True / False
1. In place of relatively stable and predictable domestic markets, firms across the globe find that they are competing in
relatively unstable and unpredictable global markets.
a. True
b. False
2. After a firm decides to compete internationally, it must select its strategy and choose a mode of entry into
international markets.
a. True
b. False
3. Because there are still several industrial and consumer markets in which only domestic firms compete, many firms
do not have to be able to compete internationally.
a. True
b. False
4. One reason why firms pursue international opportunities is to extend the product’s life cycle.
a. True
b. False
5. A reason that firms use international strategies is to secure needed resources, especially minerals and energy.
a. True
b. False
6. In some industries, technology drives globalization because the economies of scale necessary to reduce costs
cannot be met by competing in domestic markets alone.
a. True
b. False
7. A major incentive for the use of international strategy by French-based Carrefour Group is the potential for large
demand for goods and services from emerging markets such as China and India.
a. True
b. False
8. The three basic benefits of international strategies are 1) increased market size; 2) increased economies of scale
and learning; and 3) development of competitive advantages through location.
a. True
b. False
9. Rivals Airbus and Boeing have multiple manufacturing facilities and outsource activities partly for the purpose of
developing economies of scale as a source of being able to create value for customers.
a. True
b. False
10. As an indication of the importance of economies of scale, Ford Motor Company runs a single global business
developing cars and trucks that can be built and sold through the world.
a. True
b. False
11. Coca Cola and PepsiCo are examples of firms that have found it unnecessary to aggressively pursue international
strategies because of extensive growth opportunities available in the U.S. market.
a. True
b. False
12. Multinational firms have many opportunities to learn from their experiences in international markets, but they must
have a strong R&D system to absorb the knowledge.
a. True
b. False
13. Cultural differences affect location advantages in that business transactions are less difficult for a firm to complete
when there is a strong match among the cultures with which the firm is involved.
a. True
b. False
14. Location advantages are influenced by costs of production, access to natural resources and critical supplies, as well
as the needs of customers, but not culture.
a. True
b. False
15. The three corporate-level international strategies are cost leadership, differentiation, and focus.
a. True
b. False
16. When a firm initially pursues an international business-level strategy, the resources and capabilities established in
the home country frequently allow the firm to pursue the strategy into markets located in other countries.
a. True
b. False
17. Michael Porter’s Determinants of National Advantage describe factors associated with the firm’s domestic
environment that contribute to its dominance in a particular global industry.
a. True
b. False
18. Both the size and the nature of a country’s domestic demand for a particular industry’s good or service are
important in Porter’s determinants of national advantage.
a. True
b. False
19. Having substantial supplies of critical basic natural resources is a necessary condition for a country to support
businesses that can successfully compete in international markets.
a. True
b. False
20. South Korea‘s success in international markets is primarily a result of its abundant natural resources.
a. True
b. False
21. Italy has become the leader in the shoe industry because of related and supporting industries such as a well-
established leather-processing industry that provides the leather needed to construct shoes and related products.
a. True
b. False
22. A firm based in a country with a national competitive advantage is not guaranteed success as it implements its
chosen international business-level strategy. Instead, the actual strategic choices managers make may be the most
compelling reasons for success or failure.
a. True
b. False
23. A multidomestic strategy is an international strategy in which a firm‘s home office determines the strategies
business units are to use in each region.
a. True
b. False
24. A multidomestic strategy is an international strategy in which strategic and operating decisions are decentralized to
the strategic business units in individual or regions.
a. True
b. False
25. A major advantage of multidomestic strategies is the ability to customize for the specific market, although this
sacrifices economies of scale.
a. True
b. False
26. The firm using a global strategy seeks to develop economies of scale as it produces the same or virtually the same
products for distribution to customers throughout the world who are assumed to have similar needs.
a. True
b. False
27. A global strategy is an international strategy through which the firm offers standardized products across country
markets, with competitive strategy being dictated by offices within the host markets served.
a. True
b. False
28. The global strategy offers greater opportunities to take innovations developed at the corporate level or in one
market and apply them to other markets.
a. True
b. False
29. Research suggests that the performance of the global strategy is enhanced if it deploys in areas where regional
integration across countries is occurring.
a. True
b. False
30. A transnational strategy is an international strategy in which the firm seeks to achieve both global efficiency and
local responsiveness.
a. True
b. False
31. A transnational strategy is difficult to use because of its conflicting goals.
a. True
b. False
32. Even if effectively implemented, the transnational strategy often produces lower performance than does the
implementation of either the multidomestic or global strategies.
a. True
b. False
33. The growing number of global competitors heightens the requirements to keep costs down and there is the desire
for more specialized products to meet customer needs. These two pressures make transnational strategies
increasingly necessary.
a. True
b. False
34. A company that chooses a truly global corporate-level strategy assumes that the liability of foreignness will be
minimal.
a. True
b. False
35. The “liability of foreignness” will have a greater negative impact on a firm using a multidomestic strategy than on a
firm using a global strategy.
a. True
b. False
36. Four types of distances are associated with the liability of foreignness: cultural, administrative, geographic, and
economic.
a. True
b. False
37. The “liability of foreignness” means that many firms need to focus more on local adaptation or risk problems such
as the Walt Disney Company faced opening its theme park in France.
a. True
b. False
38. The “regionalization” environmental trend means that firms can focus on a region (customization) but also have
some standardization or sharing within the region.
a. True
b. False
39. By choosing a region where markets are more similar, the firm may be able to better understand those markets and
cater to their needs, but also achieve economies through sharing of resources.
a. True
b. False
40. International associations such as the European Union, the Organization of American States, and the North
American Free Trade Association encourage regionalization of competition rather than globalization.
a. True
b. False
41. Exporting and licensing are the most appropriate ways for smaller firms to first enter international markets.
a. True
b. False
42. The high cost of transportation, expense of tariffs, and loss of control are three disadvantages of exporting.
a. True
b. False
43. Evidence suggests that, in general, using an international cost leadership strategy when exporting to developed
countries has the most positive effect on firm performance while using an international differentiation strategy with
larger scale when exporting to emerging economies leads to the greatest amounts of success.
a. True
b. False
44. Because of the lack of protection of intellectual property in some foreign countries, licensing arrangements are one
of the best ways for a firm to protect its technology from being appropriated by potential competitors.
a. True
b. False
45. Although licensing is the least costly method to enter a foreign market, its disadvantages include high costs of
transportation and low control over the marketing and distribution of goods.
a. True
b. False
46. Strategic alliances tend to increase the risk associated with international expansion for the U.S. partner because of
the greater dependence on the foreign firm.
a. True
b. False
47. Establishing a wholly-owned subsidiary provides the quickest access to a new market.
a. True
b. False
48. Research suggests that wholly owned subsidiaries and expatriate staff are inappropriate for service industries
because those industries require close contact with customers, high levels of professional skills, specialized know-
how, and customization.
a. True
b. False
49. The greenfield venture option is useful when control of proprietary technology is important in an international
expansion.
a. True
b. False
50. When the country risk is high, firms prefer to enter with a greenfield investment rather than a joint venture.
a. True
b. False
51. While there are multiple means of entering new international markets, firms should use one method consistently
with all of its various products and across its different markets in order to reduce administrative complexity.
a. True
b. False
52. Export, licensing, and the strategic alliance entry modes are all appropriate for early market development.
a. True
b. False
53. Export, licensing, and the strategic alliance entry modes are also appropriate when firms want to establish a strong
presence in an international market.
a. True
b. False
54. Acquisitions, greenfield ventures, and sometimes joint ventures are appropriate when firms want to establish a
strong presence in an international market.
a. True
b. False
55. International diversification can help to reduce a firm’s overall risk through the stabilization of returns.
a. True
b. False
56. Research has shown that, as international diversification increases, firms’ returns decrease initially but then increase
quickly as firms learn to manage international expansion.
a. True
b. False
57. International diversification is a strategy through which a firm expands the sale of its goods and services across
borders of global regions and countries into a potentially large number of geographic locations of markets. Instead
of entering one or a few markets, international diversification means that the firm enters multiple markets.
a. True
b. False
58. The chief risks in the international environment are political and cultural.
a. True
b. False
59. Fluctuation in the value of different currencies is a major economic risk associated with international diversification.
a. True
b. False
60. A U.S. manufacturer of pigments for household paint that exports about 40 percent of its production to European
markets will find its sales will be harmed by a weak dollar.
a. True
b. False