) facilities layout planning
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Scenario: Hafstrom Motors
Based in Kentucky, Hafstrom Motors has always used spare parts made in America for its
automobiles. However, sales and profits have slumped over the past three years. A senior
manager at the company comes up with new strategies for improving the firm’s production
activities.
22) The senior manager recommends that Hafstrom obtain auto parts from a country where
production activities would generate more value than it would generate elsewhere. He wants to
take advantage of ________.
A) just-in-time manufacturing
B) facilities layout planning
C) process planning
D) location economies
23) The process of assessing a company’s ability to produce enough output to satisfy market
demand is called capacity planning.
24) Capacity planning applies only to manufacturing companies.
25) Differentiation strategies demand that producers provide extra value by offering customers
something unique, such as superior quality, added features, or special brand images.
26) Worker productivity tends to be lower in most developing nations than in developed nations.
27) Supply issues (location and availability of vendors) are also important in location planning.
28) Companies selling undifferentiated products find centralized production most effective.
29) It is important for low-cost competitors to locate near their markets in order to keep track of
buyer preferences.
30) The particular process to be used to create products is typically determined by a firm’s
corporate-level strategy.
31) Availability and cost of labor in the local market is crucial to capacity planning.
32) The process by which a company extends its control over additional stages of production is
called vertical integration.
33) Companies strive toward quality improvements for attaining economies of scale.
34) Explain the process of facilities location planning. What issues must companies consider
while selecting the location for their production facilities?
35) How is process planning affected by a company’s business-level strategy? How can
outsourcing lower risk for firms?
36) Describe the production managers’ decision regarding whether to centralize or decentralize
production facilities, and explain the benefits of vertical integration.
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Greater Control—Companies that depend on others for key ingredients or components give up a
degree of control. Making rather than buying can give managers greater control over raw
materials, product design, and the production process itself—all of which are important factors in
product quality. In turn, quality control is especially important when customers are highly
sensitive to even slight declines in quality or company reputation.
In addition, persuading an outside supplier to make significant modifications to quality or
features can be difficult. This is especially true if modifications entail investment in costly
equipment or if they promise to be time-consuming. If just one buyer requests costly product
adaptations or if there is reason to suspect that a buyer will eventually take its business
elsewhere, a supplier may be reluctant to undertake a costly investment. Unless that buyer
purchases in large volumes, the cost of the modifications may be too great for the supplier to
absorb. In such a case, the buyer simply may be unable to obtain the product it wants without
manufacturing it in-house. Thus companies maintain greater control over product design and
product features if they manufacture components themselves.
Finally, making a product can be a good idea when buying from a supplier means providing the
supplier with a firm’s key technology. Through licensing agreements companies often provide
suppliers in low-wage countries with the technologies needed to make their products. But if a
company’s competitive advantage depends on that technology, the licensor could inadvertently
be creating a future competitor. When controlling a key technology is paramount, it is often
better to manufacture in-house.
AACSB: Application of knowledge
Skill: Synthesis
Difficulty: Hard
LO: 15.1: Describe the elements to consider when formulating production strategies.
37) Discuss the standardization versus adaptation decision for managers when considering
production facilities, and describe considerations for managers when acquiring fixed assets.
38) The process by which a company extends its control over additional stages of production is
called ________.
A) a push strategy
B) a pull strategy
C) vertical integration
D) horizontal integration
39) Which of the following reasons encourages companies to make a product rather than buy it?
A) Making a product gives managers greater control over the production process.
B) Making a product lowers the risk associated with the production process.
C) Making a product increases the company’s flexibility to respond to market conditions.
D) Making a product gives companies a great deal of power in their relationships with suppliers.
40) Which of the following reasons encourages companies to buy a product rather than make it?
A) Buying a product gives managers greater control over the production process.
B) Buying a product increases the company’s total costs significantly compared to making the
product in-house.
C) Buying a product ensures non-flexibility to local market conditions.
D) Buying a product enables a company to gain a great deal of power in their relationships with
suppliers.
41) Which of the following processes will a computer assembling firm engage in if it decides to
manufacture its own monitors and printers?
A) outsourcing
B) vertical integration
C) niche marketing
D) lean production
42) A firm that buys from another company a good or service that is part of the firm’s value-
added activities is practicing ________.
A) outsourcing
B) vertical integration
C) horizontal integration
D) lean production
43) ________ will enable a company to reduce the degree to which it is vertically integrated and
the overall amount of specialized skills and knowledge that it would have to possess.
A) Outsourcing
B) Skimming
C) Lean production
D) Centralized production
44) Which of the following statements is true of outsourcing?
A) It reduces economic risk by facilitating the purchase of large insurance policies.
B) It reduces production risk by eliminating delays in the timely receipt of needed parts.
C) It reduces political risk by enabling the company to avoid investing in plants and equipment
abroad.
D) It reduces currency risk by allowing the company to invest the home currency on in-house
production facilities.
45) Computer companies buying hardware components from component-makers, assembling
them in their own facilities, and selling completed systems to consumers and businesses is an
example of ________.
A) telecommuting
B) franchising
C) outsourcing
D) licensing
46) ________ manufacturing is any manufacturing that takes place in a country different from
the home country.
A) Offshore
B) Multidomestic
C) Cost-minimization
D) Outsourcing
47) ________ in the computer industry is the outsourcing of the actual assembly of computers
plus the job of shipping them to distributors and other intermediaries.
A) Agile manufacturing
B) Just in time manufacturing
C) Lean manufacturing
D) Stealth manufacturing
48) Storage facilities, retail outlets, and production equipment in the host country are examples
of ________.
A) liquid assets
B) current assets
C) fixed assets
D) intangible assets
49) A fixed asset can also be referred to as a ________ asset.
A) liquid
B) current
C) tangible
D) trading account
50) Which of the following is a barrier to buying products from international suppliers?
A) extremely low tariffs
B) additional transportation costs
C) lower flexibility to respond to market conditions
D) high political risk
51) Which of the following is established by a company that has the option of either (1)
acquiring or modifying existing factories or (2) building entirely new facilities?
A) a divestiture
B) a shadow economy
C) a greenfield investment
D) a shell corporation
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Scenario: Hafstrom Motors
Based in Kentucky, Hafstrom Motors has always used spare parts made in America for its
automobiles. However, sales and profits have slumped over the past three years. A senior
manager at the company comes up with new strategies for improving the firm’s production
activities.
52) The top management of the company contends that Hafstrom would benefit most from
manufacturing its own parts, rather than sourcing it from elsewhere, even if they are made at
another location overseas. Which of the following is being recommended in this approach?
A) just-in-time manufacturing
B) location economies
C) vertical integration
D) outsourcing
53) The senior manager argues that Hafstrom could reduce its costs significantly by purchasing
parts from companies located overseas rather than producing its own parts. Which of the
following is the senior manager advocating?
A) outsourcing
B) a greenfield investment
C) lean production
D) vertical integration