1.

The globalization of production has been decreasing as companies have been facing lower barriers to international
trade and location economies.
a. True
b. False

ANSWER: False
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

2. Despite the globalization of production and markets, many of the most successful companies in certain industries are
still clustered in a small number of countries.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

3. Factor endowments, the cost and quality of factors of production, are a prime determinant of the competitive
advantage that certain countries have in certain industries.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
4. Southwest Airlines, Sony, and Costco conduct business in two or more countries. These companies can be referred
to as multinational companies.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.15.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Application

5. A company can increase its growth rate by taking goods or services developed at horne and selling them
internationally.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

6. Location economies refer to the economic benefits that arise from performing a value creation activity at an optimal
location.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

7. A company may create value if it can leverage the skills created within subsidiaries and apply them to other
operations within the finn's global network.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
8. By offering a standardized product to the global marketplace and manufacturing that product in each nation in which
it does business irrespective of production costs, a multinational company can realize substantial scale economies.
a. True
b. False

ANSWER: False
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

9. Local responsiveness may be driven by economic and political demands placed on companies by host country
governments.
a. True
b. False

ANSWER: True
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

I 0. An international strategy may not be viable in the long term and to survive, companies that can pursue it need to shift
toward a global standardization strategy.
a. True
b. False

ANSWER: True
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

II. A transnational strategy makes the most sense when demand for local responsiveness is minimal.
a. True
b. False

ANSWER: False
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension
12. A localization strategy is most appropriate when there are substantial differences across nations with regard to
consumer tastes and preferences and when cost pressures are not too intense.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

13. Global standardization strategy emphasizes customization and product differentiation.
a. True
b. False

ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thinking
KEYWORDS: Bloom's: Comprehension

14. Companies that pursue a global standardization strategy are trying to develop a business model that simultaneously
achieves low costs and differentiates the product offering across geographic markets.
a. True
b. False

ANSWER: False
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
15. Most manufacturing companies begin their global expansion by exporting.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

16. When a company licenses its technology it can quickly lose control over it.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

17. One advantage of a joint venture is that a company may benefit from a local partner's knowledge of the many
dimensions of a host country.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Knowledge
18. If a company's competitive advantage derives from its control of proprietary teclrnological know-how, it should either
license its teclrnology to others or pursue a joint venture.
a. True
b. False

ANSWER: False
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

19. Companies should form strategic alliances with frrms that have a reputation for being opportunistic.
a. True
b. False

ANSWER: False
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

20. Alliances can be designed to make it difficult (if not impossible) to transfer teclrnology not meant to be transferred.
a. True
b. False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
21. Which of the following has occurred in international trade over the past half-century?
a. There has been a dramatic increase in the barriers to international trade.
b. Tariff rates on manufactured goods traded by advanced nations have fallen.
c. Regulations prohibiting foreign companies from entering domestic markets and establishing production
facilities have increased.
d. The volume of world trade has decreased dramatically.
e. There has been a decline in the value of foreign direct investment.

ANSWER: b
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

22. Which of the following is not an attribute of a national or country-specific environment that has an impact on global
competitiveness of companies located in that nation?
a. Factor endowments
b. Local demand conditions
c. Related and supporting industries
d. Strategy, structure, and rivalry of firms within the nation
e. Advertising expenses

ANSWER: e
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

23. Global economies of scale can be realized by:
a. restricting the expansion of overseas sales.
b. limiting the utilization of production facilities.
c. curbing bargaining power with suppliers.
d. decreasing cost savings through learning effects.
e. spreading the fixed costs associated with developing.

ANSWER: e
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension
24. Which of the following statements is true in the context oflocal demand conditions?
a. Companies are typically least sensitive to the needs of their closest customers.
b. Home demand plays little role in helping companies upgrade their national competitive advantage.
c. A nation's companies gain competitive advantage if their domestic customers are sophisticated and
demanding.
d. The characteristics of international demand alone shape the attributes of a company's products; not local
demand.
e. Local demand characteristics have little role to play in creating pressure for innovation and quality.

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SM1A.HlLL.15.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

25. Which of the following is not a factor of production?
a. Land
b. Labor
c. Raw materials
d. Competitive forces
e. Managerial sophistication

ANSWER: d
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SM1A.HlLL.15.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

26. Black and Decker, Capitol One, Gillette, and Unilever are all companies that conduct business in two or more
national markets. These companies are known as
a. bimarket companies.
b. national companies.
c. domestic companies.
d. multinational companies.
e. localized companies.

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SM1A.HlLL.15.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Application
27. Which of the following statements is true in the context of attributes of national competitive advantage?
a. Factor endowments do not encompass aspects such as managerial sophistication.
b. Companies are typically least sensitive to the needs of their closest customers.
c. The benefits of investments in advanced factors of production by related and supporting industries are
confined to those industries.
d. Domestic rivalry creates pressures to increase costs and avoid investing in upgrading advanced factors.
e. The nature of home demand shapes the attributes of domestically made products .

ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SM1A.HILL.15.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

28. Swedish strength in fabricated steel products (such as ball bearings and cutting tools) has drawn on strengths in
Sweden's specialty steel industry. This is an example of which of the following attributes that impact national
competitive advantage?
a. Local demand conditions
b. Competitiveness of related and supporting industries
c. Intensity of rivalry in an industry
d. Factor endowments
e. Differences in distribution channels

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SM1A.HILL.15.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

29. The globalization of production has caused fmns to:
a. lower their market share.
b. lower their cost structure.
c. centralize their production process.
d. curb international competition.
e. limit the number of market segments.

ANSWER: b
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SM1A.HILL.15.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
30. Which of the following statements is true in the context of globalization of production and markets?
a. Globalization of production has significantly increased the costs for many industries.
b. The globalization of markets and production has failed to threaten companies' horne markets.
c. Consolidated oligopolies continue to be dominated by a small number of companies despite globalization.
d. The shift from national to global markets has curbed competitive rivalry in many industries.
e. Globalization has significantly increased the threat of entry.

ANSWER: e
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

31. When a company expands its sales volume through international expansion, it can realize cost savings from
economies of scale through all of the following except:
a. spreading fixed costs over its global sales volume.
b. utilizing its production facilities more intensely.
c. increased bargaining power with its suppliers.
d. learning effects associated with higher volume.
e. adopting high cost structures.

ANSWER: e
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

32. When a company performs a value creation activity in a region that is optimal for that activity, wherever in the world
that might be, it is trying to capitalize on:
a. negative feedback loops.
b. economies of scope.
c. the transnational strategy.
d. location economies.
e. its localization strategy.

ANSWER: d
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
33. Which of the following is not a necessity for leveraging the skills of global subsidiaries?
a. Incentives for local managers to share knowledge and ideas
b. Awareness among managers that competencies can develop anywhere
c. Assertion of monopoly of the corporate center over subsidiaries
d. Transfer of competencies around the company
e. Incentives that encourage employees to take necessary risks

ANSWER: c
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

34. Global expansion:
a. is feasible only for non-technology based companies.
b. can enable companies to increase their profitability and grow their profits more rapidly.
c. has significantly decreased in the recent years as the industry barriers are now higher.
d. does not involve selling existing products to new markets in different countries.
e. is not feasible for service-based firms.

ANSWER: b
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

35. Which of the following factors increases pressures for cost reductions?
a. Meaningful differentiation between products
b. Reduced international competition
c. Competitors that are based in high-cost locations
d. High switching costs
e. Persistent excess capacity

ANSWER: e
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension
36. Which of the following factors increases pressures for local responsiveness?
a. Powerful buyers
b. Uniformity in distribution channels
c. Host govermnent demands
d. Similarities in customer tastes and preferences
e. Competitors that are based in high-cost locations

ANSWER: c
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

37. Differences in tastes and preferences:
a. increase pressures for cost reductions.
b. do not affect service-based firms.
c. increase pressures for local responsiveness.
d. reduce pressures from the host government.
e. significantly decrease R&D costs of a company.

ANSWER: c
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

38. Host govermnent demands generally:
a. increase pressures for local responsiveness.
b. decrease pressures for cost reductions.
c. do not encompass local content rules.
d. compel companies to abandon localization strategies.
e. impede a company's ability to differentiate its product offering across national borders.

ANSWER: a
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
39. In the wireless teleconnnunications industry, different technical standards are found in different parts of the world. A
technical standard known as GSM is common in Europe, and an alternative standard, CDMA, is more common in
the United States and parts of Asia. Equipment designed for GSM will not work on a CDMA network and vice
versa. Which of the following pressures for local responsiveness does this represent?
a. Global envirornnental demands
b. Host govennnent demands
c. Differences in distribution channels
d. Differences in customer tastes and preferences
e. Differences in infrastructure

ANSWER: e
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Application

40. Cost reduction pressures can be particularly intense in industries producing:
a. commodity-type products.
b. highly differential products.
c. highly customized services.
d. goods that have no close substitutes.
e. goods that need minimal advertising.

ANSWER: a
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.02- Discuss the motives for expanding internationally
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

41. Nutrimax, a sports foods manufacturer, has recently expanded its operations to different countries. The company has
realized that customers in different countries have different tastes and preferences. So, the company customizes its
products based on the country where it's selling. In this scenario, Nutrirnax is most likely to be using strategy.
a. global standardization
b. localization
c. Achilles heel
d. centralization
e. transnational

ANSWER: b
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thinking
KEYWORDS: Bloom's: Application
42. Companies that pursue a strategy are trying to develop a business model that simultaneously achieves low
costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different
subsidiaries in the company's global network of operations.
a. transnational
b. downsizing
c. centralization
d. localization
e. global standardization

ANSWER: a
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

43. Which of the following ideas is a localization strategy is based on?
a. There is a convergence in the tastes of consumers in different nations of the world.
b. There are substantial economies of scale to be realized from centralizing global production.
c. Consumer tastes and preferences differ among national markets.
d. There are cost advantages associated with manufacturing a standard product for global consumption.
e. Competitive strategy should be centralized at the world head office.

ANSWER: c
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

44. The Achilles heel of international strategy is that:
a. economies of scale cannot be achieved.
b. customization of products makes the company lose its credibility.
c. competitors inevitably emerge.
d. non-price differences among products hold little importance.
e. customer preferences eventually become identical.

ANSWER: c
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.15.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
45. Which of the following statements is true about global standardization strategy?
a. It emphasizes product customization to specifically meet customer needs.
b. It involves the spreading of production, marketing, and research and development activities of companies to all
the location it operates in.
c. It makes most sense when there are strong pressures for cost reductions.
d. It makes most sense when the pressures for local responsiveness are maximum.
e. It fails to focus on achieving location and scale economies.

ANSWER: c
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

46. Which of the following statements is true about localization strategy?
a. It focuses on marketing a standardized product worldwide to achieve cost reductions.
b. It makes most sense when cost pressures are extremely intense.
c. It is most appropriate when there are similarities across nations with regard to consumer tastes and
preferences.
d. It involves some duplication of functions and smaller production runs.
e. It usually relieves companies of the task of closely monitoring their costs.

ANSWER: d
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

47. Which of the following statements is true about transnational strategy?
a. It gives little emphasis to cost reduction and achieving scale economies.
b. It makes little sense when the pressures for local responsiveness are intense.
c. It is an easy one to pursue because it places minimal demands on the company.
d. It fosters a flow of skills between different subsidiaries in the company's global network of operations.
e. It is adopted by companies that produce standardized goods that do not require product differentiation.

ANSWER: d
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension
48. Relish is a large fast food chain that operates in many countries. As there are several competitors in the fast food
sector, the company has been facing intense pressures for achieving low cost structures. The company also faces
the task of customizing its product line as there are significant differences in tastes and preferences among
customers in different geographic locations. In order to achieve both low costs and product differentiation, the
company should aim to pursue a strategy.
a. global standardization
b. transnational
c. localization
d. downsizing
e. divestment

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.15.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Application

49. Aries Travels is a company that offers holiday and travel packages. The company realizes that customer
preferences vary and thus extensively customizes its packages. As there are not many competitors in the market in
which Aries Travels operates, there are minimal pressures to reduce costs. Aries Travels is most likely to have
adopted a strategy.
a. global standardization
b. international
c. localization
d. transnational
e. harvest

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.15.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Application
50. WKL Entertainment Inc. is a service-based firm with very few competitors. The company is looking to sell its
services in different nations with substantial differences in consumer preferences and where cost pressures are not
too intense. Which of the following strategies should WKL Entertairnnentlnc. managers pursue?
a. Global standardization
b. Transnational
c. Localization
d. International
e. Multinational

ANSWER: c
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Application

51. Which of the following statements is true about international strategy?
a. It is usually adopted by companies that face intense cost pressures due to competition.
b. It makes most sense when the pressures for local responsiveness are very intense.
c. It often involves the head office retaining tight control over marketing and product strategy.
d. It often involves decentralizing product development functions such as R&D to different subsidiaries.
e. It involves extensive scope for localization and product differentiation.

ANSWER: c
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension
52. Which of the following is an advantage of international licensing?
a. It enables the company realize scale economies and location economies through manufacturing products in a
centralized location.
b. It allows the company to collect profits from one licensee and use it to support others.
c. It eliminates the risk oflosing control over a technology that the company owns.
d. It enables the company to coordinate its strategy efficiently to achieve competitive advantage.
e. It takes away the pressure of development costs and risks associated with opening up a foreign market from
the company.

ANSWER: e
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

53. A company, Pluto Inc., employs the franchising strategy to enter a new national market. Which of the following
statements is more likely to be true of Pluto?
a. It is more likely to be a service company.
b. It is more likely to have a greater control over the quality the products manufactured in the foreign country.
c. It is less likely to impose strict rules regarding how a franchisee does business.
d. It is less likely to receive royalty payment from the franchisee.
e. It is more likely to bear the development costs associated with opening a foreign market on its own.

ANSWER: a
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Application

54. Which entry mode gives a multinational the tightest control over foreign operations?
a. Exporting from the horne country and letting a foreign agent organize local marketing
b. Licensing
c. Franchising
d. Entering into a joint venture with a foreign company to set up overseas operations
e. Setting up a wholly owned subsidiary

ANSWER: e
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension
55. Which of the following is an advantage of franchising?
a. It ensures tight control over quality.
b. It enables companies to engage in global strategic coordination.
c. It involves low development costs and risks.
d. It enables the company to collect all the profits made by the franchisees.
e. It frees companies from the task of monitoring and assisting operations at franchisees.

ANSWER: c
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

56. Which of the following entry modes allows a company to engage in global strategic coordination?
a. Exporting
b. Licensing
c. Joint ventures
d. Wholly owned subsidiaries
e. Franchising

ANSWER: d
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension

57. Which of the following is disadvantage of strategic alliances?
a. They give competitors a low-cost route to new technology and markets.
b. They do not facilitate entry into a foreign market.
c. They do not allow for sharing of risks and fixed costs.
d. They mandate that the companies do not share complementary skills and assets.
e. They cause problems when it comes to establishing technological standards for the industry.

ANSWER: a
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge
58. For a strategic alliance, fmns should seek partners that are:
a. different in terms of vision and agendas.
b. known for being opportunistic.
c. willing to share costs and risks of product development.
d. radically different when it comes to strategic goals.
e. similar when it comes to capabilities.

ANSWER: c
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

59. Most manufacturing companies begin their global expansion by:
a. licensing.
b. franchising.
c. exporting.
d. forming a joint venture.
e. setting up a wholly owned subsidiary in the host country.

ANSWER: c
POINTS: I
DIFFICULTY: Easy
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Knowledge

60. Which of the following is not a risk of exporting?
a. Tariffbarriers
b. Transportation costs
c. Location diseconomies
d. High manufacturing costs
e. Delegation of marketing activities to a local agent

ANSWER: d
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Comprehension
61. Dietizza is a fast food network that makes low-calorie pizzas. As the finn wishes to expand its operations in different
locations, it has licensed a few entrepreneurs to open Dietizza outlets under the company's trademark. The
entrepreneurs will take up the responsibility of costs while Dietizza will assist them in running operations. The
company will receive royalty payments and a percentage of profits from the entrepreneurs. Which of the following
concepts is illustrated here?
a. Exporting
b. Franchising
c. Setting up of a wholly owned subsidiary
d. Strategic alliance
e. Joint venture

ANSWER: b
POINTS: I
DIFFICULTY: Moderate
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Application

62. What is meant by the term national competitive advantage, and what are the attributes of a nation that affect the
global competitiveness of companies located within that nation?

ANSWER: National competitive advantage refers to the fact that the nation within which a
company is based may have an important bearing on the competitive position of that
company in the global marketplace. There are four attributes of a country-specific
environment that have an important impact on the global competitiveness of companies
based within that country. Factor endowments encompass a nation's position in factors
of production and include factors such as skilled labor and the infrastructure necessary
to compete in a given industry. Demand conditions refer to the nature of demand for a
product or service in the horne country. Relating and supporting industries refer to the
presence or absence of supplier industries and related industries that are internationally
competitive. Finally, finn strategy, structure, and rivalry refers to the conditions in the
nation governing how companies are created, organized, and managed and the nature
of domestic rivalry.
POINTS: I
DIFFICULTY: Challenging
LEARNING OBJECTIVES: SMIA.HILL.l5.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Synthesis
63. Identify and discuss the general ways in which companies can increase their profitability and profit growth through
global expansion.

ANSWER: Companies can increase their profitability and profit growth from global expansion in
several ways. First, companies can take goods or services developed at horne and sell
them internationally. In so doing, a company instantly expands its market, often by
using the same business model. It should be noted that benefits may come from the
fact that products are superior, but it is also important that companies use existing
competencies in foreign markets as well. Second, companies that expand their sales
volume through international expansion can expect to realize savings from economies
of scale, thereby increasing profitability through the ability to lower their cost structure.
Third, companies can realize location economies by performing value creation activities
in the optimal location for that activity, wherever in the world that may be. Different
counties offer opportunities to both lower costs and increase differentiation. Finally, a
company can leverage the skills of global subsidiaries by applying best practices and
good ideas that may come from anywhere in the organization.
POINTS: I
DIFFICULTY: Challenging
LEARNING OBJECTIVES: SMIA.HILL.l5.08.01- Understand the process of globalization and how it impacts a
company's strategy
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Analysis

64. Whirlpool, a leading U.S. maker of household appliances, has a wholly owned subsidiary that is responsible for
research and development (R&D), manufacturing, and sales in over two dozen European countries, from Norway to
Greece. What are some of the potential advantages that Whirlpool may gain from its use of a wholly owned
subsidiary for global expansion? What are some of the potential disadvantages?

ANSWER: Whirlpool stands to make high profits from its wholly owned subsidiary because it
doesn't have to share profits with a partner, franchisee, or licensee. Also, the firm
maintains control over proprietary technology and know-how. Tight quality control is
also possible, which can protect the finn's brand-name reputation. In addition,
Whirlpool will likely realize economies of scale and will be able to use profits from U.S.
operations to fund further expansion into Europe. Finally, the company will benefit from
learning that takes place at its subsidiary.
On the downside, Whirlpool has invested its own capital in the subsidiary and therefore
faces a large risk of financial loss.
POINTS: I
DIFFICULTY: Challenging
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Analytic
KEYWORDS: Bloom's: Analysis
65. What are the potential benefits and risks of global strategic alliances? What actions can a finn take to minimize the
risks and maximize the benefits?

ANSWER: Global strategic alliances share the risk of global expansion, bring together
complementary skills, facilitate entry into a new market, and can set technological
standards. However, the partners risk loss of control over proprietary know-how, they
must learn to work together in a cooperative fashion, and they must share any profits
they earn.
To maximize the benefits and minimize the risks, fmns should choose a partner wisely,
ensuring that the partner is trustworthy, has a common vision, and has complementary
skills. To reduce the potential for loss of control, the company should consider walling
off the technology, writing contractual safeguards, use cross-licensing agreements to
exchange skills, and ask for a credible commitment in advance. Finally, bringing the
two firms together is a significant challenge and can be eased if managers are sensitive
to cultnral differences, if they build interpersonal relationships across company
boundaries, and if they look for opportunities for mutnallearning and benefit.
POINTS: I
DIFFICULTY: Challenging
LEARNING OBJECTIVES: SMIA.HILL.l5.08.04- Explain the pros and cons of different modes for entering
foreign markets
NATIONAL STANDARDS: United States- BUSPROG: Reflective Thin- BUSPROG: Analytic
KEYWORDS: Bloom's: Analysis

66. List and briefly describe each of the four basic global strategies.

ANSWER: Companies that pursue a global standardization strategy focus on increasing profitability
by reaping the cost reductions that come from economies of scale and location
economies. A localization strategy focuses on increasing profitability by customizing the
company's goods or services so that the goods provide a favorable match to tastes and
preferences in national markets. Companies that pursue a transnational strategy are
trying to develop a business model that simultaneously achieves low costs,
differentiates the product offering across geographic markets, and fosters a flow of
skills between different subsidiaries in the company's global network of operations.
Lastly, an international strategy is pursued when companies are confronted with low
cost pressures and low pressures for local responsiveness.
POINTS: I
DIFFICULTY: Challenging
LEARNING OBJECTIVES: SMIA.HILL.l5.08.03- Review the different strategies that companies use to compete
in the global market place
NATIONAL STANDARDS: United States- BUSPROG Analytic
KEYWORDS: Bloom's: Synthesis