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TESTBANK: CHAPTER 12
Global Strategy and the Multinational Corporation
True/False Questions
1. The two primary drivers of change in business environment during the past half century are deregulation
and internationalization.
[See p.312]
2. Internationalization represents both an opportunity and a threat to business enterprises.
[See p.312]
3. Internationalization occurs through two main mechanisms: trade and offshoring.
[See p.313]
4. International trade is motivated by the quest to exploit market opportunities in other countries; foreign
direct investment, on the other hand, is motivated by the desire to exploit resources and capabilities located
in other countries.
[See p.313]
5. Sheltered industries are shielded from imports by high barriers to entry.
[See p.313]
6. Service industries such as commercial banking and hotels tend to be “multidomestic” in their pattern of
internationalization.
[See p.314]
7. In general, internationalization of an industry results in more competition and lower profitability
[See p.314]
8. Internationalization often involves mergers and acquisitions; hence, it tends to reduce seller
concentration within individual national markets.
[See p.314]
9. Internationalization tends to increase competition by increasing investment in new capacity and
increasing the diversity of competitors within each national market.
[See pp.314-315]
10. In an international context, comparative advantage and competitive advantage are identical concepts.
[See pp.315-316]
11. Comparative advantage refers to countries’ relative efficiencies in producing different products
[See p.320-321
12. The revealed comparative advantage of the US, Canada and Australia in cereals is a reflection of these
countries’ large natural endowments of land.
[See p.320
13. Switzerland’s comparative advantage in clocks and watches is likely to reflect the Swiss emphasis on
punctuality rather than Switzerland’s resource endowments.
[See pp.316-317]
14. Porter’s “national diamond” framework implies that government policies which foster “national
champions” within technology-based industries are likely to be successful in stimulating national
competitiveness in these sectors.
[See p.317-318]
15. Porter’s “national diamond” framework suggests that a significant factor explaining the dominance by
German firms of the world market for luxury and high performance automobiles is to be found more in the
factors of production available in Germany than in the demand characteristics of German consumers.
[See p.317]
16. For high-tech products such as aircraft and smartphones, the international fragmentation of the value
chain tends to be driven less by cost considerations and more by the availability of sophisticated technical
capabilities.
[See pp.320-321]
17. The benefits from fragmenting a product’s value chain across multiple locations almost always
outweigh the costs of coordinating globally dispersed activities.
[See p.321-322]
18. If the firm’s competitive advantage is country-based, the firm can exploit foreign markets either by
exports or by direct investment
[See pp.322-323]
19. In pharmaceuticals (where patent protection tends to be strong), exports or direct foreign investment
will tend to be preferred over licensing as a means of exploiting overseas markets.
[See pp.323-324]
20. Starbucks entry into India by means of a joint venture with Tata Group in preference to its usual
practice of operating wholly owned subsidiaries outside the US reflects Starbucks’ view that Indian market
is highly complex and Starbucks needed the knowledge and connections possessed by a local partner.
[See p.323]
21. Traditionally, European-based multinational companies such as Unilever, Shell, and Philips have been
highly centralized; Japanese multinationals such as Honda, Sony, and Hitachi have been highly
decentralized.
[See pp.331-332]
22. A key difference between Bartlett and Ghoshal’s “transnational corporation” and the conventional US
multinational corporation (described by Bartlett and Ghoshal as a “coordinated federation”) is that
communication and coordination occurs between national units rather than exclusively between each
national unit and the corporate HQ
[See pp.332-334]
23. In Ghemawat’s “Aggregation, Adaptation, Arbitrage” framework, the potential for a multinational
enterprise to exploit arbitrage benefits are likely to be greater in a capital-intensive industry than in a labor-
intensive industry
[See p.334-335]
24. Designating a national subsidiary as a “center of excellence” for a particular product, technology, or
activity is a way of reconciling differentiation to meet the needs of national markets with the exploitation of
global scale advantages.
[See pp.334-337]
Multiple Choice Questions
25. Uber’s distribution of ice cream in over 38 counties of the world on July 17, 2014, exemplifies the
following feature of international business:
[See p.311]
26. Firms internationalize through two mechanisms:
[See p.313]
27. Global industries are those where:
[See p.313]
28. With internationalization, the threat of new entry into domestic industries is increases because:
[See p.314]
29. Which aspect of internationalization by companies does not increase the intensity of competition within
national markets?
[See p.318]
30. The theory of comparative advantage is concerned with:
[See p.315]
31. Large countries have an advantage over small countries in technology-intensive and capital-intensive
industries, because:
[See p.316]
32. According to Porter’s “national diamond” analysis, the competitive advantage of Swiss firms in
watches, German firms in luxury cars, and Japanese firms in cameras is a result of:
[See p.317]
33. In Porter’s national diamond framework, Porter emphasizes that encouraging mergers in an industry in
order to form a “national champion”:
[See p.318]
34 Toyota operates automobile assembly plants in all five continents of the worlds. This reflects:
[See p.319]
35. The value chain for a product will tend to be dispersed across different countries when:
[See pp.320-321]
36. Saudi Aramco and Statoil are both major oil producers. Saudi Aramco’s competitive advantage is based
on its access to low-cost domestic oil reserves; Statoil’s competitive advantage is its capability in offshore
exploration and production. The implications for the internationalization strategies of the two companies
are:
[See p.319]
37. A start-up company based in Canada and led by an academic microbiologist has patented genetically-
modified, drought-resistant maize particularly suitable to arid regions of Africa. The firm has been unable
to attract significant venture capital investment. How should the firm exploit commercial opportunities for
its product in Africa?
[See pp.322-324]
38. Many retailers that have been outstandingly successful in their how markets have experienced much
poorer performance when they have entered overseas markets. These include: Tesco, Marks& Spencer,
Laura Ashley, and Body Shop in the UK); Best Buy, Sears, Macy’s, and Wal-Mart in the US. This reflects:
[See pp.322-324]
39. A common approach to reconciling the benefits of global scale with the need for national differentiation
is to:
[See pp.324-325]
40. The “centralized hub” strategy that Japanese multinationals pursued during the 1970s and 1980s is
likely to be most successful in industries with:
[See pp.331-332]
41. Internationalization among New York-based law firms is the result of:
[See p.325]
42. The Dutch-based electrical and consumer electronics multinational, Philips, has transferred the
headquarters for several of its global business away from the Netherlands. In terms of Bartlett and
Ghoshal’s typology of multinational strategies, this represents a transition from:
[See pp.331-333]
43. The costs of national differentiation can be low if:
[See p.329]
44. McDonald’s introduction of a greater number of local products on its menus, then transferring these
items across national borders points to:
[See p.330]
