57.
When companies disperse different stages of the value chain to those
locations around the world where perceived value is maximized or where
the costs of value creation are minimized, companies create:
A.
a differentiated organization.
B.
a location economy curve.
C.
economies of scale.
D.
a global web of value creation activities.
The creation of a global web of value creation activities results with
different stages of the value chain being dispersed to those locations
around the globe where perceived value is maximized or where the costs of
value creation are minimized.
58.
Lenovo’s ThinkPad laptop computers is designed in the United States, the
case, keyboard, and hard drive are made in Thailand; the display screen and
memory in South Korea; the built-in wireless card in Malaysia; and the
microprocessor in the United States. In each case, these components are
manufactured and sourced from the optimal location given current factor
costs. In this example, Lenovo has:
A.
vertical integration advantages.
B.
a global web of value creation activities.
C.
learning effects.
D.
high local responsiveness.
Locating a value creation activity in the optimal location for that activity can
have one of two effects. It can lower the costs of value creation and help
the firm to achieve a low-cost position, and/or it can enable a firm to
differentiate its product offering from those of competitors. One result of
this kind of thinking is the creation of a global web of value creation
activities, with different stages of the value chain being dispersed to those
59.
_____ refer(s) to systematic reductions in production costs that have been
observed to occur over the life of a product.
A.
Experience curve
B.
Economies of scale
C.
Location economies
D.
Production possibility
The experience curve refers to systematic reductions in production costs
that have been observed to occur over the life of a product.
60.
It has been observed that a product’s production costs decline by some
quantity about each time, cumulative output:
A.
increases by twenty five percent.
B.
quadruples.
C.
doubles.
D.
triples.
The experience curve refers to systematic reductions in production costs
that have been observed to occur over the life of a product. A number of
studies have observed that a product’s production costs decline by some
quantity about each time cumulative output doubles.
61.
It has been observed in the aircraft industry that, each time cumulative
output of airframes was doubled, unit costs typically declined to 80 percent
of their previous level. This is an example of:
A.
the core performance curve.
B.
the location curve.
C.
the strategic curve.
D.
the experience curve.
The experience curve refers to systematic reductions in production costs
that have been observed to occur over the life of a product. A number of
studies have observed that a product’s production costs decline by some
quantity about each time cumulative output doubles.
62.
When individuals gain knowledge of the most efficient ways to perform
particular tasks, they are saving costs through:
A.
location economies.
B.
value creation effects.
C.
experience curve effects.
D.
learning effects.
Learning effects refer to cost savings that come from learning by doing.
Labor, for example, learns by repetition how to carry out a task, such as
assembling airframes, most efficiently.
63.
Learning effects:
A.
tend to be less significant when a technologically complex task is
repeated.
B.
will be less significant in an assembly process involving 1,000 complex
steps than in one of only 100 simple steps.
C.
typically disappear after a while, in spite of the complexity of the task.
D.
are more significant after two or three years of the introduction of a new
process.
Learning effects tend to be more significant when a technologically complex
task is repeated, because there is more that can be learned about the task.
No matter how complex the task, however, learning effects typically
disappear after a while.
64.
It has been suggested that learning effects are important only during the
start-up period of a new process and that they cease after two or three
years. Any decline in the experience curve after such a point is due to:
A.
reduction in fixed costs.
B.
higher depreciation costs.
C.
economies of scale.
D.
obsolescence.
No matter how complex the task, learning effects typically disappear after a
while. It has been suggested that they are important only during the start-
up period of a new process and that they cease after two or three years.
Any decline in the experience curve after such a point is due to economies
of scale.
65.
Economies of scale arise from all of the following sources, EXCEPT:
A.
increasing fixed costs by limiting them to small volumes.
B.
serving domestic and international markets from the same production
facilities
C.
serving global markets.
D.
bargaining with suppliers to bring down the cost of key inputs.
Economies of scale refer to the reductions in unit cost achieved by
producing a large volume of a product. Attaining economies of scale lowers
a firm’s unit costs and increases its profitability.
66.
Moving down the experience curve:
A.
increases the cost of a firm’s raw material.
B.
allows a firm to reduce its cost of creating value.
C.
decreases a firm’s profitability.
D.
increases the R & D expenditure of a firm.
Moving down the experience curve allows a firm to reduce its cost of
creating value and increase its profitability. The firm that moves down the
experience curve most rapidly will have a cost advantage vis-à-vis its
competitors.
67.
Firms usually respond to pressures for cost reduction by trying to:
A.
lower the costs of value creation.
B.
be locally responsive.
C.
undertaking product differentiation.
D.
diversifying product lines.
In competitive global markets, international businesses often face
pressures for cost reductions. Responding to pressures for cost reduction
requires a firm to try to lower the costs of value creation.
68.
Responding to pressure for _____ requires that a firm differentiate its
product offering and marketing strategy from country to country.
A.
cost reductions
B.
experience effects
C.
lowering the costs of value creation
D.
being locally responsive
Responding to pressures to be locally responsive requires that a firm
differentiate its product offering and marketing strategy from country to
country in an effort to accommodate the diverse demands arising from
national differences in consumer tastes and preferences, business
practices, distribution channels, competitive conditions, and government
policies.
69.
_____ exists when the tastes and preferences of consumers in different
nations are similar if not identical.
A.
Universal needs
B.
Homogenous needs
C.
Basic needs
D.
Bundled needs
Universal needs exist when the tastes and preferences of consumers in
different nations are similar if not identical. This is the case for conventional
commodity products such as bulk chemicals, petroleum, steel, sugar, and
the like.
70.
Which of the following is less likely to add to the pressure for a firm to be
locally responsive?
A.
National differences in consumer tastes and preferences
B.
Differences in infrastructure and traditional practices
C.
Switching costs for consumers
D.
Host-government demands
Pressures for local responsiveness arise from national differences in
consumer tastes and preferences, infrastructure, accepted business
practices, and distribution channels, and from host-government demands.
Responding to pressures to be locally responsive requires a firm to
differentiate its products and marketing strategy from country to country to
accommodate these factors, all of which tends to raise the firm’s cost
structure.
71.
When a firm has a strategic goal of pursuing a low-cost strategy on a
worldwide scale, the firm should follow a(n) _____ strategy.
A.
global standardization
B.
localization
C.
international
D.
customization
Firms pursuing a global standardization strategy try not to customize their
product offering and marketing strategy to local conditions because
customization involves shorter production runs and the duplication of
functions, which tends to raise costs. Instead, they prefer to market a
standardized product worldwide so that they can reap the maximum
benefits from economies of scale and learning effects.
72.
Which of the following is NOT associated with firms following the global
standardization strategy?
A.
Low pressures for local responsiveness
B.
Use cost advantage to support aggressive pricing in world markets
C.
High pressures for cost reductions
D.
Customize product offering and marketing strategy to local conditions
Firms pursuing a global standardization strategy try not to customize their
product offering and marketing strategy to local conditions because
customization involves shorter production runs and the duplication of
functions, which tends to raise costs. Instead, they prefer to market a
standardized product worldwide so that they can reap the maximum
benefits from economies of scale and learning effects.
73.
_____ 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.
A.
Localization
B.
Transnational
C.
Global standardization
D.
International
Localization 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. By customizing the product offering to
local demands, the firm increases the value of that product in the local
market.
74.
Which strategy focuses on increasing profitability by customizing the firm’s
goods or services so they provide a good match to tastes and preferences in
different national markets?
A.
Global standardization strategy
B.
Transnational strategy
C.
Localization strategy
D.
International strategy
A localization strategy focuses on increasing profitability by customizing the
firm’s goods or services so that they provide a good match to tastes and
preferences in different national markets.
75.
Which of the following is a disadvantage of the localization strategy?
A.
Decrease in the value of the product in the local market
B.
Duplication of functions
C.
Inability to accommodate varying tastes and preferences in different
markets
D.
Reduced customization
On the downside, because the localization strategy involves some
duplication of functions and smaller production runs, customization limits
the ability of the firm to capture the cost reductions associated with mass-
producing a standardized product for global consumption.
76.
A firm that is facing both strong cost pressures and strong pressures for
local responsiveness should follow a(n) _____ strategy.
A.
localization
B.
global standardization
C.
international
D.
transnational
Firms that pursue a transnational strategy are trying to simultaneously
achieve low costs through location economies, economies of scale, and
learning effects; differentiate their product offering across geographic
markets to account for local differences; and foster a multidirectional flow
of skills between different subsidiaries in the firm’s global network of
operations.