Chap 011

Chapter 11 - The Strategy of International Business
Chapter 11 The Strategy of International Business
True / False Questions 1. (p. 375) The actions that managers take to attain the goals of the firm are referred to as a firm's strategy. TRUE
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2. (p. 375) For most firms the preeminent goal is to ma!imi"e the #alue of the firm for its customers. FALSE
$. (p. 375) Strategy is a ratio or rate of return concept. FALSE
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%. (p. 37,) In general higher profita&ility and a high rate of profit gro'th 'ill increase the #alue of the enterprise and thus the returns gained &y its o'ners. TRUE
(. (p. 37,) The more #alue customers place on a firm's products the higher the price the firm can charge for those products. TRUE
). (p. 37,) The price a firm charges for a good or ser#ice is typically more than the #alue placed on that good or ser#ice &y the customer. FALSE
*. (p. 37,) It is normally impossi&le to segment the market to such a degree that the firm can charge each consumer a price that reflects that indi#idual's assessment of the #alue of the product. TRUE
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+. (p. 377) , company can create more #alue either &y lo'ering production costs or &y making the product more attracti#e through design functionality features -uality and the like. TRUE
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.. (p. 377) There are t'o &asic strategies for impro#ing a firm's profita&ility-a differentiation strategy and a di#ersification strategy. FALSE
1/. (p. 377) For a superior #alue creation relati#e to ri#als it is essential for a firm to create the most #alua&le product in the eyes of consumers. FALSE
11. (p. 37/) 0uman resources materials management and manufacturing are included as the secondary acti#ities in a firm's #alue chain. FALSE
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12. (p. 37/) 1rimary acti#ities of a firm ha#e to do 'ith the design creation and deli#ery of the product its marketing and its support and after-sale ser#ice. TRUE
1$. (p. 37/) 1rimary acti#ities of a firm are di#ided into four functions2 345 production marketing and sales and human resources. FALSE
1%. (p. 37/) 345 is concerned 'ith the design of products and production processes. TRUE
1(. (p. 301) For ser#ices such as &anking or healthcare 6production6 is concerned 'ith selecting the merchandise stocking the store and ringing up the sale at the cash register. FALSE
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1). (p. 301) In the conte!t of the #alue chain support acti#ities pro#ide the inputs that allo' the primary acti#ities of production and marketing to occur. TRUE
1*. (p. 30') The com&ination of 345 and human resources is a particularly potent source of cost sa#ings in many enterprises. FALSE
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1+. (p. 30') 7rgani"ational infrastructure refers to the totality of a firm's organi"ation. FALSE
1.. (p. 30') The logistics function controls the transmission of physical materials through the #alue chain from procurement through production and into distri&ution. TRUE
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2/. (p. 303) Controls are the metrics used to measure the performance of su&units and make 8udgments a&out ho' 'ell managers are running those su&units. TRUE
21. (p. 303) 9arket conditions and company's strategy ha#e to fit 'ith each other in order for a company to attain superior performance. TRUE
22. (p. 303) :o#ernment action and ne' technology can shift the market conditions. TRUE
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2$. (p. 304) Firms that operate internationally are a&le to reduce the costs of #alue creation &ecause they reali"e greater cost economies from e!perience effects &y ser#ing an e!panded glo&al market from a central location. TRUE
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2%. (p. 304) , firm's a&ility to increase its profita&ility is increased &y the need to customi"e its product offering marketing strategy and &usiness strategy to differing national conditions. FALSE
2(. (p. 305) ;ocating a #alue creation acti#ity in the optimal location for that acti#ity can lo'er the costs of #alue creation and help the firm to achie#e a lo' cost position and<or ena&le a firm to differentiate its product offering from the offerings of competitors. TRUE
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2). (p. 307) 5ue to fa#ora&le endo'ments =e' >ealand may ha#e a comparati#e ad#antage for automo&ile assem&ly operations &ut high transportation costs 'ould make it an uneconomical location from 'hich to ser#e glo&al markets. TRUE
2*. (p. 307) The system cur#e refers to systematic reductions in production costs that ha#e &een o&ser#ed to occur o#er the life of a product. FALSE
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2+. (p. 300) For the most comple! tasks learning cur#es e!ist indefinitely. FALSE
2.. (p. 300) ?conomies of scale refer to cost sa#ings that come from learning &y doing. FALSE
$/. (p. 300) The reduction in unit costs achie#ed &y producing a large #olume of a product is referred to as diseconomies of scale. FALSE
$1. (p. 30/) , firm increases its cost of creating #alue 'hen it mo#es do'n the e!perience cur#e. FALSE
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$2. (p. 30/) 7ne key to progressing do'n'ard on the e!perience cur#e as rapidly as possi&le is to increase the #olume produced &y a single plant as -uickly as possi&le. TRUE
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$$. (p. 3/1) ;e#eraging the skills created 'ithin su&sidiaries and applying them to other operations 'ithin the firm's glo&al net'ork may create #alue. TRUE
$%. (p. 3/') Firms that compete in the glo&al markets typically face t'o types of competiti#e pressure2 to &e glo&ally responsi#e and pressures for cost reductions. FALSE
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$(. (p. 3/3) Because customi"ing product offerings to different national re-uirements can in#ol#e significant duplication and a lack of product standardi"ation the result is usually a decrease in costs. FALSE
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$). (p. 3/3) Cost reduction pressures can &e particularly intense in industries producing commodity-type products 'here meaningful differentiation on nonprice factors is difficult and price is the main competiti#e 'eapon. TRUE
$*. (p. 3/0) Firms that simultaneously face &oth strong cost pressures and strong pressures for local responsi#eness pursue a locali"ation strategy. FALSE
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$+. (p. 41') 3ecent decades ha#e seen a reduction in the num&er of strategic alliances. FALSE
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$.. (p. 413) Some commentators ha#e critici"ed strategic alliances on the grounds that they &ring together complementary skills and assets that neither company could easily de#elop on its o'n. FALSE
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%/. (p. 413) The failure rate for international strategic alliances is #ery lo'. FALSE
Multiple Choi e Questions %1. (p. 375) , firm's @@@@@ can &e defined as the actions that managers take to attain the goals of the firm. ,. systems B. #alue chain C. operations !" strategy
%2. (p. 375) , simple e!ample of @@@@@ is rate of return on sales. ,. strategy B. economies of scale C" profita&ility 5. primary acti#ity
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%$. (p. 37,) The price a firm charges for a good or ser#ice is typically less than the #alue placed on that good or ser#ice &y the customer. This is &ecause the consumer captures some of that #alue in the form of 'hat economists call2 ,. firm #alue. B" consumer surplus. C. customer loyalty. 5. consumer emotions.
%%. (p. 377) There are t'o &asic strategies for impro#ing a firm's profita&ility. These are2 A" a differentiation strategy and a lo'-cost strategy. B. a premier strategy and a generic strategy. C. a one-si"e-fits-all strategy and a "ero-sum strategy. 5. a comparison strategy and a standardi"ation strategy.
%(. (p. 377) The @@@@@ of a firm is measured &y the difference &et'een #alue and cost. ,. -uality-cost differential B" #alue creation C. cost cur#e 5. efficiency cur#e
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%). (p. 377) , strategy that focuses primarily on increasing the attracti#eness of a product is referred to as aAnB2 ,. di#ersion strategy. B. international strategy. C. di#ersification strategy. !" differentiation strategy.
%*. (p. 370) The @@@@@ sho's all of the different positions that a firm can adopt 'ith regard to #alue creation and lo' cost assuming that its internal operations are configured efficiently to support a particular position. ,. production paradigm B. e!perience cur#e C" efficiency frontier 5. production cur#e
%+. (p. 370) Because of diminishing returns the efficiency frontier has 'hat kind of shapeC ,. Bell B" Con#e! C. Flat 5. Daria&le
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%.. (p. 37/) To ma!imi"e its long-run return on in#ested capital a firm must do all of the follo'ing ?EC?1T2 A" esta&lish economies of scale through high-end customi"ation. B. pick a position on the efficiency frontier that is #ia&le. C. configure its internal operations. 5. install the right organi"ation structure to e!ecute its strategy.
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(/. (p. 37/) ,ccording to the te!t it is useful to think of the firm as aAnB @@@@@ composed of a series of distinct acti#ities including production marketing materials management 345 human resources information systems and the firm infrastructure. ,. functional stream B. momentum machine C. supply chain !" #alue chain
(1. (p. 37/) The @@@@@ acti#ities of a firm ha#e to do 'ith creating the product marketing and deli#ering the product to &uyers and pro#iding support and after-sales ser#ice to the &uyers of the product. ,. support B. su&ordinate C. ancillary !" primary
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(2. (p. 37/) In the conte!t of #alue chain analysis 'hich of the follo'ing is an e!ample of a 6primary6 acti#ityC ,. 9aterials management B" 3esearch and de#elopment C. Information system 5. 0uman relations
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($. (p. 37/) Fhich function of a firm is concerned 'ith the design of products and production processesC ,. 0uman resources B" 3esearch and de#elopment C. 9arketing and sales 5. Customer ser#ice
(%. (p. 37/) Fhich of the follo'ing is =7T a support acti#ity in the #alue chainC ,. Company infrastructure B. ;ogistics C" 1roduction 5. 0uman resources
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((. (p. 301) @@@@@ is concerned 'ith the creation of goods or ser#ices. ,. 1rofita&ility B. 9arketing C. Sales !" 1roduction
(). (p. 301) Fhich function of a firm can help create #alue through &rand positioning and ad#ertisingC A" The marketing and sales function B. The production function C. The research and de#elopment function 5. The human resource function
(*. (p. 30') Fhich function ensures that the company has the right mi! of skilled people to perform its #alue creation acti#ities effecti#elyC ,. ,ccounting B" 0uman resources C. 9aterials management 5. Infrastructure
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(+. (p. 30') Fhich of the follo'ing is =7T an e!ample of an information systemC ,. , system for managing in#entory B. , product pricing system C. , system for tracking sales !" ,n employee-training pamphlet
(.. (p. 30') ,ll of the follo'ing are included in infrastructure ?EC?1T2 ,. structure. B" &rand positioning. C. culture. 5. control systems.
)/. (p. 30') The term @@@@@ can &e used to refer to the totality of a firm's organi"ation including its organi"ational structure control systems and incenti#es and people. ,. organi"ation infrastructure B" organi"ation architecture C. organi"ational culture 5. company credo
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)1. (p. 30') Fhich of the follo'ing is =7T a part of organi"ational structureC A" The market en#ironment of a firm. B. The formal di#isions of an organi"ation. C. The location of decision-making responsi&ilities 'ithin a structure. 5. The esta&lishment of integrating mechanisms to coordinate acti#ities of su&units.
)2. (p. 30') Fhich of the follo'ing is =7T part of the organi"ational architectureC ,. Incenti#es and controls B. 1rocesses C" Competitors 5. 1eople
)$. (p. 303) 5e#ices used to re'ard appropriate managerial &eha#ior are called2 ,. loyalties. B. controls. C. processes. !" incenti#es.
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)%. (p. 303) The manner in 'hich decisions are made and 'ork is performed 'ithin the organi"ation refers to2 A" processes. B. methods. C. production. 5. controls.
)(. (p. 303) The norms and #alue systems that are shared among the employees of an organi"ation refer to its2 ,. processes. B. controls. C. human resource strategy. !" organi"ational culture.
)). (p. 303) For a firm to attain superior performance and earn a high return on capital its strategy must make sense gi#en2 ,. their &alance sheet. B" market conditions. C. noncompetitors' strategy. 5. their employee preference.
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)*. (p. 304) Firms that operate internationally are a&le to do all of the follo'ing ?EC?1T2 ,. reali"e location economies. B" e!pand their international market &y selling those products in the domestic market. C. reali"e greater cost economies from e!perience effects. 5. earn a greater return &y le#eraging any #alua&le skills de#eloped in foreign operations and transferring them to other entities.
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)+. (p. 304) Skills 'ithin the firm that competitors cannot easily match or imitate are referred to as2 A" core competencies. B. glo&al competencies. C. initial strengths. 5. competiti#e threats.
).. (p. 304) Toyota is a&le to produce high--uality 'ell-designed cars at a lo'er deli#ered cost. This is an e!ample of aAnB2 A" core competency. B. e!ternal opportunity. C. initial strength. 5. a&solute ad#antage.
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*/. (p. 305) Implicit in the discussion of le#eraging core competencies is the idea that2 ,. firms should offer products first produced for their domestic market and selling them internationally 'ithout any changes. B" firms should transfer core competencies to foreign locations. C. firms should transfer la&or force that 'as part of the original design to foreign locations. 5. firms should not 'ork 'ith local managers.
*1. (p. 305) @@@@@ permitting the firm 'ill &enefit &y &asing each #alue creation acti#ity it performs at that location 'here economic political and cultural positions are most conduci#e to the performance of that acti#ity. ,. 1roduction regulations B. 3esources and re#enues C" Trade &arriers and transportation costs 5. 5istri&ution and resource a#aila&ility
*2. (p. 305) ?conomies that arise from performing a #alue creation acti#ity in the optimal location for that acti#ity are called2 ,. internationali"ation. B" location economies. C. economies of scale. 5. imperialism.
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*$. (p. 305) If the most producti#e la&or force for assem&ly operations is in 9e!ico assem&ly operations should &e &ased in 9e!ico. This is &ased on the principle of2 ,. geographic markets. B. the e!perience cur#e. C. economies of scale. !" location economies.
*%. (p. 305) ;ocation economies are important &ecause locating an optimal location can2 ,. help in imitating competitor's products. B. help the firm reduce customi"ation and costs. C" increase #alue and support higher pricing. 5. cause competitors to mo#e in.
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*(. (p. 30,(307) ,ccording to the te!t a firm creates aAnB @@@@@ &y dispersing the stages of its #alue chain to those locations around the glo&e 'here the #alue added is ma!imi"ed or 'here the costs of #alue creation are minimi"ed. ,. integrate circle B. disperse chain C" glo&al 'e& 5. international mesh
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*). (p. 307) Fhich of the follo'ing is =7T an important ca#eat that is likely to discourage glo&al e!pansionC ,. Transportation costs B" Cultural differences C. Trade &arriers 5. 1olitical and economic risks
**. (p. 307) The @@@@@ refers to the systematic reduction in production costs that ha#e &een o&ser#ed to occur o#er the life of a product. A" e!perience cur#e B. for'ard ad#antage C. positi#e-sum result 5. managed ad#antage
*+. (p. 307) , num&er of studies ha#e o&ser#ed that a product's @@@@@ decline &y some characteristic each time cumulati#e output dou&les. ,. financing costs B" production costs C. marketing costs 5. 345 costs
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*.. (p. 307) The t'o phenomena that help e!plain the e!perience cur#e are2 A" learning effects and economies of scale. B. technology inputs and 'ealth transfer. C. le#eraging su&sidiary and local responsi#eness. 5. standardi"ed manufacturing and glo&al 'e&.
+/. (p. 300) @@@@@ refer to cost sa#ings that come from ac-uiring kno'ledge of repetition of ho' to carry out a task. A" ;earning effects B. ?!ponential effects C. ,ncillary effects 5. ?conomies of scale
+1. (p. 300) ;earning effects tend to &e more significant 'hen a @@@@@ task is repeated &ecause there is more that can &e learned a&out the task. ,. repetiti#e manufacturing B. standardi"ed manufacturing C" technologically comple! 5. standardi"ed ser#ice
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+2. (p. 300) The a&ility to spread fi!ed costs o#er a large #olume results in a cost-sa#ings phenomenon is referred to as2 ,. #olume synergies. B" economies of scale. C. captured sa#ings. 5. si"e effects.
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+$. (p. 300) 1roduction costs e#entually decline due to increasing la&or producti#ity and management efficiency &ecause of2 ,. la&or markets of scale. B. economies of scale. C" learning effects. 5. education effects.
+%. (p. 30/) , firm 'ould mo#e do'n the e!perience cur#e if it2 ,. prices and markets slo'ly to increase the demand gradually. B. ser#es only the domestic market. C. ser#es multiple markets from multiple location points. !" chooses an optimal location for a particular #alue creation acti#ity.
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+(. (p. 3/') Firms that compete in the glo&al marketplace typically face t'o types of competiti#e pressures. They face pressures for cost reductions and2 ,. pressures to &e in a concentrated industry. B" pressures to &e locally responsi#e. C. pressures to opt for a skimming price. 5. pressures to reduce tariffs.
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+). (p. 3/3) Cost reduction pressures tend to &e particularly intense in industries that2 A" create products that ser#e uni#ersal needs. B. create customi"ed products. C. are not in#ol#ed in international &usiness. 5. produce products that ha#e inelastic demand.
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+*. (p. 3/3) Fhich of the follo'ing is =7T an e!ample of a con#entional commodity productC ,. 1etroleum B. Sugar C. Steel !" 5iamonds
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++. (p. 3/3) ,mong glo&al firms 'hich of the follo'ing is =7T a factor that is dri#ing pressures for local responsi#enessC ,. 5ifferences in distri&ution channels B. 5ifferences in infrastructure and traditional practices C" Similarities in consumer tastes and preferences 5. 0ost-go#ernment demands
+.. (p. 3/4) In =orth ,merica consumer electrical systems are &ased on 11/ #olts 'hile in some ?uropean countries 2%/-#olt systems are standard. This is an e!ample of2 ,. differences in consumer tastes and preferences. B. differences in distri&ution channels. C" differences in infrastructure and traditional practices. 5. differences in go#ernmental demands.
./. (p. 3/4) ,ll of these countries ha#e a similar per capita income on a purchasing po'er parity &asis ?EC?1T2 ,. Bra"il. B" ,ustralia. C. 1oland. 5. 3ussia.
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.1. (p. 3/4) , firm's @@@@@ strategies may ha#e to &e responsi#e to differences in distri&ution channels among countries. A" marketing B. finance C. pu&lic relations 5. research and de#elopment
.2. (p. 3/5) Threats of protectionism economic nationalism and local content rules2 ,. try to encourage e!ports from foreign companies. B" dictate that international &usinesses manufacture locally. C. put harsh regulations on distri&ution. 5. strictly regulate the ra' materials that foreign companies use.
.$. (p. 3/5) 1ressures for @@@@@ imply that it may not &e possi&le for a firm to reali"e the full &enefits from learning effects and location economies. ,. go#ernment appro#al B. consumer guidance C. national recognition !" local responsi#eness
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.%. (p. 3/5) Firms use four &asic strategies to compete in the international en#ironment. These are2 A" glo&al standardi"ation strategy a locali"ation strategy a transnational strategy and an international strategy. B. a cross-cultural strategy a trade &lock strategy a regional strategy and a 'orld strategy. C. a domestic-&ased strategy an economy of scale strategy a nonelastic market strategy and a skimming price strategy. 5. a location economy strategy a single location production strategy a glo&al strategy and an inelastic demand strategy.
.(. (p. 3/5) The appropriateness of the strategy that a firm chooses to use in an international market #aries 'ith the e!tent of pressures for @@@@@ and @@@@@@. ,. e!it from in#estmentG product uniformity. B. price concessionsG -uality impro#ements. C. a#aila&ility of financingG product standardi"ation. !" cost reductionsG local responsi#eness.
.). (p. 3/5) Fhich of the follo'ing is =7T one of the four &asic strategies used &y firms to deal 'ith cost reduction and local responsi#enessC A" ?!it strategy B. :lo&al standardi"ation strategy C. International strategy 5. Transnational strategy
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.*. (p. 3/,) Fhich strategy makes the most sense 'hen there are strong pressures for cost reductions and demands for local responsi#eness are minimalC ,. 5omestic strategy B" :lo&al standardi"ation strategy C. International strategy 5. Transnational strategy
.+. (p. 3/,) Fhich of the follo'ing companies 57?S =7T pursue a glo&al standardi"ation strategyC ,. 9otorola B. Te!as Instruments C" 9c5onald's 5. Intel
... (p. 3/,) Fhich strategy focuses on increasing profita&ility &y customi"ing the firm's goods or ser#ices so that they pro#ide a good match to tastes and preferences in different national marketsC ,. International B. :lo&al standardi"ation C" ;ocali"ation 5. Transnational
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1//. (p. 3/,) 9TD is a company that had to pursue aAnB2 ,. international strategy. B. glo&al standardi"ation strategy. C" locali"ation strategy. 5. transnational strategy.
1/1. (p. 3/0) Fhich strategy makes the most sense 'hen cost pressures are intense and demands for local responsi#eness are highC ,. 5omestic strategy B. :lo&al standardi"ation strategy C. International strategy !" Transnational strategy
1/2. (p. 3/0) The 'ork of Christopher Bartlett and Sumantra :hoshal is associated 'ith2 ,. glo&al strategy. B. multidomestic strategy. C" transnational strategy. 5. international strategy.
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1/$. (p. 3/0) ,AnB @@@@@ strategy makes sense 'hen a firm faces high pressures for cost reductions high pressures for local responsi#eness and significant opportunities for le#eraging #alua&le skills 'ithin a multinational's glo&al net'ork of operations. ,. international B. glo&al C" transnational 5. multidomestic
1/%. (p. 3/0) ,ccording to the te!t 'hich of the follo'ing strategies is difficult to implement due to conflicting demandsC A" Transnational B. International C. :lo&al 5. ;ocali"ation
1/(. (p. 3//) Firms that pursue aAnB @@@@@ strategy try to create #alue &y transferring #alua&le skills and products to foreign markets 'here indigenous competitors lack those skills and products. ,. nationali"ation B. transnational C. glo&al !" international
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1/). (p. 3//) ,AnB @@@@@ strategy makes sense if a firm has a #alua&le core competence that indigenous competitors in foreign markets lack. ,. glo&al B" international C. nationali"ation 5. transnational
1/*. (p. 3/0) ;ocali"ing the product offering yet simultaneously capturing some scale economies are ad#antages of 'hich strategyC ,. 5omestic B" Transnational C. International 5. :lo&al
1/+. (p. 41') The term @@@@@ refers to cooperati#e agreements &et'een potential or actual competitors. ,. tactical union B" strategic alliance C. political affiliation 5. economic association
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1/.. (p. 41') @@@@@ run the range from formal 8oint #entures to short-term contractual agreements. ,. Cooperati#e synergies B" Strategic alliances C. Franchise organi"ations 5. Tactical mergers
11/. (p. 413) @@@@@ allo' firms to share the fi!ed costs of de#eloping ne' products or processes. A" Strategic alliances B. Su&sidiaries C. =e' #entures 5. :reenfield #entures
AACSB: -eflecti&e t)in.ing BT: Co+p"e)en ion Difficulty: 2ediu+ !ea"ning #$%ecti&e: ''(5 Topic: St"ategic Alliance
111. (p. 413) 9any firms tie up 'ith Chinese firms to &e a&le to do &usiness successfully in China. 7n their o'n they 'ill not &e a&le to esta&lish &usiness connections essential to succeed in China. This is an e!ample of 'hich ad#antage of a strategic allianceC ,. , strategic alliance could help the firm esta&lish technological standards for the industry that 'ill &enefit the firm. B. , strategic alliance is a 'ay to &ring together complementary skills and assets that neither company could easily de#elop on its o'n. C. Strategic alliances allo' firms to share fi!ed costs. !" Strategic alliances may facilitate entry into a foreign market.
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112. (p. 413) Strategic alliances ha#e three ma8or ad#antages. These are A1B may facilitate trade into a foreign market A2B allo' firms to share the fi!ed costs and de#eloping ne' products or processes and A$B2 A" a 'ay to &ring together the complementary skills and assets of the participants. B. gi#es competitors a lo' cost route to ne' technology. C. the strategic and operational controls essential for success in foreign market 'ill &e retained e!clusi#ely &y the local partner. 5. transfer of technological kno'-ho' to a potential competitor.
11$. (p. 413) 7ne of the principal risks 'ith strategic alliances is2 ,. they &ring together the complementary skills of alliances partners. B. alliances may facilitate entry into foreign markets. C" a firm can gi#e a'ay more than it recei#es. 5. they allo' firms to share fi!ed costs.
11%. (p. 414) ,ccording to the te!t the success of a strategic alliance is a function of three factors. These are2 partner selection alliance structure and2 ,. similarity in si"e of the alliance partners. B. geographic distance &et'een the alliance partners. C" the manner in 'hich the alliance is managed. 5. go#ernment support.
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11(. (p. 414) Fhich of the follo'ing is =7T a re-uired attri&ute of a good strategic alliance partnerC ,. It is unlikely to opportunistically e!ploit the alliances for his<her o'n ends. B. It shares the firm's #ision for the purpose of the alliance. C" It must ha#e capa&ilities identical to his<her partner. 5. It helps the firm achie#e its strategic goals.
11). (p. 414) ,ll of the follo'ing are characteristics of good allies or partners ?EC?1T2 ,. a good partner helps the firm achie#e its strategic goals. B. a good partner shares the firm's #ision for the purpose of the alliance. C" a good partner di#ulges all secrets of his organi"ation to you. 5. a good partner is unlikely to try to opportunistically e!ploit the alliance for his<her o'n ends.
11*. (p. 414) To increase the pro&a&ility of selecting a good partner a firm should do all of the follo'ing ?EC?1T2 ,. collect as much pertinent pu&licly a#aila&le information on potential allies as possi&le. B" contact the potential ally's family and friends to find out as much information as possi&le. C. collect information from informed third parties such as in#estment &ankers or former employees. 5. get to kno' the potential partner as 'ell as possi&le &efore committing to an alliance.
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11+. (p. 415) The four safeguards against opportunism &y alliance partners include2 'alling off critical technology esta&lishing contractual safeguards agreeing to s'ap #alua&le skills and technologies and2 A" e!tracting significant credi&le commitments. B. maintaining an atmosphere of secrecy. C. retaining a C1, to audit the alliance's &ooks. 5. restricting the life span of the alliance to three years or less.
11.. (p. 415) @@@@@ agreements are one 'ay to achie#e the goal of s'apping skills and technologies that each company in a strategic alliance co#ets and ensuring a chance for e-uita&le gain. ,. Hoint #enture B. Sharing C" Cross-licensing 5. ;earning
12/. (p. 415) 9anaging an alliance successfully re-uires &uilding interpersonal relationships &et'een the firms' managers or 'hat is sometimes referred to as2 A" relational capital. B. personnel capital. C. financial capital. 5. physical capital.
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Essay Questions 121. (p. 37,(377) 5escri&e the concept of #alue creation. Fhat are the t'o primary strategies used to attain competiti#e ad#antage &y organi"ationsC Dalue creation is performing acti#ities that increase the #alue of goods or ser#ices to consumers. It is measured &y the difference &et'een #alue and cost. 9ichael 1orter has argued that the t'o strategies for creating #alue and attaining a competiti#e ad#antage in an industry are the lo'-cost strategy and the differentiation strategy. , strategy that focuses primarily on lo'ering production costs is called a lo'-cost strategy. , strategy that focuses on increasing the attracti#eness of a product is called a differentiation strategy.
122. (p. 37/(30') Fhat makes up a #alue chainC 5escri&e the roles of primary acti#ities and support acti#ities in the #alue chain. The #alue chain is composed of a series of distinct #alue creation acti#ities that are categori"ed as primary acti#ities and support acti#ities. 1rimary acti#ities include research and de#elopment production marketing and sales and customer ser#ice. 3esearch and de#elopment is concerned 'ith the design of products and production processes. 1roduction is concerned 'ith the creation of a good or ser#ice. 9arketing and sales are concerned 'ith creating #alue through &rand positioning and ad#ertising. The customer ser#ice acti#ity is concerned 'ith pro#iding after-sale ser#ice and support. Support acti#ities include company infrastructure information systems logistics and human resources. Infrastructure is the conte!t 'ithin 'hich all the other #alue creation acti#ities occur. Information systems include electronic systems that alter the efficiency and effecti#eness of a firm. ;ogistics control the transmission of physical materials through the #alue chain. 0uman resources help create more #alue &y ensuring that the company has the right mi! of skilled people to perform its #alue creation acti#ities effecti#ely.
AACSB: -eflecti&e t)in.ing BT: Co+p"e)en ion Difficulty: 9a"d !ea"ning #$%ecti&e: ''(' Topic: St"ategy and t)e *i"+
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12$. (p. 304) 5escri&e four 'ays that a firm can profit from glo&al e!pansion. Firms that operate internationally are a&le to2 A1B ?!pand the market for their domestic product offerings &y selling those products in international markets. A2B 3eali"e location economies &y dispersing indi#idual #alue creation acti#ities to those locations around the glo&e 'here they can &e performed most efficiently and effecti#ely. A$B 3eali"e greater cost economies from e!perience effects &y ser#ing an e!panded glo&al market from a central location. A%B ?arn a greater return &y le#eraging any #alua&le skills de#eloped in foreign operations and transferring them to other entities 'ithin the firm's glo&al net'ork of operations.
AACSB: Co+p"e)en ion BT: Co+p"e)en ion Difficulty: 2ediu+ !ea"ning #$%ecti&e: ''(3 Topic: 5lo$al E6pan ion7 8"ofita$ility7 and 8"ofit 5"owt)
12%. (p. 304) 5escri&e the concept of 6core competence.6 Fhat types of core competencies are the most #alua&le for penetrating foreign marketsC The term core competence refers to the skills 'ithin the firms that competitors cannot easily match or imitate. These skills may e!ist in any of the firm's #alue creation acti#ities Ai.e. manufacturing marketing sales materials management etc.B. These skills typically ena&le a firm to produce a product or ser#ice that competitors find difficult to duplicate. Core competencies are the &edrock of a firm's competiti#e ad#antage. They ena&le a firm to reduce the costs of #alue creation and<or to create percei#ed #alue in such a 'ay that premium pricing is possi&le.
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12(. (p. 307(30/) Fhat is the e!perience cur#eC 0o' can an in#ol#ement in o#erseas markets help a firm capture e!perience cur#e ad#antages more rapidlyC The e!perience cur#e refers to systematic reductions in production costs that ha#e &een o&ser#ed to occur o#er the life of a product. In general the e!perience cur#e suggests that as a firm produces more of a particular product the unit price of the product drops. This phenomenon occurs &ecause of learning effects and economies of scale. ;earning effects refer to the cost sa#ings that come from learning &y doing. ?conomies of scale refer to the reductions in unit costs achie#ed &y producing a large #olume of a product as a result of the a&ility to spread fi!ed costs o#er a larger #olume. Firms can typically mo#e do'n the e!perience cur#e faster through in#ol#ement in o#erseas markets. The simple logic is that &y going glo&al a firm e!pands its customer &ase and is a&le to sell a higher #olume of its product. By selling a higher #olume of its product a firm can e!perience learning effects and economies of scale &enefits more rapidly.
12). (p. 300) Fhat is the difference &et'een learning effects and economies of scaleC ;earning effects refer to cost sa#ings that come from learning &y doing. ;a&or for e!ample learns &y repetition ho' to carry out a task such as assem&ling airframes most efficiently. ?conomies of scale refer to the reductions in unit cost achie#ed &y producing a large #olume of a product. ?conomies of scale ha#e a num&er of sources one of the most important of 'hich seems to &e the a&ility to spread fi!ed costs o#er a large #olume.
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12*. (p. 3/3(3/3) Firms that compete in glo&al markets often face pressures for local responsi#eness. 5escri&e 'hat is meant &y local responsi#eness and identify the underlying reasons that local responsi#eness pressures e!ist. 1ressures for local responsi#eness arise from national differences in consumer tastes and preferences infrastructure accepted &usiness practices and distri&ution channels and from host-go#ernment demands. 3esponding to pressures to &e locally responsi#e re-uires a firm to differentiate its products and marketing strategy from country to country to accommodate these factors all of 'hich tends to raise the firm's cost structure.
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12+. (p. 3/5(3//) 5escri&e the four &asic strategies that firms use to compete in international markets. Fhich strategy is the &estC The four &asic strategies that firms use to compete in international markets are2 an international strategy a locali"ation strategy a glo&al strategy and a transnational strategy. ?ach of the strategies is &riefly descri&ed &elo'. :lo&al Strategy - Firms that pursue a glo&al standardi"ation strategy focus upon increasing profita&ility &y reaping the cost reductions that come from e!perience cur#e effects and location economies. That is they are pursuing a lo'-cost strategy. The ma8ority of the #alue chain acti#ities for a glo&al firm are concentrated in a fe' fa#ora&le locations. :lo&al firms are not #ery locally responsi#e. Instead they prefer to market a standardi"ed product 'orld'ide. This strategy makes most sense in those cases 'here there are strong pressures for cost reductions and 'here demands for local responsi#eness are minimal. ;ocali"ation Strategy - , locali"ation strategy focuses on increasing profita&ility &y customi"ing the firm's goods or ser#ices so that they pro#ide a good match to tastes and preferences in different national markets. ;ocali"ation is most appropriate 'hen there are su&stantial differences across nations 'ith regard to consumer tastes and preferences and 'here cost pressures are not too intense. By customi"ing the product offering to local demands the firm increases the #alue of that product in the local market. 7n the do'nside &ecause it in#ol#es some duplication of functions and smaller production runs customi"ation limits the a&ility of the firm to capture the cost reductions associated 'ith mass-producing a standardi"ed product for glo&al consumption. , locali"ation strategy makes sense 'hen there are high pressures for local responsi#eness and lo' pressures for cost reductions. The high cost structure associated 'ith the duplication of production facilities makes this strategy inappropriate in industries 'here cost pressures are intense. Transnational Strategy - , transnational strategy is an am&itious strategy in 'hich a firm tries to simultaneously e!ploit e!perience-&ased cost economies and location economies transfer distincti#e competencies 'ithin the firm and pay attention to pressures for local responsi#eness. This type of strategy makes sense 'hen a firm faces high pressures for cost reductions and high pressures for local responsi#eness. Bartlett and :hoshal admit that &uilding an organi"ation that is capa&le of supporting a transnational strategic posture is comple! and difficult. In essence a transnational strategy re-uires a firm to simultaneously achie#e cost efficiencies glo&al learning and local responsi#eness. These are contradictory demands that are difficult to achie#e at the same time in practice.
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International strategy - Firms that find themsel#es in the fortunate position of &eing confronted 'ith lo' cost pressures and lo' pressures for local responsi#eness. 9any of these enterprises ha#e pursued an international strategy taking products first produced for their domestic market and selling them internationally 'ith only minimal local customi"ation. The distinguishing feature of many such firms is that they are selling a product that ser#es uni#ersal needs &ut they do not face significant competitors and thus unlike firms pursuing a glo&al standardi"ation strategy they are not confronted 'ith pressures to reduce their cost structure. These firms tend to centrali"e product de#elopment functions at home and esta&lish manufacturing and marketing functions in each ma8or country in 'hich they do &usiness. ,n international strategy makes sense if a firm has a #alua&le core competence that indigenous competitors in foreign markets lack and if the firm faces relati#ely 'eak pressures for local responsi#eness and cost reductions. Typically local responsi#eness is fairly modest.
12.. (p. 41') Fhat are strategic alliancesC Strategic alliances are cooperati#e agreements &et'een potential or actual competitors. Strategic alliances run the range from formal 8oint #entures in 'hich t'o or more firms ha#e e-uity stakes to short-term contractual arrangements in 'hich t'o companies agree to cooperate on a particular task.
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1$/. (p. 413(414) Fhat are the disad#antages of strategic alliancesC Some commentators ha#e critici"ed strategic alliances on the grounds that they gi#e competitors a lo'-cost route to ne' technology and markets. The failure rate for international strategic alliances seems to &e high. 7ne study of %. international strategic alliances found that t'o-thirds run into serious managerial and financial trou&les 'ithin t'o years of their formation and that although many of these pro&lems are sol#ed $$ percent are ultimately rated as failures &y the parties in#ol#ed.
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Chapter 11 - The Strategy of International Business

Chapter 11 The Strategy of International Business

$. (p. 375) Strategy is a ratio or rate of return concept. FALSE

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

Chapter 11 - The Strategy of International Business

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