Chapter 6 Multinational and Entry-Mode Strategies: Content and Formulation
MULTIPLE CHOICE
1. According to the text, a fundamental dilemma faced by all multinationals is
a.
The form of competitive strategy they should use.
b.
How much they emphasize responding to differences in all the markets they operate.
c.
How to fight their rivals.
d.
None of the above
2. Responding to differences in the markets in all the countries in which a company operates is
a.
The global-local dilemma.
b.
The best strategy for success for a multinational.
c.
The local-responsiveness solution.
d.
The global solution.
3. The global solution to the global-local dilemma refers to
a.
Conducting business similarly around the world.
b.
Responding to differences in the global markets in which a company operates.
c.
Customization of products to regional but not country differences.
d.
None of the above
4. Conducting business similarly throughout the world, and locating company units wherever there is
high quality and low cost is
a.
The global-local dilemma.
b.
The global integration solution.
c.
The local responsiveness solution.
d.
The multidomestic solution.
5. A multidomestic company gives strategic priority to
a.
Providing a low cost product to local customers.
b.
Adapting a product or service to local needs.
c.
Having multiple locations for sources its raw materials.
d.
Controlling the strategic options of local companies.
6. Which strategy attempts to balance advantages from three other multinational strategies?
a.
Regional
b.
Multidomestic
c.
Transnational
d.
International
7. Dispersing value-chain activities anywhere in the world where the company can do them best or
cheapest refers to seeking
a.
The global-local dilemma.
b.
Comparative advantage of nations.
c.
Competitive advantage of firms.
d.
Locations advantages.
8. Comparative advantage is
a.
Similar to competitive advantage.
b.
A local responsiveness solution.
c.
Where the company can produce the cheapest.
d.
Advantages of nations over other nations.
9. Comparative advantages are
a.
Cost or quality advantages particular to a nation.
b.
Similar to competitive advantages.
c.
Emphasized through multidomestic strategies.
d.
None of the above
10. Selling global products and using similar marketing techniques worldwide is an example of a
a.
Transnational strategy.
b.
International strategy.
c.
Multidomestic strategy.
d.
Regional strategy.
11. A regional strategy refers to
a.
Managing raw-material sourcing, production, marketing, and support activities within a
particular region.
b.
Selling global products and using similar marketing techniques worldwide.
c.
Dispersing value-chain activities anywhere in the world where the company can do them
best or cheapest.
d.
None of the above
12. Global companies usually seek to
a.
Provide unique products for all countries of the world.
b.
Take advantage of different factor costs among countries.
c.
Manufacture their products in every country.
d.
Focus only on downstream activities in the value chain.
13. Common customer needs, global sources of raw material, and favorable trade policies all lead to
a.
An increased focus on local markets.
b.
More use of the multidomestic strategy.
c.
More use of the local solution to the global-local dilemma.
d.
A greater likelihood that companies select global strategies.
14. Having one set of products for North American countries and another set of products for Europe
illustrates which strategy?
a.
Multidomestic
b.
Regional
c.
Transnational
d.
Global
15. Globalization drivers
a.
Fall into four categories: market, costs, governments, and competition.
b.
Are conditions in an industry that favor transnational or international strategies over
multidomestic or regional strategies.
c.
Indicate the degree of globalization of an industry.
d.
All of the above
16. Asking diagnostic questions such as are there economies of scale, are there cheaper sources of raw
materials, are there global sources of low-cost raw materials provide information regarding which
globalization driver?
a.
Global markets
b.
Costs
c.
Competition
d.
Governments
17. Entry-mode strategies
a.
Include multidomestic and transnational strategies.
b.
Are options multinationals have to enter foreign markets and countries.
c.
Are only processes by which firms fill overseas orders like domestic orders.
d.
None of the above
18. Using intermediaries or go-between firms to provide the knowledge and contacts necessary to sell
overseas is usually associated with
a.
Direct exporting.
b.
Franchising.
c.
Indirect exporting.
d.
Licensing.
19. A company that treats and fills overseas orders like domestic orders is an example of a
a.
Indirect exporter.
b.
Export management company.
c.
Aggressive exporter.
d.
Passive exporter.
20. International franchising
a.
Is a comprehensive licensing agreement where the franchisor grants to the franchisee the
use of a whole business operation.
b.
When multinationals make a project fully operational and train local managers and
workers before the owner takes control.
c.
The use of intermediaries or go-between firms to provide the knowledge and contacts
necessary to sell overseas is.
d.
None of the above
21. When multinationals make a project fully operational and train local managers and workers before the
owner takes control, they are using which entry-mode strategy?
a.
Licensing
b.
Franchising
c.
Turnkey
d.
Direct export
22. When a firm from another country has an equity (or ownership) position in a separate company, it is
engaging in
a.
An international cooperative alliance.
b.
A turnkey operation.
c.
A contract manufacturer.
d.
FDI.
23. Foreign direct investment
a.
Is an entry-mode strategy.
b.
Means that a multinational owns, in part or in whole, an operation in another country.
c.
Symbolizes the highest rate of internationalization.
d.
All of the above
24. Major drawbacks of licensing include
a.
The risk of losing the capital investment.
b.
The risk of the local government changing international trade policies.
c.
The loss of control and the possibility of creating a new competitor.
d.
All of the above
25. Companies should license if
a.
They want to control all aspects of operation.
b.
Their product is older or a soon-to-be replaced technology.
c.
They have the necessary resources to export or invest directly.
d.
There are no tariffs or quotas.
26. If a company seeks a strategic alliance with another firm, it is a
a.
Low cost strategy.
b.
Franchising agreement.
c.
Competitive agreement.
d.
Cooperative agreement.
27. Advantages of foreign direct investment include
a.
Increased capital investment.
b.
Greater control of product and marketing strategy.
c.
Greater exposure to financial risks.
d.
The lower costs of using expatriates managers.
28. If management believes that it must control foreign sales, customer credit, and the eventual sale of the
product, then the company should choose which of the following entry-mode strategies?
a.
Indirect exporting
b.
Licensing
c.
Direct exporting
d.
Franchising
29. When deciding on an entry-mode strategy, cultural distance is
a.
The physical distance between two countries.
b.
Not the distance between an organization’s culture and the local national culture.
c.
Similar to the geographic distance.
d.
None of the above
30. As entry-mode strategies, direct and indirect exporting have
a.
High levels of control and low levels of risk.
b.
Similar levels of risk and control as FDI.
c.
Low levels of risk and control.
d.
Are among the most risky.
31. Which of the following strategies gives top priority to seeking location advantages and to gaining
operation efficiencies from worldwide operation?
a.
Multidomestic strategy
b.
Regional strategy
c.
Transnational strategy
d.
International strategy
32. If strategists in a firm believe that centralizing key activities such as R&D is necessary to reduce
coordination costs and to achieve economies of scale, they are more likely to choose
a.
An international strategy.
b.
A transnational strategy.
c.
A local strategy.
d.
None of the above
33. What dictates the choice of a multinational entry-mode strategy?
a.
Strategic competition
b.
Strategic reason to be in the market
c.
Companies want to share risks and costs of developing technology
d.
Companies want to achieve economies of scale
34. If a company believes that it needs to control foreign sales, customer credit, and sale of product to the
customer, it is more likely to choose
a.
Indirect exporting.
b.
Rely on foreign intermediaries for export purposes.
c.
Direct exporting.
d.
None of the above
35. To deal with political risk, various private and government agencies offer
a.
Insurance.
b.
Assurance.
c.
Investment.
d.
All of the above are true.
36. A company pursuing a regional strategy
a.
Has worldwide products and a worldwide value chain.
b.
Sells the same product using only minor modification in marketing and product offerings.
c.
Is similar to a company pursuing an international strategy.
d.
Attempt to gain location advantages of more global transnational combined with some of
the local-adaptation advantages of the multidomestic company.
37. Which of the following statements regarding exporting is FALSE?
a.
Exporting is the easiest of entry-mode strategies.
b.
Export can be of the passive form where overseas orders are treated like domestic orders.
c.
Export can be indirect where companies rely on intermediaries to sell overseas.
d.
Because it is the easiest form of going international, exports are not as important to the US
economy.
38. Foreign direct investment
a.
Exists when two or more firms have an ownership position in a separate company.
b.
Requires at least three separate companies to combine resources.
c.
Exists when two or more companies agree to cooperate in any value-chain activity.
d.
The above statements are all true for equity international joint ventures.
39. Which of the following refers to the negative impact of political decisions or events on a
multinational’s profitability?
a.
Economic risk
b.
Local government risk
c.
Political risk
d.
Control risk
40. Which of the following is NOT a factor considered when assessing political risk?
a.
The durability of the political system
b.
The role of the government, unions and the media in political stability
c.
The profitability
d.
The reliability of the rule of law
ESSAY
1. Describe the global-local dilemma. When is each solution most appropriate?
2. What are globalization drivers?
3. Discuss the conditions when a transnational or international firm is likely to outcompete a
multidomestic or regional strategist. Contrast this with the opposite situation where the multidomestic
is most likely to be successful.
4. Contrast the transnational and international strategies in their approach to location advantages.
5. You work for a small company that has an innovative low-cost production method for laser disks. A
Japanese firm approaches your CEO to license the technology. The CEO asks you to write a report
detailing the risks and potential benefits of this deal. What will you include in the report and why?
6. You work for a small company that has an innovative low-cost production method for laser disks that
allow it to produce at very low cost. A Belgian firm approaches your CEO and offers to export your
disks to Belgium for a commission. The CEO asks you to write a report detailing the risks and
potential benefits of this deal. What will you include in your report and why
7. Under what conditions would a regional strategy be best for a multinational? Explain.
8. Discuss some key issues to consider when choosing an entry-mode strategy.
ANS:
9. Discuss some general strategic considerations regarding multinational strategy when choosing a entry-
mode strategy.
10. What is political risk? Discuss some of the aspects of political risk assessment. How can
multinationals use political risk assessment?