36.
When a firm focuses on increasing profitability by customizing the product
or service so that they provide a good match to tastes and preferences in
different national markets, the firm is following a transnational strategy.
FALSE
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.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-04 Identify the different strategies for competing globally and their pros and cons.
Topic: Choosing a Strategy
37.
When the firm simultaneously faces both strong cost pressures and strong
pressures for local responsiveness, the ideal strategy to follow is the
transnational strategy.
TRUE
Sometimes a firm simultaneously faces both strong cost pressures and
strong pressures for local responsiveness. How can managers balance the
competing and inconsistent demands such divergent pressures place on the
firm? According to some researchers, the answer is to pursue what has
Difficulty: 2 Medium
Learning Objective: 13-04 Identify the different strategies for competing globally and their pros and cons.
Topic: Choosing a Strategy
38.
A localization strategy makes most sense when demands for local
responsiveness are high, but cost pressures are moderate or low.
TRUE
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.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-04 Identify the different strategies for competing globally and their pros and cons.
Topic: Choosing a Strategy
39.
The distinguishing feature of many firms that pursue an international
strategy is that they are selling a product that serves local needs, but they
do not face significant competitors.
FALSE
Many enterprises have pursued an international strategy, taking products
first produced for their domestic market and selling them internationally
with only minimal local customization. The distinguishing feature of many
such firms is that they are selling a product that serves universal needs, but
they do not face significant competitors.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-04 Identify the different strategies for competing globally and their pros and cons.
Topic: Choosing a Strategy
40.
As competition intensifies, global standardization strategies and
transnational strategies tend to become less viable, and managers need to
orientate their companies toward either an international strategy or a
localization strategy.
FALSE
International strategy may not be viable in the long term, and to survive,
firms need to shift toward a global standardization strategy or a
transnational strategy in advance of competitors. The same can be said
about a localization strategy.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-04 Identify the different strategies for competing globally and their pros and cons.
Topic: Choosing a Strategy
Multiple Choice Questions
41.
_____ can be defined as the rate of return that the firm makes on its
invested capital, which is calculated by dividing the net profits of the firm by
total invested capital.
A.
Profitability
B.
Performance
C.
Cash flow
D.
Profitability can be defined as the rate of return that the firm makes on its
invested capital (ROIC), which is calculated by dividing the net profits of the
firm by total invested capital. To maximize the value of a firm, managers
must pursue strategies that increase the profitability of the enterprise and
its rate of profit growth over time.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
42.
The percentage increase in net profits over time measures:
A.
capital return.
B.
profitability.
C.
market growth.
D.
profit growth.
Profit growth is measured by the percentage increase in net profits over
time. In general, higher profitability and a higher rate of profit growth will
increase the value of an enterprise and thus the returns garnered by its
owners, the shareholders.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
43.
Which of the following statements is NOT true?
A.
The way to increase the profitability of a firm is to create more value.
B.
The amount of value a firm creates is measured by the difference
between its costs of production and the value that consumers perceive in
its products.
C.
The more value customers place on a firm’s products, the higher the
price the firm is able to charge for those products.
D.
The price a firm charges for a good or service is typically more than the
value the customer places on that good or service.
The price a firm charges for a good or service is typically less than the value
placed on that good or service by the customer. This is because the
customer captures some of that value in the form of what economists call a
consumer surplus.
AACSB: Analytic
Blooms: Remember
44.
The price a firm charges for a good or service is typically less than the value
placed on that good or service by the customer. This is because:
A.
the customer’s disposable income is significantly higher than what the
market demands.
B.
the customer captures some of that value in the form of a consumer
surplus.
C.
regulatory mechanisms ensure that the customer is not overcharged for
products/services.
D.
marketers implement psychological pricing tactics to ensure that
customers perceive the prices to be low.
The price a firm charges for a good or service is typically less than the value
placed on that good or service by the customer. This is because the
customer captures some of that value in the form of what economists call a
consumer surplus.
AACSB: Analytic
Blooms: Understand
45.
The value of a product to an average consumer is V; and the average price
that the firm can charge a consumer for that product is P. Here, V – P can
be termed as:
A.
consumer surplus per unit.
B.
producer surplus per unit.
C.
profit growth.
D.
profit per unit sold.
The value of a product to an average consumer is V; the average price that
the firm can charge a consumer for that product given competitive
pressures and its ability to segment the market is P; and the average unit
cost of producing that product is C. The firm’s profit per unit sold (π) is
equal to P – C, while the consumer surplus per unit is equal to V – P.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
46.
A consumer surplus can be best described as:
A.
what the consumer has “left-over” after a purchase.
B.
how much extra a consumer has to pay for a product.
C.
value for the money.
D.
the premium charged for a quality product.
The value of a product to an average consumer is V; the average price that
the firm can charge a consumer for that product given competitive
pressures and its ability to segment the market is P. The consumer surplus
per unit is equal to V — P (another way of thinking of the consumer surplus
is as “value for the money”; the greater the consumer surplus, the greater
the value for the money the consumer gets).
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
47.
A strategy that focuses on increasing the attractiveness of a product is
referred to as a(n):
A.
differentiation strategy.
B.
low cost strategy.
C.
effectiveness strategy.
D.
efficiency strategy.
A strategy that focuses primarily on increasing the attractiveness of a
product is known as a differentiation strategy. Michael Porter has argued
that low cost and differentiation are two basic strategies for creating value
and attaining a competitive advantage in an industry.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
48.
The efficiency frontier has a convex shape because of:
A.
consumer surplus.
B.
diminishing returns.
C.
profitability.
D.
differentiation strategy.
The efficiency frontier shows all of the different positions that a firm can
adopt with regard to adding value to the product (V) and low cost (C)
assuming that its internal operations are configured efficiently to support a
particular position. The efficiency frontier has a convex shape because of
diminishing returns.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
49.
_____ imply that when a firm already has significant value built into its
product offering, increasing value by a relatively small amount requires
significant additional costs.
A.
Efficiency matrixes
B.
Diminishing returns
C.
Cost plus curves
D.
Strategy convex curves
The efficiency frontier has a convex shape because of diminishing returns.
Diminishing returns imply that when a firm already has significant value
built into its product offering, increasing value by a relatively small amount
requires significant additional costs.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
50.
The basic strategy paradigm suggests that to maximize its profitability, a
firm should do all of the following, EXCEPT:
A.
choose, according to strategy, any position on the efficiency frontier as
all positions are viable.
B.
pick a position on the efficiency frontier that is viable in the sense that
there is enough demand to support that choice.
C.
configure its internal operations so that they support the position on the
efficiency frontier.
D.
make sure that the right organization structure is in place to execute the
strategy.
Porter emphasizes that it is very important for management to decide where
the company wants to be positioned with regard to value (V) and cost (C),
to configure operations accordingly, and to manage them efficiently to make
51.
_____ activities are basically concerned with creating the product, marketing
and delivering the product to buyers, and providing support and after-sales
service.
A.
Support
B.
Subordinate
C.
Ancillary
D.
Primary
Primary activities have to do with the design, creation, and delivery of the
product; its marketing; and its support and after-sale service.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
52.
Which of the following is an example of a primary activity in a firm’s value
chain?
A.
Information systems
B.
Research and development
C.
Logistics
D.
Human relations
Research and development (R&D) is concerned with the design of products
and production processes. Although we think of R&D as being associated
with the design of physical products and production processes in
manufacturing enterprises, many service companies also undertake R&D.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
53.
Which of the following is an example of a support activity in a firm’s value
chain?
A.
R&D
B.
Customer service
C.
Human resources
D.
Marketing and sales
The support activities of the value chain provide inputs that allow the
primary activities to occur. The human resource functions ensure that
people are adequately trained, motivated and compensated to perform their
value creation tasks.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
54.
_____ activities of the value chain provide inputs that allow the primary
activities to occur.
A.
Complementary
B.
Basic
C.
Core
D.
Support
The support activities of the value chain provide inputs that allow the
primary activities to occur.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 Explain the concept of strategy.
Topic: Strategy and the Firm
55.
A firm benefits by basing each value creation activity it performs at that
location where economic, political, and cultural conditions, including relative
factor costs, are most conducive to the performance of that activity. Firms
that pursue such a strategy can realize:
A.
differentiation.
B.
location economies.
C.
vertical integration.
D.
horizontal integration.
For a firm that is trying to survive in a competitive global market, this
implies that trade barriers and transportation costs permitting, the firm will
benefit by basing each value creation activity it performs at that location
where economic, political, and cultural conditions, including relative factor
costs, are most conducive to the performance of that activity.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 Recognize how firms can profit by expanding globally.
Topic: Global Expansion, Profitability, and Profit Growth
56.
Economies that arise from performing a value creation activity in the
optimal place for that activity are referred to as:
A.
factor economies.
B.
production economies.
C.
location economies.
D.
value creation economies.
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.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 Recognize how firms can profit by expanding globally.
Topic: Global Expansion, Profitability, and Profit Growth