Chapter 07 International Strategy: Creating Value in Global Markets Answer
Key
True / False Questions
1.
The trend towards worldwide markets makes it easier to predict where competitors will spring up.
2.
Because many countries are investing in countries other than their own, each country is becoming more
autonomous and independent.
3.
Increasing international exchange in goods and services can run into the difficulty of having one offer
that meets the needs of customers at differing income levels.
4.
By 2015, it is predicted that trade within nations will exceed trade across nations.
5.
There are risks associated with the Bottom of the Pyramid strategy. One of them is that the new low–
cost products that are developed may cannibalize the sales of the core products of the company using
the strategy.
6.
Emerging markets are growing slower than developed markets, thus shifting the structure of the global
economy.
7.
Multinational companies, like GE, take advantage of globalization to tap into talent around the world in
order to build products.
8.
The shift in the global automobile market over the past several years, in which China supplanted the
U.S. at the largest market for automobiles in 2009, is an example of how the structure of the global
economy is unchanging.
9.
According to The Economist article explained in Exhibit 7.1 in the textbook, the rate of GDP growth is
the highest in the European Union and the United States.
10.
Globalization is a term used to mean the growing dissimilarity of laws, rules, norms, values and ideas
across countries.
11.
The Michael Porter Diamond of National Advantage is a framework that explains why countries foster
successful multinational corporations based on factor endowments and demand conditions only.
12.
The factor endowments of a country are inherited and cannot be created.
13.
With regard to factor conditions, the pool of resources that a firm (or nation) has is much more
important than the speed and efficiency with which these resources are deployed.
14.
Demanding domestic consumers tend to push firms to move ahead of companies in other countries
where consumers are less demanding and more complacent.
15.
High levels of environmental awareness in Denmark have led to a decline in Danish industrial
competitiveness in the international marketplace.
16.
Countries with a strong supplier base benefit by adding efficiency to downstream activities.
17.
Typically, intense rivalry in domestic markets does not force firms to look outside their national
boundaries for new markets.
18.
Rivalry is particularly intense in nations with conditions of strong consumer demand, strong supplier
bases, and high new-entrant potential from related industries.
19.
The Indian software industry has become one of the leading global markets for software. The industry
has grown to over 60 billion USD, and Indian IT firms provide software and services to over half the
Fortune 500 firms. This success is being driven by factor endowments such as a large, growing market
with sophisticated customers.
20.
The Indian software industry has become one of the leading global markets for software. The industry
has grown to over 60 billion USD, and Indian IT firms provide software and services to over half the
Fortune 500 firms. This success is being driven by related and supporting industries such as a large
network of public and private educational institutions.
21.
Many international firms are increasing their efforts to market their products and services to countries
such as India and China as the ranks of their middle class continue to increase.
22.
Expanding the global presence of a firm automatically increases its scale of operations.
23.
Arbitrage opportunities are simple trading opportunities and therefore account for little of the success
Walmart experiences.
24.
Arbitrage opportunities in global financial markets are more attractive to global companies than local
corporations, because they enable them to buy in huge volume and therefore increase their bargaining
power with suppliers.
25.
International expansion can extend the life cycle of a product that is in its maturity stage in the company
home country.
26.
A disadvantage of international expansion is that it can enable a firm to optimize the location of every
activity in its value chain.
27.
The laws and the enforcement of laws associated with the protection of intellectual property rights
represent a significant currency and management risk to multinational firms.
28.
Reverse innovation occurs when a company develops a product that meets the needs of a developed
country and then adapts it to the needs of the developing country.
29.
The World Bank publishes the Euromoney magazine Country Risk Rating semiannual report. In the
text, the January 2013 sampling of these ratings indicates that Norway is the best country in which to
invest in terms of its expected level of risk based on the evaluation of its political, economic and
structural risks and debt indicators and access to capital.
30.
Firms can lessen political instability and adverse government actions risks by: competing in a range of
geographic markets, developing stakeholder coalitions, cultivating relationships with key influences,
and including key public-private stakeholders in their boards.
31.
Two opposing pressures that managers face when they compete in foreign markets are cost reduction
and adaptation to foreign markets.
32.
Theodore Levitt, a marketing strategist, argued that people around the world are willing to sacrifice
preferences in product features, functions, and design for lower prices and lower quality.
33.
Among the assumptions of Theodore Levitt that would favor a global strategy is that consumers around
the world are becoming less price-sensitive.
34.
Within a worldwide market, the most effective strategies are neither purely multidomestic nor purely
global.
35.
Customer needs and interests are becoming increasingly divergent worldwide, according to Theodore
Levitt.
36.
The Nestle line of pizzas marketed in the United Kingdom includes cheese with ham and pineapple
37.
In addition to responding to pressures to lower costs, managers must strive to be responsive to global
pressures in order to tailor their products to the demand of the local market in which they do business.
38.
Since the strategies and tactics to differentiate products and services to local markets can involve
additional expenses, company costs will tend to fall.
39.
In choosing one of the four basic strategies for competing in the global marketplace (international,
global, multidomestic, transnational), the strategy that a company selects depends upon the degree of
pressure that it is facing for revenues.
40.
As the pressure to lower costs increases, firms move toward selecting global and transnational strategies
for competing in the global marketplace.
41.
Industries in which proportionally more value is added in upstream activities are more likely to benefit
from a global strategy than those in which more value is added downstream (closer to the customer).
42.
In a global strategy a firm operates all of its businesses under a single common strategy, regardless of
location.
43.
A multidomestic strategy is the most appropriate strategy for international operations, because it drives
economies of scale as far as possible and provides a middle–of-the-road product that appeal to the
largest number of consumers in every market.
44.
The need to attain economies of scale encourages multinational firms to operate under a multidomestic
strategy.
45.
Corporations with multiple foreign operations that act very independently of one another are following a
multidomestic strategy.
46.
A multidomestic strategy would likely include the use of high volume, centralized production facilities
to maximize economies of scale.
47.
A limitation of a multidomestic strategy is that it may lead to over-adaptation as conditions change.
48.
Multinational firms following a transnational strategy strive to optimize the trade-offs associated with
efficiency, local adaptation, and learning.
49.
A key tenet of a transnational strategy is improved adaptation to all competitive situations as well as
flexibility by capitalizing on communication and knowledge flows throughout the organization.
50.
Panasonic needed to change its strategy in the 1980s in order to respond to demographic and economic
changes in China. As the Chinese middle class began to emerge, local companies responded with
competitive products. Panasonic then changed its strategy from a transnational strategy to a global
strategy.
51.
According to studies by Rugman and Verbeke, most of the 500 largest companies in the world are
global.
52.
Trading blocs and free trade zones promote the rise of international expansion.
53.
Traditionally, company globalization is measured in terms of its foreign sales as a percentage of total
sales, but this can be confused with regionalization.
54.
When we look at what we might call the true distance between the U.S. and China, the effects of
A U.S. firm expands into China and Canada at exactly the same sales volume. The physical distance is
the only factor that affects the true distance between the countries.
55.
The U.S. and Australia have common language and culture and yet the true distance is great.
56.
The U.S. and Mexico are close geographically and so is the true distance.
57.
Major Western hemisphere trade blocs include NAFTA, Mercosur, and ASEAN.
58.
A natural regional trade bloc based upon language affinity is the region from Algeria and Morocco to
Oman and Yemen.
59.
Central and South America are not part of a natural regional bloc because they only share language,
religion, and colonization history.
60.
The European Union is a trading bloc that eases trade restrictions, taxes, and tariffs for its members.
61.
A franchise generally expires after a few years, whereas a license is designed to last into perpetuity.
62.
Typically, joint ventures involve less control and risk than franchising.
Regional economic integration has progressed at a faster pace than global economic integration, and the