Chapter 1 - Strategizing Around The Globe Test Bank True/False Questions

GLOBAL STRATEGY: Test Bank/Chapter One
CHAPTER 1 – STRATEGIZING AROUND THE GLOBE

TEST BANK
TRUE/FALSE QUESTIONS
1. The opening case is an example of how the publishing industry now requires a
simultaneous penetration of all markets rather than trying to win one market after
another.
a. True b. False
AACSB: Tier 1: Analytic; Tier 2: Strategy
2. In the opening case, the formal rules in China stated that foreign companies could
not publish books on their own.
a. True b. False
AACSB: Tier 1: Analytic; Tier 2: Environmental Influence
3. In China, political correctness may need to be considered when making reference

to Taiwan.
a. True b. False
4. The Closing Case illustrates how to strategically focus on the base of the global
economic pyramid and to do so successfully.
a. True b. False
AACSB: Tier 1: Reflective Thinking; Tier 2: Strategy
5. A SWOT analysis resonates very well with Sun Tzu’s teachings.

a. True b. False
6. If a strategy (theory) is truly successful, it will work not just for one firm but for
all others as well.
a. True b. False
7. Determining the scope of the firm involves not only growth of the firm but also
contraction.
a. True b. False
1
8. The text stresses that realism indicates that all companies should “go global” and
endeavor to do so as quickly as possible in view of the vast opportunities that
exist.
a. True b. False
9. The industry-based view posits that the degree of competitiveness in an industry

largely determines firm performance.
a. True b. False
10. The resource-based view suggests that firm-specific capabilities do not drive
performance differences.
a. True b. False
11. The institution-based view argues that institutional forces provide an answer to
similarities in firm performance but not differences.
a. True b. False
12. As illustrated by Cengage Learning’s penetration of the China market with Global
Strategy (Opening Case), the idea that firms must “think global and act local”
simultaneously is simply not possible.
a. True b. False
AACSB: Tier 1: Reflective Thinking; Tier 2: Creation of Value
13. The earliest MNEs existed in some form thousands of years ago in the Assyrian,
Phoenician, and Roman empires.
a. True b. False
14. According to the text, today’s most successful MNEs far exceed the historical
clout of some MNEs such as Britain’s East India Company during colonial times.
a. True b. False
AACSB: Tier 1: Analytic; Tier 2: Creation of Value
15. During the second half of the twentieth century, Hong Kong, Singapore, South
Korea, and Taiwan, refused to participate in the global economy and became
known as the “Four Toothless Tigers.”
2
a. True b. False
AACSB: Tier 1: Analytic; Tier 2: Motivation Concepts
16. During the 1990s there was an increase in both global trade and opposition to
global trade.
a. True b. False
17. Semiglobalization involves doing business in either the northern or southern

hemisphere but not both.
a. True b. False
18. Beginning in the late 1990s and early twenty first century, a corporate governance
crisis has developed.
a. True b. False
19. According to the text, business students may tend to focus more on the economic
gains of globalization, and be less concerned with its darker sides.
a. True b. False
AACSB: Tier 1: Reflective Thinking; Tier 2: Motivation Concepts
20. A lot of opponents of globalization are nongovernmental organizations (NGOs),

such as environmentalists and consumer groups.
a. True b. False
AACSB: Tier 1: Analytic; Tier 2: Group Dynamics
MULTIPLE CHOICE QUESTIONS
1. Multinational enterprises (MNEs) are firms that:

a. Engage in foreign direct investment (FDI).
b. Directly control value-adding activities in other countries.
c. Manage value-adding activities in other countries.
d. All of the above.
3
e. None of the above.

2. Which of the following best describes foreign direct investment (FDI)?

a. A firm’s direct investment in production and/or service activities abroad.
b. The purchases of foreign securities by people within the U.S.
c. The purchases of U. S. securities by people from other countries.
d. Avoidance of brokers or other financial intermediaries when making foreign
investments.
e. B and C above.
AACSB: Tier 1: Analytic; Tier 2: Motivation Concepts
3. Which of the following best defines “Triad” as the term is used in the text?
a. The U.S., Japan, and Germany.
b. The U.S., Canada, and Mexico.
c. North America, Europe, and Japan.
d. North America, Europe, and Asia.
e. The U.S. dollar, the Euro, and the Yen.
4. According to the text, the current brand of “global strategy” seems relevant only
for MNEs from:
a. BRIC.
b. The Triad.
c. OPEC nations.
d. NAFTA.
e. The E. U.
5. Emerging economies (or emerging markets):

a. Now command a full one-third of the worldwide FDI flow.
b. Command half of the global gross domestic product (GDP) measured at
purchasing power parity.
c. A and B above
d. Despite their growth, they still command less than 10% of global GDP.
e. Consist of countries which are in a state of decline but which are believed to have
potential for growth.
6. BRIC refers to:

a. Bahrain, Russia, Iran, and China.
b. Bolivia, Romania, India, and Columbia.
4
c. Bulgaria, Romania, Iraq, and China.

d. Bermuda, Rwanda, Iraq, and the Czech Republic.
e. Brazil, Russia, India, and China.
7. Many BRIC local firms are:

a. Effectively competing at home.
b. Launching offensives abroad.
c. Creating serious ramifications for Triad-based MNEs.
e. BRIC local firms have yet to become significant globally.
8. Strategy:
a. Dates back to 500bc and the work of the strategist Sun Tzu of China.
b. Applies concepts developed by the strategist von Clausewitz.
c. Includes application of principles of military strategy to business competition.
e. In this century, civilian companies no longer apply military theories and
principles in dealing with competition.
9. A hallmark of theory building and development is:

a. The outcome of a test.
b. Replication.
c. Intuition.
d. Consensus.
e. Lack of controversy.
AACSB: Tier 1: Reflective Thinking; Tier 2: Creation of Value
10. Overall, strategy is:

a. A rulebook.
b. A blueprint.
c. A set of programmed instructions.
11. Much of our knowledge about “the firm” is from research on firms in:
a. Anglo-American capitalism.
b. Japan after World War II.
c. German mathematical models.
d. Emerging markets.
5
e. The early industrial era.

12. The word _______has now become the most famous Chinese business word to
appear in English-language media.
a. Keiretsu
b. Guanxi
c. Chaebol
d. Blat
13. The _______ view primarily focuses on the ______ in a SWOT analysis.
a. Industry-based, OT
b. Resource-based, OT
c. Industry-based, SW
d. Resource-based, SW
e. Industry and resource, SWOT
14. As shown in the Opening Case, the informal rules of the game:
a. Must be avoided because global business is not a mere game.
b. Are not applicable in cultures in which tend to be very formal.
c. Often require that the firm seek to change the informal rules instead of going
along with those rules.
d. Need to be understood by firms.
e. Are being replaced by formal rules.
15. Diversification:
a. Was acclaimed in the West during the 1960s and 1970s but was discredited
twenty years later.
b. Is believed by Western media to destroy value in emerging economies.
c. Has resulted in higher profitability for some in emerging economies than
independent firms.
d. In emerging economies may be a function of the level of institutional (under)
development.
e. All of the above.
AACSB: Tier 1: Analytic; Tier 2: Creation of Value
6
16. “Global strategy” refers to:

a. A particular theory on how to compete.
b. Offering standardized products and services on a worldwide basis.
c. Any strategy outside one’s home country.
d. Strategy of firms around the globe—essentially various firms’ theories about how
to compete successfully.
17. Globalization is viewed as:

a. A new force sweeping through the world in recent times.
b. A long-run historical evolution since the dawn of human history.
c. A pendulum that swings from one extreme to another from time to time.
18. Which of the following were the first to express concern about international
competition from low-cost countries?
a. American political leaders in the twenty first century.
b. Union leaders in the last half of the twentieth century.
c. American business leaders in the late 1800s.
d. The King of England in the late 1700s.
e. A first century Roman emperor.
AACSB: Tier 1: Reflective Thinking; Tier 2: Environmental Influence
19. The current era of globalization originated in the aftermath of:

a. World War I.
b. World War II.
c. The Korean Conflict.
d. The Vietnam Conflict.
e. The Gulf War.
20. At the dawn of the 21st century, __________ had significant ramifications for
companies and strategists around the world.
a. Antiglobalization protests
b. Terrorist attacks
c. Corporate governance crisis
d. All of the above
e. None of the above
7
SHORT ANSWER ESSAY QUESTIONS
1. How can principles of military strategy be useful in developing a global business

strategy? Explain by using SWOT analysis.
Students may point out that military strategy involves developing a clear idea of
goals and objectives, an understanding of the barriers to achieving those
objectives (such the opponents), the development of capabilities to overcome
those barriers and the selection of the best alternative means of achieving the
objectives under specific circumstances. Business firms can benefit by doing the
same thing. They need to start by examining their current situation which includes
an understanding of their internal strengths (S) and weaknesses (W) and how that
can affect the strategy they use to deal with their external opportunities (O) and
threats (T).
2. The text points out that not all firms should go global. In view of the vast
opportunities, why should some firms not pursue international business?
Many will point out that success in one market or part of the world does not
assure that the firm will be able to be successful with its product and strategy in
some other part. Much depends on whether it will be able to modify its product or
its strategy so as to be successful in the country it seeks to enter. Timing may also
be off either in terms of market readiness or development of the firm’s
capabilities.
3. Having valuable, unique, and hard to imitate capabilities may be advantageous in

doing business globally. However, what is the problem with trying to maintain
that advantage?
There are many possible ways to answer this question. Some may argue that it is
much like being on a treadmill in which one must keep moving forward just to
stay in place. What is valuable today may lose its value as changes occur in
technology and markets. Other firms in other parts of the world may develop
alternatives that imitate or even exceed one’s capabilities or render them no
longer unique. As firms expand production around the world, they may in fact be
helping to train others to compete with them.
4. Why is there a backlash against globalization, and how do aspects of that backlash
actually enhance globalization?
As the text points out, many incorrectly assume that globalization is a new force
that is enabling emerging economics to take away both low-end manufacturing
jobs high-end jobs as well while enabling MNE’s to destroy local companies,
local cultures and values as well and the environment. NGO’s (Non Government
Organizations) have focused on various abuses (real or alleged) and brought
about a public debate regarding the relative positive and negative outcomes
involved in globalization. As a result, social responsibility, ethics, and
8
governance, long regarded as “backburners,” have now increasingly become

central topics for strategy discussions. To the extent that MNE’s can effectively
counter misunderstandings and positively respond to valid concerns, they may be
able prevent or overcome barriers to global trade and investment.
5. As you examine the current political, social, and economic environment of your
country and the world as of the moment you are reading the text, what is your
estimate of the extent to which globalization will increase or decrease in the short
run? In the long run?
The response is likely to be specific to the national and cultural background of the
student and the major news events at the time the student is taking the course.
The text has shown that there is a pendulum that tends to swing back and forth in
regards to the acceptance or resistance of globalization but the long run trend
appears to be moving toward greater globalization. However, the future is not
always like the past and even long-term trends can be reversed. As a result, some
students may have reasons why they feel that there will be increasing barriers to
globalization in the future. Whatever the response, this question is one in which
the answer is not as important as the thought process that goes into it.
9
STRATEGIZING AROUND THE GLOBE
1. The opening case is an example of how the publishing industry now requires a
simultaneous penetration of all markets rather than trying to win one market after
another.
a. True b. False
2. In the opening case, the formal rules in China stated that foreign companies could
not publish books on their own.
a. True b. False
3. In China, political correctness may need to be considered when making reference

to Taiwan.
a. True b. False
4. The closing case illustrates how to strategically focus on the base of the global
economic pyramid and to do so successfully.
a. True b. False
5. A SWOT analysis resonates very well with Sun Tzu’s teachings.

a. True b. False
6. If a strategy (theory) is truly successful, it will work not just for one firm but for all
others as well.
a. True b. False
7. Determining the scope of the firm involves not only growth of the firm but also
contraction.
a. True b. False
8. The text stresses that realism indicates that all companies should “go global” and
endeavor to do so as quickly as possible in view of the vast opportunities that exist.
a. True b. False
LO: 1-4;
9. The industry-based view posits that the degree of competitiveness in an industry

largely determines firm performance.
a. True b. False
10. The resource-based view suggests that firm-specific capabilities do not drive
performance differences.
a. True b. False
11. The institution-based view argues that institutional forces provide an answer to
similarities in firm performance but not differences.
a. True b. False
12. As illustrated by Cengage Learning’s penetration of the China market with Global
Strategy (opening case), the idea that firms must “think global and act local”
simultaneously is simply not possible.
a. True b. False
DISC: Creation of Value
13. The earliest MNEs existed in some form thousands of years ago in the Assyrian,
Phoenician, and Roman empires.
a. True b. False
14. According to the text, today’s most successful MNEs far exceed the historical
clout of some MNEs such as Britain’s East India Company during colonial times.
a. True b. False
15. During the second half of the twentieth century, Hong Kong, Singapore, South
Korea, and Taiwan, refused to participate in the global economy and became
known as the “Four Toothless Tigers.”
a. True b. False
16. During the 1990s there was an increase in both global trade and opposition to
global trade.
a. True b. False
17. Semiglobalization involves doing business in either the northern or southern

hemisphere but not both.
a. True b. False
18. Beginning in the late 1990s and early twenty first century, a corporate governance
crisis has developed.
a. True b. False
19. According to the text, business students may tend to focus more on the economic
gains of globalization, and be less concerned with its darker sides.
a. True b. False
20. A lot of opponents of globalization are nongovernmental organizations (NGOs),

such as environmentalists and consumer groups.
a. True b. False
DISC: Group Dynamics
1. Multinational enterprises (MNEs) are firms that:

a. Engage in foreign direct investment (FDI).
b. Directly control value-adding activities in other countries.
c. Manage value-adding activities in other countries.
2. Which of the following best describes foreign direct investment (FDI)?

a. A firm’s direct investment in production and/or service activities abroad.
b. The purchases of foreign securities by people within the U.S.
c. The purchases of U. S. securities by people from other countries.
d. Avoidance of brokers or other financial intermediaries when making foreign
investments.
e. B and C above.
3. Which of the following best defines “Triad” as the term is used in the text?
a. The U.S., Japan, and Germany.
b. The U.S., Canada, and Mexico.
c. North America, Europe, and Japan.
d. North America, Europe, and Asia.
LO: 1-1; Bloom’s Knowledge;
4. According to the text, the current brand of “global strategy” seems relevant only
for MNEs from:
a. BRIC.
b. The Triad.
c. OPEC nations.
d. NAFTA.
e. The E. U.
5. Emerging economies (or emerging markets):

a. Now command a full one-third of the worldwide FDI flow.
b. Command half of the global gross domestic product (GDP) measured at
purchasing power parity.
c. A and B above
d. Despite their growth, they still command less than 10% of global GDP.
e. Consist of countries which are in a state of decline but which are believed to have
potential for growth.
6. BRIC refers to:
a. Bahrain, Russia, Iran, and China.
b. Bolivia, Romania, India, and Columbia.
LO: 1-1;
7. Many BRIC local firms are:

a. Effectively competing at home.
b. Launching offensives abroad.
c. Creating serious ramifications for Triad-based MNEs.
e. BRIC local firms have yet to become significant globally.
8. Strategy:
a. Dates back to 500bc and the work of the strategist Sun Tzu of China.
b. Applies concepts developed by the strategist von Clausewitz.
c. Includes application of principles of military strategy to business competition.
e. In this century, civilian companies no longer apply military theories and
principles in dealing with competition.
LO: 1-3;
9. A hallmark of theory building and development is:

a. The outcome of a test.
b. Replication.
c. Intuition.
d. Consensus.
e. Lack of controversy.
LO: 1-3;
10. Overall, strategy is:

a. A rulebook.
b. A blueprint.
c. A set of programmed instructions.
LO: 1-3;
11. Much of our knowledge about “the firm” is from research on firms in:
a. Anglo-American capitalism.
b. Japan after World War II.
c. German mathematical models.
d. Emerging markets.
e. The early industrial era.
12. The word _______has now become the most famous Chinese business word to
appear in English-language media.
a. Keiretsu
b. Guanxi
c. Chaebol
d. Blat
13. The _______ view primarily focuses on the ______ in a SWOT analysis.
14. As shown in the closing case, the informal rules of the game:
a. Must be avoided because global business is not a mere game.
b. Are not applicable in cultures in which tend to be very formal.
c. Often require that the firm seek to change the informal rules instead of going
along with those rules.
15. Diversification:
a. Was acclaimed in the West during the 1960s and 1970s but was discredited
twenty years later.
b. Is believed by Western media to destroy value in emerging economies.
c. Has resulted in higher profitability for some in emerging economies than
independent firms.
d. In emerging economies may be a function of the level of institutional (under)
development.
LO: 1-4; Difficulty: Challenging
16. “Global strategy” refers to:

b. Offering standardized products and services on a worldwide basis.
c. Any strategy outside one’s home country.
d. Strategy of firms around the globe—essentially various firms’ theories about how
to compete successfully.
LO: 1-3;
17. Globalization is viewed as:

a. A new force sweeping through the world in recent times.
b. A long-run historical evolution since the dawn of human history.
c. A pendulum that swings from one extreme to another from time to time.
18. Which of the following were the first to express concern about international
competition from low-cost countries?
b. Union leaders in the last half of the twentieth century.
19. The current era of globalization originated in the aftermath of:

a. World War I.
b. World War II.
c. The Korean Conflict.
d. The Vietnam Conflict.
e. The Gulf War.
20. At the dawn of the 21st century, __________ had significant ramifications for
companies and strategists around the world.
a. Antiglobalization protests
b. Terrorist attacks
c. Corporate governance crisis
d. All of the above
e. None of the above
SHORT ANSWER ESSAY QUESTIONS
1. How can principles of military strategy be useful in developing a global business

strategy? Explain by using SWOT analysis.
Students may point out that military strategy involves developing a clear idea of
goals and objectives, an understanding of the barriers to achieving those
objectives (such the opponents), the development of capabilities to overcome
those barriers and the selection of the best alternative means of achieving the
objectives under specific circumstances. Business firms can benefit by doing the
same thing. They need to start by examining their current situation which includes
an understanding of their internal strengths (S) and weaknesses (W) and how that
can affect the strategy they use to deal with their external opportunities (O) and
threats (T).
2. The text points out that not all firms should go global. In view of the vast
opportunities, why should some firms not pursue international business?
Many will point out that success in one market or part of the world does not
assure that the firm will be able to be successful with its product and strategy in
some other part. Much depends on whether it will be able to modify its product or
its strategy so as to be successful in the country it seeks to enter. Timing may also
be off either in terms of market readiness or development of the firm’s
capabilities.
3. Having valuable, unique, and hard-to-imitate capabilities may be advantageous in

doing business globally. However, what is the problem with trying to maintain
that advantage?
There are many possible ways to answer this question. Some may argue that it is
much like being on a treadmill in which one must keep moving forward just to
stay in place. What is valuable today may lose its value as changes occur in
technology and markets. Other firms in other parts of the world may develop
alternatives that imitate or even exceed one’s capabilities or render them no
longer unique. As firms expand production around the world, they may in fact be
helping to train others to compete with them.
4. Why is there a backlash against globalization, and how do aspects of that backlash
actually enhance globalization?
As the text points out, many incorrectly assume that globalization is a new force
that is enabling emerging economics to take away both low-end manufacturing
jobs high-end jobs as well while enabling MNE’s to destroy local companies,
local cultures and values as well and the environment. NGO’s (Non Government
Organizations) have focused on various abuses (real or alleged) and brought
about a public debate regarding the relative positive and negative outcomes
involved in globalization. As a result, social responsibility, ethics, and
governance, long regarded as “backburners,” have now increasingly become
central topics for strategy discussions. To the extent that MNE’s can effectively
counter misunderstandings and positively respond to valid concerns, they may be
able prevent or overcome barriers to global trade and investment.
5. As you examine the current political, social, and economic environment of your
country and the world as of the moment you are reading the text, what is your
estimate of the extent to which globalization will increase or decrease in the short
run? In the long run?
The response is likely to be specific to the national and cultural background of the
student and the major news events at the time the student is taking the course.
The text has shown that there is a pendulum that tends to swing back and forth in
regards to the acceptance or resistance of globalization but the long run trend
appears to be moving toward greater globalization. However, the future is not
always like the past and even long-term trends can be reversed. As a result, some
students may have reasons why they feel that there will be increasing barriers to
globalization in the future. Whatever the response, this question is one in which
the answer is not as important as the thought process that goes into it.
IBUS 305 Lecture 2 - Managing Industry Competition
Study online at quizlet.com/_1ntghz
1. As a strategist, which of the followings you see as incorrect: 1. Industry specific characteristics (five forces) influence the
international success and failure of firms
2. Five forces in different industries lead to diversity in firm
behaviour
(3. Industry is destiny for firm success)
4. Willingness to collaborate with suppliers and buyers, and
focusing on core competencies advocate
outsourcing against integration.
2. Case Study: Emerging markets - High fashion fights reccession - 2009 the fashion industry sales fall by 20%
- New entrants not dying to enter
- Suppliers hit hard by scaled down orders
- Dominated by big 3: LVMH, Gucci group, Burberry
- Next in line more specialised players
- Informal code of conduct - no discounts, price wars
- Recession - many cut prices quietly
- Weaker players bankruptcy, LVMH Grew (industry leader)
- Customers - aspirational, recession, economically depressed
- EMs (China) gave hope
3. If there are many sellers but only a few buyers, the sellers tend True or False
to have the most bargaining power.
False
4. Porters 5 forces 1. Intensity of rivalry
Indicators of intensity of rivalry
- Frequent price wars and Intense advertising campaigns
- Proliferation of new products e.g. Luxury car versus mass market
- High costs of competitive actions and reactions
Conditions that lead to intense rivalry

- Number and size of firms in direct competition e.g. Hollywood
- Product differentiation and product costs e.g. airlines
- Industry growth e.g. McDonalds, Burger King, Wendy's
- High exit costs
- Govt policy and regulations: New Zealand
2. Barriers to New Entrants

- High Setup costs and economies of scale
- Product standardisation
- Access to supply or distribution channels
- Possible retaliation by existing competitors
- Government policies
Examples
Airline Industry in NZ
Airbus New A380 and Boeing new 787, >$10bn
Galanz, China
3. Bargaining Power of Suppliers

- Number of possible suppliers
PC industry: Profitable: Dell & Lenovo or suppliers Microsoft & Intel?
- Unique differentiated products

Coca-cola Bottlers: only one supplier of Coke syrup: Coca-cola
Fonterra - undifferentiated suppliers
- Focal firm not an important customer

Boeing and Airbus - Lower versus large airlines
- Ability and willingness to Integrate Forward

Nike: supplies to footwear stores and own Nike Towns as well
4. Bargaining Power of Buyers

- Number of possible buyers
- NZ Govt drug buying agency: Pharmac
- Toyota City in China - surrounded by 30 supplier factories
5. Substitute products
- Products of different industries that satisfy similar needs
- Superior substitutes: Music downloads, Tata Nano
- Switching costs: commodity products, Air travel (NZ to Havai),
- Brand differentiation: Michael Hill, The Warehouse
5. Porter's Three Generic Competitive Strategies 1. Focus
- Concentrates on distinct market segment and/or geographic
focus
- Cost leadership focus
- Differentiation focus
- Most appropriate for NZ firms, Why?
2. Cost leadership
- Firm aims to be lower cost producer in industry
- Move to lower cost locations
3. Differentiation
- Offering more perceived value to customers
- Superior products, image, branding
- Mars - the milk chocolate that melts in your mouth and not in
your hand
6. Product proliferation is a potential strategy used to reduce the True or False
threat of potential entry.
True
7. The threat of substitutes (products from different industries that True or False
satisfy customer needs being met
by focal firms) is greater if there are low switching costs. True
8. Which of the following tends to reduce the intensity of rivalry? a. Similarity of firms in terms of size, market influence and
product offerings.
b. Products are big-ticket items and purchased infrequently.
c. New capacity must be added in large increments.
d. Slow industry growth or decline in demand.
(e. None of the above.)
9. Which of the follow would tend to reduce the bargaining power (a. Large number of buyers.)
of buyers? b. Products of the industry do not produce clear cost
advantages or enhance the quality of life
for buyers.
c. Purchase standard, undifferentiated commodity products
from suppliers.
d. Willingness and ability of buyers to integrate backward.
EXAM on ch 1 2 3
Study online at quizlet.com/_7zn4a0
1. _____ are firms that add value to Comolimentors 15. True or false : Both in shoring and True
the products of a focal firms captive sourcing refer to a firms
industry strategy that permorns value chain
activities in house
2. As a manager you answer to this Access resources and
question do we have resources capabilities through 16. True or false : For institutional firms True
and capabilities to add value in a strategic alliance the key role of institutions is
better way than our rivals do " you decreasing uncertainty in international
say no we can transactions
3. A competitive advantage based Path dependence and 17. True or false : Formal market Truw
on inimitabilifty can be sustained casual ambiguity supporting Instutution lower
for at least some time if it has the transaction cost and facilitate new
following charactieristcs entires
4. Critics of offshoring make all the Many large US firms 18. True or false: How a firm performs True
following arguments accept claim that they are different value added activities
global companies but relative to rivals determines the scope
they seem to be bound of the firm
by American values
19. True or false : If there are many sellers False
5. A firms ______ are it's tangible and Recourses , but only a few buyers the sellers
intangible assets a form uses to tend to have been strong bargaining
choose and implement its strategy power
6. A focus strategy serves the needs Complimentor 20. True or false: products that use True
of a particular segment of niche of differentiation strategy must have
the industry . The segment can be unique attributes (actual or perceived)
defined by multiple dimensions
21. True or false : the threat of substitutes True
excelt
( products from doffernt industries
7. Institutions do all the following Be projected into the that satisfy needs being met by local
except production process firms ) is greater if there are low
switching costs
8. International outsourcing involves Offshoring
22. True or false : the three generic True
9. In the resource based view of the Financial resources,
strategies cost leadership ,
firm examples of tangible physical recourses and
differentiations , and focus strat can
resources include technological
strengthen a firms position relative to
resources
the five forces
10. _____ is not the result of to down Emergent strategy
23. True or false: Valuable rare but True
planning but rather the outcome
inimitable recourses/ capabilities may
of a stream of smaller decisions
provide temporary competitive
made from the bottom up
advantage
11. Long term orientation is best Emphasis on
24. The ______ view primarily focuses on the Industry based ,
defined as perseverance and
___ ____ in the SWOT analysis opportunity and
savings
threat
12. Recent aspects of outsourcing As stated by the text.
25. What is a reason for integration as The activity is
include all of the following except The outsourcing of
opposed to outsourcing crucial to the core
services definitely has
business
a long term benefit
26. Which are true About informal Even in
13. A systematic foundation for The industry based
contraints delveloped
industry and competitor analysis is view
economics the
best provided by
best connected
14. True or false : an industry is True firms can reap
defined as a group of firms significant benefits
producing goods and services that
are similar to each other
27. Which of the following defines institutions Humanity devised constraints that control human interaction
28. Which of the following describes the complementary Numerous non core assets that compliment and support the value
asset adding activities of core assets
29. Which of the following is not about global strategy Action plan to defeat local competitors
30. Which of the following is not about multinational Firms only operate in their own countries
enterprises
31. Which of the following is not a fundamental question in Why do firms exist
strategy
32. Which of the following is not primary activities in the Human resource management
value chain of a firm
33. Which of the following is not true about cost leadership Firms should deliver products that customers preceive to be valuable
strategy and different
34. Which of the following lists consist of support activitie shuman recourses management and logistics and firm infrastructure
35. Which of the following would tend to reduce the Unwillingness and inability to integrate forward
bargaining power of suppliers
Foundations of Global Dimensions of Business
Study online at quizlet.com/_4ld360
1. All of the following are true of The agendas and 10. First mover advantages do not Successful clashes
direct exports except: objectives of the include: with dominant firms
intermediaries and in domestic markets.
exporters are the same.
11. The following managerial motives for Organizational
2. As firms expand into more Foreign firms are still conglomerations do not benefit stability.
countries, they should often discriminated shareholders except:
recognize: against.
12. Four strategic choices for MNEs do domestic
Foreign firms primarily
not include
deploy overwhelming
resources and capabilities 13. Global strategies have reached new terrorist attacks,
that offset the liability of levels of significance because of anti-globalization
foreignness. three defining events: protests, and
Foreign firms are able to corporate crisis in
offset the liability of Asia and the U.S.
foreignness and still have 14. "Global Strategy" refers to a particular theory
some competitive on how to compete
advantage. offering
standardized
All of the above. products and
3. At its core, diversification is Less complicated services on a
essentially driven by all of the information systems. worldwide basis
following except: strategy of firms
around the globe --
4. At the dawn of the 21st century, anti-globalization
essentially various
____ had significant ramifications protests
firms' theories about
for companies and strategists terrorist attacks
how to compete
around the world. corporate governance
successfully
crisis
All of the above.
All of the above.
15. Greenfield operations refers to: Wholly owned
5. Corporate scope is shaped by: Industry conditions.
subsidiaries.
Firm capabilities.
Institutional constraints. 16. In combining product and geographic Classic replicators.
Opportunities in both diversification, which is not one of the
developed and emerging four possible combinations?
economies. 17. In developing a strategy regarding "Look back, reason
competition or cooperation, it would ahead"
All of the above. be useful to not
6. The differences in formal and Regulatory 18. In some industries where pressures extender
informal institutions that govern Language for globalization are relatively low,
the rules of the game in Cultural local firms may possess some skills
different countries include _______ and assets that are transferable
differences. All of the above. overseas, thus leading to a/an_____
7. Diversification premium is the Conglomerate advantage. strategy.
same thing as:
8. Dumping is defined as an exporter selling below
cost abroad and planning
to raise prices after
eliminating local rivals
9. Firms may choose not to enter There are dissemination
certain countries if: risks.
19. Knowing the concepts and improve job and career 30. Research regarding the relationship Performance may
components of global opportunities between product diversification increase as firms shift
strategy will build awareness of what is and firm performance indicates from single business
going on in the world that: strategies to product-
avoid the downside risks of related diversification.
globalization Performance may
decrease as firms
All of the above. change from product-
related to product-
20. Knowledge management global standardization
unrelated.
uses "centers of
The linkage between
excellence" in which type
diversification and
of MNE?
performance is
21. Large-scale entries do Benefit from a strategic inverted U shaped.
which of the following? commitment. "Putting your eggs in
Assure local customers and similar baskets," has
suppliers. emerged as a
Deter potential entrants. balanced way to both
reduce risk and
All of the above. leverage synergy.
22. Localization (multi- global standardization strategy
domestic) strategy is the same as a multi- All of the above.
involves all of the domestic strategy 31. Select the best choice: a company Vertical
following except that is engaged in oil production,
23. The main types of attacks thrust pipelines and tankers, refining, and
include feint gasoline stations has engaged in
gambit _____________ expansion.
32. Selling the rights to intellectual Licensing/franchising.
All of the above. property for a royalty fee is
24. Much of our knowledge Anglo-American capitalsim involved in:
about "the firm" is from 33. Small firms in a large domestic Occasional
research on firms in market are referred to as: internationalizers.
25. Non-equity modes of Exports and contractual 34. Sources of operational synergy Technologies.
entry typically involve: agreements. include: Marketing.
26. Organizing firm-specific Favors firms with strong Manufacturing.
resources and capabilities complementary assets.
as a bundle: All of the above.
27. Overall, strategy is none of the above 35. The strategic goal of __________ Market seeking
involves going after countries that
28. Pressures for cost the framework of how to
offer the highest price.
reductions and local simultaneously deal with these
responsiveness include two sets of pressures 36. A SWOT analysis entails a firm's strengths, weaknesses,
host country demands and assessment of ______ opportunities, and
expectations threats
being locally responsive 37. "The extent to which a given resources
makes local customers and competitor possesses strategic
governments happy but endowment comparable, in terms
increase costs of both type and amount, to those
of the focal firm" refers to similarity
All of the above. of
29. Product-related A single business strategy.
diversification involves all
of the following except:
38. This structure is often used to global account structure 49. Which is true of relatedness? Relatedness can be a
supply customers (often other common underlying
MNEs) in a coordinated and dominant logic that
consistent way across various connects various
countries. businesses in a
diversified firm.
39. The three drivers of vengeance
counterattacks do not include 50. Which is true of strategy? Business strategy has
similarities with military
40. To ensure the success of the Seek organizational
strategy
M&A, managers need to make contrast and variety
Military principles
sure of all the following except: rather than organizational
cannot be completely
fit.
applied in business
41. The type of knowledge that is explicit Militaries fight over
codifiable (that is, it can be territories, waters, and
written down and transferred air spaces while firms
without losing much of its compete in markets
richness) is called
42. Unique to international consumer preferences All of the above.
competition are the pressures distribution channels 51. Which is true regarding Corporate restructuring
for local responsiveness, which host country demands restructuring? is not widely embraced
are reflected in around the world.
All of the above.
52. Which of the following are not Recent trends among
43. What are the three "legs" of the Industry-based regulatory risks? host governments
strategy tripod that ensure a competition, firm-specific regarding their
strategy impacts performance? resources and relationships with
capabilities, and MNEs.
institutional conditions
53. Which of the following exemplify Tariffs.
and transitions
trade barriers? Local content
44. What is the best view of the A new force sweeping requirements.
concept of globalization? through the world in Restrictions on certain
recent times entry modes.
A long-run historical
evolution since the dawn All of the above.
of human history
54. Which of the following is not a Direct discussion of
A pendulum that swings
legal means of signaling? reduced rivalry with
from one extreme to
competitors
another from time to time
55. Which of the following is not an Permits greater speed,
All of the above. argument in favor of flexibility, and
centralization in knowledge innovation
45. Which geographic diversification Culturally adjacent
management but instead is an
is most likely to reduce the countries.
argument in favor of
liability of foreignness?
decentralization?
46. Which is not true concerning The legal standards for
56. Which of the following is not an sufficient power for
U.S. anti-trust policy today? inter-firm cooperation are
argument in favor of corporate-level
no longer ambiguous in
decentralization in knowledge managers to initiate
the U.S.
management but instead is an necessary actions
47. Which is one motive for M&A Hubris. argument in favor of
which does not necessarily centralization?
increase shareholder value?
57. Which of the following is true As many as 70 percent
48. Which is true of globalized For large firms, there are regarding M&As? of M&As reportedly fail.
R&D? actually diminishing
returns for R&D
58. Which of the following would not be considered an initial set of actions to gain competitive counterattacks
advantage:
59. Which would be more characteristic of conglomerates? "Putting one's eggs in
similar baskets."
"Putting one's eggs in
different baskets."
B and C above.
60. The word ____________ has now become the most famous Chinese business word to appear in English- guanxi
language media and means interpersonal networks.
Test One MGMT 0472
1. Mass markets tend to be characterized by low profit margins.

a. True b. False
2. An industry is defined as a group of firms producing goods and/or services

that are similar to each other.
a. True b. False
3. A key proposition of the five forces framework is that industry structure is

unrelated to firm performance and the strength of the five forces.
a. True b. False
4. A key indicator of intense rivalry among firms is low cost competitive

actions and reactions.
a. True b. False
5. High exit costs from an industry tend to reduce the intensity of rivalry.
a. True b. False
6. Product proliferation is a potential strategy used to reduce the threat of

potential entry.
a. True b. False
7. Substantial switching costs reduce the threat of potential entry.

a. True b. False
8. The threat of substitutes (products from different industries that satisfy
customer needs being met by focal firms) is greater if there are low
switching costs.
a. True b. False
9. Core features of the five forces model remain remarkably insightful when
analyzing old industries but not new phenomena, such as e-commerce.
a. True b. False
10. Japanese firms do not tend to maintain close relationships with their
suppliers.
a. True b. False
11. One of the benefits of having a cost advantage is that it serves as barrier to
entry.
a. True b. False
12. If there are many buyers but only a few sellers, the buyers tend to have the
most bargaining power.
a. True b. False
13. If there are many sellers but only a few buyers, the sellers tend to have the
most bargaining power.
a. True b. False
14. The three generic strategies can strengthen a focal firm’s position relative to
the five forces.
a. True b. False
15. A focused firm avoids being either a specialized differentiator or a
specialized cost leader.
a. True b. False
16. Choosing whether to perform activities differently than rivals or to perform

different activities than competitors is the essence of the Three Generic
Strategies.
a. True b. False
17. Telecommunications is an example of one industry in which one can

determine exact boundaries.
a. True b. False
18. Strategic alliances are on the decline.

a. True b. False
19. The five forces model overemphasizes threats and downplays opportunities.
a. True b. False
20. If a low-cost firm has already achieved the maximum efficient scale, it must
turn to differentiation to distinguish itself from competitors.
a. True b. False
21. Strategies of firms within a strategic group tend to be different and so does
their performance.
a. True b. False
22. Recent success of firms in unattractive industries suggests that firm-specific
resources and capabilities are not needed to determine firm performance.
a. True b. False
23. The industry-based view ignores the impact of industry history and
institutions on firm performance.
a. True b. False
24. The traditional view recommends avoidance of integration.

a. True b. False
25. Recent work favors outsourcing and willingness to collaborate with

suppliers/buyers, as well as competitors.
a. True b. False
1. The luxury market is characterized by:

a. Fewer competitors than in a mass market.
b. Less use of incentives and price cuts to induce purchases.
c. Healthier profit margins than in a mass-market segment.
2. The ultra luxury automobile market is characterized by:

a. Little competition in the past – but that is changing.
b. A small number of cars produced each year – but they are very expensive.
c. Being the same as the luxury market.
d. A and B above.
3. Which of the following is NOT true of the industrial organization (IO)
economics model?
a. Industry structure determines firm conduct (strategy), which determines firm
performance.
b. Original goal – help regulators set policy to minimize the ability of firms to
earn excess profits.
c. Strategists use the IO model to try to earn above-average returns (excess
profits).
d. All of the above are NOT true.
e. All of the above ARE true.
4. Which of the following tends to reduce the intensity of rivalry?

a. Similarity of firms in terms of size, market influence and product offerings.
b. Products are big-ticket items and purchased infrequently.
c. New capacity must be added in large increments.
d. Slow industry growth or decline in demand.
5. Which of the following are scale-based low cost advantages?

a. Experience curves.
b. Proprietary technology.
c. Favorable access to raw materials and distribution channels.
d. Favorable locations.
6. Which of the following would tend to reduce the bargaining power of

suppliers?
a. Dominance of the supplier industry by a few firms.
b. Suppliers provide unique, differentiated products with few or no substitutes.
c. Focal firm is not an important customer.
d. Unwillingness and inability of suppliers to integrate forward.
7. Which of the follow would tend to reduce the bargaining power of buyers?
a. Large number of buyers.
b. Products of the industry do not produce clear cost advantages or enhance the
quality of life for buyers.
c. Purchase standard, undifferentiated commodity products from suppliers.
d. Willingness and ability of buyers to integrate backward.
8. Which of the following are true concerning cost leadership?

a. Targets average customers for mass market – little differentiation.
b. Key functional areas are manufacturing and materials management.
c. Relentless drive to cut costs might compromise value that customers desire.
9. Which is generally NOT true of differentiation?

a. Difficult to sustain basis of differentiation in the long run.
b. Relentless efforts of competitors to duplicate differentiation.
c. Key areas of application include research and development, marketing/sales
and after-sale services.
d. It is a challenge to identify attributes that are valued by customers in each
market segment.
e. Inability to pass on suppliers’ price increases to buyers.
10. Related and supporting industries are called _________ and they are an
additional force that can impact the competitiveness of an industry.
a. Complementors
b. All-rounders
c. Customizers
d. Flexible manufacturing
e. Supporters
11. One noncontroversial issue with strategic groups is:

a. Stability of strategic groups.
b. Mobility barriers between strategic groups.
c. The requirement for large quantities of objective data.
d. All of the above are controversial issues.
e. None of the above is controversial.
12. The industry-based view recommends:

a. Backward integration as a way to defend against the power of suppliers.
b. Backward integration as a way to defend against the power of buyers.
c. Forward integration as a way to defend against the power of suppliers.
d. Forward integration as a way to defend against the power of buyers.
e. Backward or forward integration as a way to defend against the power of
suppliers and buyers.
13. Which is a reason for integration as opposed to outsourcing?

a. Greater expense.
b. Strategic flexibility is enhanced.
c. Those within the firm are often more competitive.
d. The activity is crucial to the core business.
14. Which is a reason for outsourcing as opposed to integration?

a. Less expense.
b. Strategic flexibility is enhanced.
c. Those outside the firm are often more competitive.
d. The activity is not crucial to the core business.
15. Which of the following is NOT true regarding supplier relationships?

a. Supplier relationships that are too close may introduce rigidities, including loss
of flexibility.
b. In Japan suppliers may become trusted members of the keiretsu.
c. In Japan, instead of treating suppliers as adversaries, they are treated as
collaboration partners.
d. In view of A through C above, supplier relationships in Japan tend to be
ineffective.
e. In view of A through C above, close supplier relationships are not necessarily
good or bad.
16. Porter’s five forces framework:

a. Identifies relevant variables but fails to ask the needed questions.
b. Identifies only questions to ask.
c. Identifies both relevant variables and questions to ask.
d. Eliminates the need for other frameworks to add insight about firm
performance.
17. A systematic foundation for industry and competitor analysis is best provided
by:
a. The industry-based view.
b. Resource-based view.
c. Historical view.
d. Macro analysis.
18. An industry-based view provides some answers to which of the following

questions?
a. Why do firms differ?
b. How do firms behave?
c. What determines the scope of the firm?
d. What determines the international success and failure of firms?
19. Maximizing opportunities and minimizing threats presented by the five forces
provides some answers to which of the following questions?
20. The relative bargaining power of the focal firm and (according to the traditional
view) the degree of integration helps answer which of the following questions?
ESSAY QUESTIONS
1. An intense focus on above-average firm performance is shared by IO

economists and those involved in the strategy of firms and yet their
perspective is opposite of each other. Explain.
IO economists are interested in the minimization instead of the maximization

of above-average profits. The goal of these economist strategists instead is to
try and earn above-average returns that remain within ethical boundaries.
2. How can high exit costs increase the chance that firms may continue to
operate for at least a while when operating at a loss? Explain by giving
examples.
Specialized equipment and facilities lack alternative uses are issues that can
pose as exit barriers. There is also the personal investment and career costs
that can lead to the inability and reluctance of those that own the business to
exit. In general, business owners tend to try everything in their power to
remain in business whether it is due to personal investment or potential
monetary losses that would hurt them too bad. At a certain point, though, it
may be best for a company to go out of business in which case they must
weigh the exit barriers against the losses which they are currently facing.
3. Many high-technology industries are characterized by network externalities.

What are those externalities and how can they pay off?
Network externalities are the value a user gets from a product that increases
with the number of users of the same product. These industries tend to model
after monopolies in a way, in which the owners of these businesses whose
technology is embraced by the market and really lacks competition basically
block anyone from entering the market. An example of this would be Spire in
Saint Louis, there is really no possibility for an alternative gas company to
enter the market and it would be almost impossible for another business to
even compete. These businesses tend to center around increasing returns.
4. How can backward integration be used by buyers and what are some
examples?
Backward integration is gaining control of the firm’s inputs instead of relying

on outside firms for their resources, providing an alternative for outsiders.
Buyers can enhance their buying power by entering the market this way. For
example some stores compete with their own suppliers such as Target’s brand
being sold side by side on shelves with the name brands, creating a
competition within Target stores between the Target bran and name brand
items.
5. What are the “Three Generic Strategies,” and what lessons can we learn
from their use?
The three generic strategies from Porter are cost leadership, differentiation,
and focus. These strategies attempt to strengthen the business’s position in
relation to competition with other similar businesses. The idea is to decide
whether to perform activities differently or to use completely different
activities in relation to competitors. The idea is to choose once dimension and
focus on it. Companies that are in the middle, without having the lowest cost
or most differentiation, likely have no strategy which can lead to suffering in
the profits realm.
Chapter 1
Expanding abroad:
Motivations, means, and mentalities
True/False
1. The largest MNEs are equivalent in their economic importance to less developed economies
such as Nigeria, Moldova, or Jamaica.
Answer: False (Sales of the largest MNEs exceed the GDPs of less developed countries.)
Difficulty: Easy
Page: 16 and Table 1.3 (16)
Topic: MNE influence in the global economy
2. The process of internationalization followed by most firms is usually well-thought out in

advance and typically builds on a combination of rational analysis, planning and
implementation.
Answer: False (It is more likely a combination of rational analysis, opportunism, and luck. In
regards to opportunism, several studies have found that most firms begin exporting due to an
unsolicited export order.)
Difficulty: Moderate
Page: 22-23
Topic: The Process of Internationalization
3. All companies internationalize in an incremental manner. First, they make an initial

commitment of resources to the foreign market in order to secure local market knowledge.
Building on this knowledge, they make subsequent resource commitments, eventually
leading to higher levels of investment in the foreign market.
Answer: False (There are many exceptions to the incremental approach. Some firms are “born
globals”. Other firms retain the same mode, including level of subsidiary involvement, in all
foreign markets.)
Page: 23
Topic: The Process of Internationalization
4. A joint venture is a contractual mode of foreign entry involving a high level of resource
commitment by all partners.
Answer: False (A JV will not typically require as high a resource commitment as we would see
in wholly owned subsidiaries. In addition, there is significant variability in the level of resources
contributed by partners.)
1
Page: 24 (Figure 1.2)
Topic: Foreign entry mode
5. Emerging motivations for internationalization include the desire to enhance the firm’s
competitive position and the desire to develop global scanning capabilities.
Answer: True
Difficulty: Easy
Page: 19-20
Topic: Emerging Motivations
6. For an MNE to exist, first foreign countries must provide location-specific advantages to
attract the company to invest there, second the company must have ownership-specific
advantages that counteract its liability of foreignness, third the company must have the
organizational capability to leverage its strategic advantages more effectively internally than
externally.
Answer: True
Page: 22
Topic: Prerequisites for internationalization
7. An MNE with an ‘international mentality’ will typically be managed as a coordinated

federation.
Answer: True
Page: 26
Topic: The evolving mentality: international to transnational
8. An MNE with a ‘multinational mentality’ will typically be managed as a coordinated

federation.
Answer: False (It will typically be managed as a decentralized federation.)

Page: 26-27
9. An MNE with a ‘global mentality’ will typically manage its operations centrally.
2
Answer: True
Page: 27
10. An MNE with a ‘transnational mentality’ will typically be managed as an integrated network.
Answer: True
Page: 27
11. The main advantage multinational mentality has over global mentality is more efficient
manufacturing. responsiveness
Answer: False (it is the other way around)

Page: 26-27
12. Raymond Vernon’s article “Gone are the cash cows of yesteryear” highlights a company’s
global scanning and learning capability.
Answer: True
Difficulty: Hard
Page 19 (footnote 10)
Topic: Emerging Motivations
13. Only one article further develops the idea that “the process of developing these strategic and
organizational attributes lies at the heart of the internationalization process through which a
company builds its position in world markets.
Answer: False (2 articles further develop the idea: A. Jonsson and N. J. Foss, “International
expansion through flexible replication: learning from the internationalization experience of
IKEA,” Journal of International Business Studies, 42:9 (2011),
1079–1102 and J. W. Lu and P. W. Beamish, “International diversification and firm
performance: the S-curve hypothesis,” Academy of Management Journal, 47:4 (2004), 598–609.)
Difficulty: Hard
Page: 22-23 (footnote 15)
Topic: Process of Internationalization
3
Multiple Choice
14. An MNE is a(n):

a. import-export company that actively trades in foreign markets.
b. company that passively manages its substantial foreign direct investment.
c. import-export company that actively manages its foreign investment portfolio.
d. company that actively manages substantial foreign direct investment.
Answer: d (A true MNE is a company that has substantial direct investment in foreign countries,
and that actively manages and regards its foreign operations as integral parts of the company,
both strategically and organizationally. Companies that either do not hold equity positions or
hold minor equity positions in overseas ventures without or with very low management
involvement may be viewed as “international” companies but would not be regarded as
multinational enterprises.)
Page: 12
Topic: MNE definition
15. Three prerequisites that must be satisfied before a national firm can transform itself into a
multinational firm include:
a. scale-based advantages, ownership-specific advantages, and contractual capabilities.
b. location-specific advantages, ownership-specific advantages, and organizational capabilities.
c. scale-based advantages, ownership-specific advantages, and organizational capabilities.
d. location-specific advantages, knowledge advantages, and organizational capabilities.
Answer: b (a, c, and d are incorrect because scale-based advantages, knowledge-based

advantages, and contractual capabilities are, by themselves, insufficient to justify the
internationalization of operations. With much less effort a company often can sell or license its
technology to foreign producers, franchise its brand name internationally, or sell its products
abroad through local distributors, without having to set up its own offshore operations.)
Difficulty: Moderate to hard
Page: 22
Topic: Prerequisites for internationalization
16. Which of the following correctly describes the sequential evolution in management thinking
with respect to the strategic role of foreign operations in emerging MNEs?
a. global mentality, multinational mentality, international mentality, transnational mentality.
b. international mentality, global mentality, transnational mentality, multinational mentality.
c. multinational mentality, global mentality, international mentality, transnational mentality.
d. international mentality, multinational mentality, global mentality, transnational mentality.
Answer: d (a, b, and c are incorrect because, although they describe the different ways of
management thinking regarding the strategic role of foreign operations in emerging MNEs, they
do not describe the evolution of this thinking in the correct sequence.)
4
Page: 25-28
Topic: The evolving mentality: International to transnational
17. A franchise, such as McDonald’s, is a _________ mode of foreign entry.

a. low commitment, low control
b. low commitment, moderate control
c. low commitment, high control
d. moderate commitment, moderate control
Answer: b (a, c, and d would describe indirect export, contract manufacturing, and joint venture
foreign modes of entry respectively.)
Page: 24 (figure 1.2)
18. A joint venture is a _________ mode of foreign entry.

a. low commitment, low control
b. low commitment, moderate control
c. low commitment, high control
d. moderate commitment, moderate control
Answer: d (a, b, and c would describe indirect export, franchise, and contract manufacturing
foreign modes of entry respectively.)
Page: 24 (figure 1.2)
19. HomeAppliances Co. is a new manufacturer of home appliances. HomeAppliances wants to

go international. Some of its traditional motivations for pursuing internationalization include:
a. securing key supplies, seeking new markets, and raising global scanning and learning
capabilities
b. securing key supplies, seeking new markets, and improving competitive positioning
c. securing key supplies, seeking new markets and accessing low-cost factors of production
d. securing key supplies, improving competitive positioning, and accessing low-cost factors of
production
Answer: c (a, b, and d are incorrect because ‘raising global scanning and learning capabilities’
and ‘improving competitive positioning’ are not traditional motivations for pursuing
internationalization, they are emerging motivations.)
Page: 16-20
Topic: The Motivations: Pushes and Pulls to Internationalize
5
20. One motivation behind internationalization is to sustain the firm’s competitive position. To
pursue a sustainable competitive position relative to its rivals in the athletic clothing industry,
Nike attempts to:
a. preempt markets, capture global scale, and secure raw materials
b. capture global scale, access scarce knowledge, and match competitors
c. match competitors, capture global scale, and preempt markets
d. exploit factor cost differences, preempt markets, and match competitors
Answer: c (a, b, and d are incorrect because ‘securing raw materials’, ‘accessing scarce
knowledge’, and ‘exploiting factor cost differences’ may give a company a temporary
competitive advantage but not a sustainable competitive advantage.)
Difficulty: Hard
Page: 16-20
21. _________ suggests that in the first stage innovations are produced in the home developed
country; in the second stage they are exported to other similarly developed countries; in the
third stage, they start being produced in these developed countries; in the fourth stage they
start being produced in low-wage developing countries.
a. Vernon’s product cycle theory
b. Johanson and Vahlne’s stages theory
c. Dunning’s eclectic theory
d. Levitt’s globalization theory
Answer: a
Page: 18-19
22. Which of the following constitutes a list of foreign entry modes that involve the MNE to
make a foreign investment
a. Wholly owned, joint venture
b. Wholly owned, license
c. Franchising, joint venture
d. Franchising, license
Answer: a (Licensing, franchising, and many forms of cooperation may not entail an MNE
making an investment.)
Difficulty: Easy
Page: 24 (Figure 1.2)
Topic: Foreign entry modes
6
23. OfficeWare Corp. is an MNE that produces and sells office equipment. If the company’s
CEO employs a ‘global mentality’ toward the strategic role of the company’s foreign
operations, then we would expect that OfficeWare:
a. regards its overseas markets as a portfolio of local opportunities.
b. leverages its domestic capabilities worldwide.
c. regards the world as a single unit of analysis.
d. simultaneously responds to local needs, global demands and cross-border learning
opportunities.
Answer: c (a, b, and d would represent multinational, international, and transnational mentalities
respectively.)
Page: 27
24. The demand for the Italy-based Sparkly Fashion Manufacturing’s unisex pants has been
continually increasing. Sparkos, the CEO of the company, intends to take his company
international by producing these unisex pants mainly in Italy and selling them in the same
way all over the world. Sparkos is operating with a(n):
a. multinational mentality
b. global mentality
c. international mentality
d. transnational mentality
Answer: b (it is the only mentality that supports "make and sell the same thing, the same way,
everywhere")
Page: 27
Topic: The Evolving Mentality: International to Transnational (Global Mentality)
25. In 2015, MNEs’ foreign affiliates generated value added of more than _____ of global GDP
and ____ of world exports.
a. 1/5, 50%
b. 1/10, 30%
c. 1/15, 20%
d. 1/8, 25%
Answer: b
Difficulty: Easy
Page: 14
Topic: MNE Influence in the Global Economy
26. The 100 largest TNCs from developing and transition economies shows:
a. The importance of developing and transition economies is declining.
7
b. The status quo of developing and transition economies.
c. The importance of developing and transition economies is increasing.
d. None of the above
Answer: c (Total assests, sales and employment have all increased from 2013-2014)
Page: 15 and table 1.2
Topic: MNE Influence in the Global Economy
Essay
27. The CEO of Paragon Ltd. wants to take his company international. What are the three big
questions he must answer before expanding abroad?
Answer:
The three questions this CEO must answer before expanding abroad are:
a. What market opportunities, sourcing advantages or strategic imperatives will motivate the
company’s international expansion?
b. How will the company expand its foreign presence – through exports, licensing, joint
ventures, wholly owned subsidiaries or some other means?
c. How will the mentalities – attitudes, assumptions and beliefs – of Paragon’s management and
employees impact the probability of the company succeeding in its efforts to
internationalize?
Page: 11 (box insert)
Topic: Introduction
28. Rana manages a French fashion design company. What would motivate Rana’s company to
internationalize?
Answer:
(i) Traditional motivations might include: securing key supplies, seeking new markets and
accessing low-cost factors of production (e.g. labor, capital, etc.); (ii) Emerging motivations
might include: increasing scale economies to offset significant R&D investments, shortening
product life cycles, improving a company’s competitive position and enhancing a company’s
global scanning and learning capabilities.
Difficulty: Easy
Page: 16-20
29. Briefly explain the product cycle of smart phones using Raymond Vernon’s product cycle
theory.
8
Answer:
This theory suggests that early in a product’s life-cycle, all the parts and labor needed to
manufacture the product will be sourced from the locale in which the product was invented. As
the product is increasingly adopted and distributed in global markets, production gradually shifts
away from the point of origin. In some cases, the product ultimately becomes a good that is
imported into the country in which it was originally invented. For example, in the case of smart
phones, during the new product stage, the phones were produced and purchased by consumers in
the United States and Canada and little export trade occurred. During the maturing product
stage, mass-production techniques were developed and foreign demand (in developed countries)
expanded. At this point, the U.S. and Canada began to export the product to other developed
countries. In the standardized product stage, production moved to developing countries, which
then export the product to developed countries.
Page: 18-19
Topic: Product cycle theory
30. Briefly compare and contrast the Uppsala Internationalization Model and the Born Global
Model. Under what circumstances is each model most applicable? Give examples to
support your arguments.
Answer: According to the Uppsala Model, companies internationalize in an incremental fashion.

Typically, they start by utilizing foreign entry modes that require low levels of resource
commitment and low levels of control over foreign activities (e.g. exporting). The model
conceptualizes subsequent stages in the internationalization process as requiring higher levels of
resource commitment and providing higher levels of control over foreign activities (e.g. wholly
owned subsidiary). The experience of Toyota is consistent with the Uppsala Model.
According to the Born Global Model, some companies are born global, establishing significant
international operations immediately or shortly after the company is launched. These firms do
not employ an incremental approach. Instead, these firms aggressively pursue
internationalization due to their internal orientation or the need to move quickly due to the nature
of their products or services. The experience of many internet companies such as Facebook and
Google is consistent with the Born Global Model.
Page: 23-25
Topic: Process of internationalization
31. Roy is the CEO of a multinational apparel company. How would he conceptualize the
strategic role of his firm’s foreign operations if he embraced a ‘global mentality’? If he
embraced a ‘multinational mentality’?
9
Answer:
If Roy embraced a global mentality, he would view the world as a single unit of analysis and he
would centralize the management of the firm’s foreign operations. Thus, he would drive the firm
to create products for a world market and manufacture them on a global scale in a few highly
efficient plants, often located at the corporate center. However, if Roy embraced a multinational
mentality, he would regard foreign markets as a portfolio of local opportunities and manage his
company as a decentralized federation. Thus, he would recognize and emphasize the differences
between national markets and operating environments and modify his products, strategies and
management practices on a country-by-country basis.
Page: 25-28
32. What is an MNE? Give examples to explain the difference between companies that are
considered MNEs and those that are not.
Answer:
An MNE is a company that engages in the active management of substantial direct investment in
one or more foreign countries and that considers those investments/operations as integral parts of
the company, both strategically and organizationally. Thus, companies that solely rely on import-
export business are not considered MNEs. They may be considered international companies but
not multi-national enterprises (MNEs). Moreover, companies that passively manage an
investment portfolio (as opposed to those that actively manage foreign assets) are not considered
MNEs.
Difficulty: Easy
Page: 12
Topic: MNE definition
33. Briefly compare and contrast the four mentalities toward internationalization.
Answer:
Companies that have an international mentality produce products for the domestic market and
only subsequently sell these products overseas. They transfer innovation and knowledge from the
parent company to the foreign operators. These companies view themselves essentially as
domestic with some foreign appendages.
Companies that have a multinational mentality modify their products, strategies, and
management practices country-by-country. These companies view themselves as nationally
sensitive and responsive, thus the term multinational.
10
Companies that have a global mentality create products for a world market and manufacture
them on a global level in a few highly efficient plants. These companies view the world, not just
individual national markets, as their unit of analysis.
Companies that have a transnational mentality are responsive to country-level operations;

however, they coordinate these operations to sustain competitive effectiveness and economic
efficiency. These companies view themselves as an integrated network.
Page: 25-28
34. If you had been the founder of Dunkin Donuts, would you have chosen to heavily rely on
franchising, the strategy used by Rosenberg, as your entry mode to foreign countries? Or
would you have chosen to rely on wholly owned subsidiaries as your foreign entry mode?
Why?
Answer:
Franchising. Franchising can help a company expand internationally faster than wholly owned
subsidiaries. This mode does not require commitment of high amounts of resources to the foreign
countries. Also this line of business would not require (1) substantial direct investment in foreign
countries, (2) active management of these foreign assets, and (3) capability of the organization to
leverage its strategic assets more effectively through its own subsidiaries than through
contractual relations with outside parties.
Page: 20-25
Topic: The Means of Internationalization (Prerequisites and Processes)
11
Chapter 2
Understanding the international context:
Responding to conflicting environmental forces
True/False
1. MNEs from emerging markets seem to be more poorly equipped to compete in other
emerging markets when compared to their counterparts from developed markets.
Answer: False (Increasingly, it is MNEs from emerging markets that seem best equipped to
compete in other emerging markets. This is due in part to the experience they already possess in
dealing with customers with similar income levels as well as with markets with similar
institutions.)
Page: 76
Topic: Forces for local differentiation and responsiveness (Subsection: Growing pressures for
localization)
2. The three conflicting environmental forces that MNEs encounter are cross-market
integration, national responsiveness, and worldwide innovation and learning.
Answer: True
Difficulty: Easy
Page: 64-65
Topic: Responding to conflicting environmental forces faced by MNEs
3. Global integration and coordination forces encountered by MNEs include economies of

scale, government demands, and the expanding spiral of globalization.
Answer: False (Government demands are part of the ‘forces for local differentiation and
responsiveness’.)
Page: 65-70
Topic: Forces for global integration and coordination
4. Local responsiveness forces encountered by MNEs include cultural differences, government

demands and economies of scope.
Answer: False (Economies of scope is part of ‘global integration and coordination forces’.)
Page: 65 and 70-77
Topic: Forces for local differentiation and responsiveness
1
5. Worldwide innovation and learning forces that are encountered by MNEs are driven by
factor costs.
Answer: False (It is mainly driven by the simultaneity of the globalizing and localizing forces, in
general, and the increasing cost of R&D coupled with shortening life cycles of technologies and
the products they spawn, in particular.)
Page: 77-78
Topic: Forces for worldwide innovation and learning
6. A global industry is characterized by low national responsiveness and high global

integration.
Answer: True
Difficulty: Easy
Page: 79
Topic: Responding to diverse forces simultaneously (Subsection: Global, Multinational, and
International Industries)
7. A multinational industry is characterized by low national responsiveness and high global

integration.
Answer: False (A multinational industry is characterized by high national responsiveness and

low global integration.)
Difficulty: Easy
Page: 79
8. An international industry is characterized by low national responsiveness and moderate

global integration.
Answer: False (An international industry is characterized by moderate national responsiveness

and moderate global integration.)
Difficulty: Easy
Page: 80
9. A transnational industry is characterized by moderate national responsiveness and moderate

global integration.
2
Answer: False (A transnational industry is characterized by high national responsiveness and
high global integration.)
Page: 80-82
Topic: Responding to diverse forces simultaneously (Subsection: Transition to transnationality)
10. The search for global competitiveness is a major source of conflict between MNEs and host
governments.
Answer: True (Although MNEs and host governments might be partners in the search for global
competitiveness, the former strives to achieve this objective within its global system, whereas the
latter tries to capture it within its national boundaries.)
Page: 72-73
Topic: Forces for local differentiation and responsiveness (Subsection: Government Demands)
11. A firm’s decision with respect to whether it should adopt a global, multinational or
international strategy should be made without any consideration of the industry in which the
firm operates.
Answer: False (An industry’s (a) economic forces of globalization, (b) national, cultural, social,
and political forces of localization, and (c) technological and diffusion forces of innovation are
central determinants for whether to adopt a global, multinational or international strategy.)
Page: 79-80
Topic: Responding to the diverse forces simultaneously (Subsection: Global, Multinational, and
12. In the emerging international environment, most industries can be categorized as

multinational, global or international.
Answer: False (In the emerging international environment there are fewer and fewer examples of
pure global, textbook multinational or classic international industries. Instead more and more
businesses are driven to a greater or lesser extent by simultaneous demands for global efficiency,
national responsiveness, and worldwide innovation. These are the characteristics of what we call
a transnational industry.)
Page: 81
Topic: Responding to the diverse forces simultaneously (Subsection: Transition to
transnationality)
3
13. Globalization is a phenomenon that took most industries by surprise.
Answer: False (For most industries globalization was simply the latest change in economic,
technological, and competitive factors over the past 100 years)
Difficulty: Easy
Page: 65
14. Ricardo’s free trade theory of competitive advantage states: if each country specializes in
areas of advantage, and trades with other countries for the products/services in which they
specialize, there is an overall loss for each country.
Answer: False (if each country specializes in areas of advantage, and trades with other countries
for the products/services in which they specialize, there is an overall gain for each country).
Difficulty: Easy
Page: 66
Topic: Forces for Global Integration and Coordination (subtopic: Forces of Change: Free Trade)
15. The GLOBE study demonstrates how distinct cultural differences across countries result in
wide variations in social norms and individual behavior and is reflected in the effectiveness
of different organizational forms and management systems.
Answer: False (Hofstede’s study demonstrates this. The GLOBE study has refined Hofstede’s
landmark work and developed new measures of organizational culture and leadership, and the
division of societies into cultural clusters.
Difficulty: Easy
Page: 71-72
Topic: Forces for Local Differentiation and Responsiveness (subtopic: cultural differences)
16. In 2016, attitudes toward free trade in some countries swung in the direction of greater
protectionism.
Answer: True
Difficulty: Easy
Page: 67
Topic: Forces for Global Integration and Coordination (subtopic: Forces of Change: Free Trade)
Multiple Choice
17. What were the original four dimensions of Hofstede’s research?

a. Power distance, uncertainty avoidance, long-term orientation, and “masculinity”
b. Power distance, uncertainty avoidance, individualism, and “masculinity”
c. Power distance, long-term orientation, indulgence, and uncertainty avoidance
d. Indulgence, uncertainty avoidance, individualism and “masculinity”
4
Answer: b (Hofstede originally described national cultural differences along four key
dimensions: power distance, uncertainty avoidance, individualism, and “masculinity”. Long-term
orientation and indulgence were later added as the fifth and sixth dimension.
Difficulty: Easy
Page: 71
18. Which global integration and coordination forces would MNEs, such as Mercedes-Benz,
encounter?
a. Economies of scale, increasingly liberalized trade environments and government demands
b. Economies of scope, factor costs and increasingly liberalized trade environments
c. Economies of scale, expanding spiral of globalization and local competitors
d. Economies of scale, economies of scope and government demands
Answer: b (a, c, and d are incorrect because government demands and local competitors are part
of ‘forces for local differentiation and responsiveness’.)
Page: 65 and 66
19. Philips, a multinational electronics corporation based in the Netherlands and diversified in
the consumer electronics, domestic appliance, lighting, medical systems and medical
technology industries would encounter the following forces of local responsiveness:
a. Cultural differences, government demands, and economies of scope
b. Cultural differences, government demands and factor costs
c. Cultural differences, government demands, and local competitors
d. Cultural differences, government demands, and increasingly liberalized trade environments
Answer: c (a, b, and d are incorrect because economies of scope, factor costs, and increasingly
liberalized trade environments are part of ‘global integration and coordination forces’.)
Page: 70-77
20. The pressures that drive book publishers such as Cambridge University Press to integrate and
coordinate their activities across national boundaries are primarily _________.
a. Economic
b. political
c. social
d. organizational
Answer: a (Forces for global integration and coordination are primarily economic rather than
political, social, or organizational.)
5
Page: 65 and 66
21. What are the main forces that motivate MNEs such as Dell Computers to disaggregate their
operations and activities to respond to national, regional and local needs and demands?
a. Social and economic forces.
b. Social and political forces.
c. Political and economic forces.
d. Economic and psychological forces.
Answer: b (Forces for local differentiation and responsiveness are mainly social and political.
They are not always economic because many times they make MNEs less efficient.)
Page: 70 and 71
22. What are the main forces that drive MNEs such as Eli Lilly, the pharmaceutical company, to
innovate and learn on a global scale?
a. Economic and political forces.
b. Political and social forces.
c. Social and informational forces.
d. Technological and informational forces.
Answer: d (a, b, and c are incorrect because political forces and social forces are forces for local
differentiation and responsiveness.)
Difficulty: Easy
Page: 77 and 78
23. An industry that is characterized by low national responsiveness and high global integration
is a(n)
a. multinational industry.
b. global industry.
c. international industry.
d. transnational industry.
Answer: b
Difficulty: Easy
Page: 79 and 80
Topic: Responding to the diverse forces simultaneously
6
24. A multinational industry is characterized by ____________.
a. low national responsiveness and low global integration
b. low national responsiveness and high global integration
c. high national responsiveness and low global integration
d. high national responsiveness and high global integration
Answer: c
Difficulty: Easy
Page: 79 and 80
Topic: Responding to diverse forces simultaneously
25. An industry that is characterized by moderate national responsiveness and moderate global
integration is a(n)
a. international industry.
b. global industry.
c. transnational industry.
d. multinational industry.
Answer: a
Difficulty: Easy
Page: 79 and 80
26. A transnational industry is characterized by _____________.

a. low national responsiveness and low global integration
b. low national responsiveness and high global integration
c. high national responsiveness and low global integration
d. high national responsiveness and high global integration
Answer: d
Difficulty: Easy
Page: 80-82
27. In a transnational industry, MNEs are expected to

a. collaborate with their competitors to increase the prices of their products.
b. build the capability to learn from the many environments in which they operate.
c. acquire their competitors to increase their pool of resources.
d. decentralize decisions to better respond to local demands.
Answer: b
Page: 80-82
7
28. Kentucky Fried Chicken (KFC) suffered a major chicken sales decrease in Hong Kong
immediately after running the Chinese version of their successful worldwide advertising
campaign “Finger lickin’ good” that supposedly highlights the tastiness of their chicken. This
is most likely an issue of:
a. Cultural differences and localization pressures
b. Government demands and factor costs
c. Localization pressures and economies of scale
d. Cultural differences and global competition
Answer: a (Very similar to the Pepsi and Chevrolet’s examples in the text book; the Chinese
translation came out as ‘eat your fingers off’, needless to say, most customers opted for the fries
instead of the chicken!)
Page: 70
Essay
29. Apple is a U.S. MNE. Briefly describe three conflicting sets of external demands that its
international operations might face.
Answer:
Three conflicting sets of external demands that Apple might face are:
a. Forces for global integration and coordination. These forces include economies of scale,
economies of scope, factor costs, an increasingly liberalized trade environment and an
expanding spiral of globalization.
b. Forces for national differentiation and responsiveness. These forces include cultural
differences, government demands and local competitors.
c. Forces for worldwide innovation and learning. These forces stem from the increased need for
rapid and coordinated worldwide innovation driven by shortening product life-cycles,
increased costs of R&D, the emergence of global technology standards and competitors’
ability to develop and diffuse innovation globally.
Page: 65-78
Topic: Forces for Global Integration and Coordination; Forces for Local Differentiation and
Responsiveness; and Forces for Worldwide Innovation and Learning
30. Briefly describe the global integration and coordination forces encountered by MNEs.
8
Answer:
The global integration and coordination forces encountered by MNEs include:
a. Economies of scale. In many industries, such as automotive manufacturing, production at
scale-economy volumes often exceeded the domestic sales levels that individual companies
could achieve which motivated these manufacturers to penetrate foreign markets which lead
to the global integration and coordination of these markets.
b. Economies of scope. More efficient worldwide communication and transportation networks
provided opportunities for economies of scope which precipitated increased global
integration and coordination.
c. Factor costs. The need for access to new resources at the best possible prices results in factor
cost differentials becoming a powerful driver of global integration and coordination.
d. Increasingly trade liberalized environments.
e. The expanding spiral of globalization.
Page: 65-68
31. Briefly describe the local differentiation and responsiveness forces encountered by Samsung,
a multinational electronics and home appliances manufacturer and retailer.
Answer:
The local differentiation and responsiveness forces encountered by MNEs such as Samsung
include:
a. Cultural differences. Cultural differences include variances in consumer tastes and
preferences, as well as differences in business customs. As such, Samsung will need to
respond to the variance in customer preferences between countries and learn to conduct
business in accordance with local expectations.
b. Government demands. These include national laws and regulations, as well as host country
pressures and demands. As such, Samsung will need to abide by the unique set of national
laws and regulations in each of its markets and to satisfy the demands of each host country’s
government.
c. Local competitors. Host country competitors may appeal to consumers’ sense of patriotism
when competing against foreign products. As such, Samsung will encounter this competitive
pressure when competing against U.S. home appliance manufacturers in the U.S. or against
Japanese home appliance manufacturers in Japan.
Page: 70-77
32. Briefly describe the worldwide innovation and learning force that Microsoft encounters.
Answer:
9
The main worldwide innovation and learning force encountered by MNEs such as Microsoft is
the increased need for rapid and coordinated worldwide innovation. This need is driven by
shortened product life-cycles, increased costs of R&D and the emergence of global technology
standards. For instance, the increased costs of R&D coupled with the shortened life-cycles of
new technologies have combined to reinforce the need for companies to seek global volume to
amortize their substantial investments as quickly as possible. Moreover, the emergence of global
technology standards have encouraged MNEs such as Microsoft to aggressively diffuse their
software with the goal of making the software the global standard which will impart a significant
global competitive advantage on the company.
Page: 77-78
33. Explain (1) what is meant by ‘global chess’ and (2) why companies that are adept at playing
global chess have an advantage over their competitors.
Answer:
‘Global chess’ refers to a competitive strategy that could be played only by companies that
manage their worldwide operations as interdependent units and that implement a coordinated
global strategy. Unlike the multinational strategic approach which assumes that each national
market is unique and independent of the others, the global chess approach assumes that a
company’s competitive position in all markets is linked by financial and strategic
interdependence. Companies that are skilled at playing global chess have an advantage over their
national competitors because they can benefit from cross-subsidization, that is, they can use
funds generated in one market to subsidize their position in another.
Difficulty: Moderate to Hard

Page: 68-70
Topic: Global competitors as change agents
34. Briefly discuss whether the type of industry a company belongs to affects that company’s
decision to adopt an international, multinational, or global strategy. Explain why you believe
that industry type affects/does not affect strategy choice.
The industry a company belongs to affects that company’s decision to adopt an international,
multinational, or global strategy, because different industries encounter different forces and
different forces lead to the adoption of different strategies. For instance, in some businesses the
economic forces of globalization were historically strong and dominated other environmental
demands. Such industries are designated as global industries. Businesses in such industries
perform best when they follow a global strategy. In other businesses, the localizing forces of
national, cultural, social, and political differences dominate the development of industry
characteristics. Such industries are designated as multinational industries. Businesses in such
industries perform best when they follow a multinational strategy. In some other industries
10
technological forces are central and the need to develop and diffuse innovations is the dominant
source of competitive advantage. Such industries are designated as international industries.
Businesses in such industries perform best when they follow an international strategy. In recent
years many industries are experiencing the above 3 sets of forces simultaneously. Such industries
are designated as transnational industries. Businesses in such industries perform best when they
follow a transnational strategy.
Difficulty: Moderate to Hard

Page: 79-82
35. Interactions between host governments and MNEs have been sometimes compared to love-
hate relationships. Could you please explain both parts of this equation and how host
governments and MNEs relationships have evolved in the 2010s?
The “love” of this equation was built on the benefits that each could bring to the other. To the
host government, the MNE represented an important source of taxation revenue, technology, and
expertise that could help further national priorities, such as regional development, employment,
import substitution, and export promotion. To the MNE, the host government represented the key
to local market or resource access, which provided new opportunities for profit, growth, and
improvement of its competitive position.
The “hate” side of the relationship - more often emerging as frustration rather than outright
antagonism - arose from the differences in the motivations and objectives of the two partners. To
be effective global competitors, MNEs sought three important operating objectives: unrestricted
access to resources and markets throughout the world; the freedom to integrate manufacturing
and other operations across national boundaries; and the unimpeded right to coordinate and
control all aspects of the company on a worldwide basis. The host government, in contrast,
sought to develop an economy that could survive and prosper in a competitive international
environment. At times, this objective led to the designation of another company - perhaps a
“national champion”—as its standard bearer in the specific industry, bringing it into direct
conflict with the MNE.
A new trend is emerging that is set to alter the MNE-government relationship during the 2010s.
Cash-rich governments and their nationally owned corporations in emerging markets,
particularly China, are looking to invest in foreign resources, with such investments often
packaged as part of a government-to-government diplomatic relationship. Not only are the
government investors looking to earn returns on investment, but perhaps more importantly, they
are securing the natural resources to ensure the future economic security of their own countries.
This policy-based partnership of governments and national corporations engaging in the global
business arena via such mechanisms as sovereign wealth funds is significantly different from the
“national champion” strategy of an earlier era, and it is certain to have important global
competitive implications over the next decades.
Page: 72-75
11
Topic: Forces for local differentiation and responsiveness (Subsection: Government demands)
36. Discuss how cultural differences can have an effect on the consumption of tea worldwide.
Answer: Take the example of tea as a beverage consumed around the globe. The British drink
their tea hot and diluted with milk, whereas Americans consume it primarily as a summer drink
served over ice, and Saudi Arabians drink a hot, heavily sweetened brew. To succeed in a world
of such diversity, companies often must modify their quest for global efficiency through
standardization and find ways to respond to the needs and opportunities created by cultural
differences. So Unilever produces 20 separate brands of black tea, each blended to meet the
specific tastes of local consumers around the world. It adapted its Lipton brand to offer a canned
iced tea drink in the United States, and sells Lipton Cold Brew tea bags in markets around the
world. Even more ambitious is the Starbucks strategy of serving green tea lattes in its Chinese
outlets in a bid to eventually get that traditionally tea-drinking nation hooked on coffee.
Difficulty: Easy
Page: 71-72
37. Free Trade agreements have become a topic of discussion recently. How would you approach
a discussion with your next door neighbor who thinks that Free Trade agreements are the
reason for job losses?
Answer: Most objective analyses would suggest a multitude of reasons for changes in the
employment picture. Some of the most commonly cited are:
 Automation which includes such things as the increased use of self-services (ex. ATMs in
banking).
 Productivity and technology advances which include the costs and features available on
computers and smart phones, compared to a decade ago.
 Economic conditions, such as the recession of 2007 to 2009 resulting from the made-in-
America subprime mortgage crisis.
None of these reasons can necessarily be attributed to globalization, particularly since the source
of each is typically either the home country, or other developed economies.
Page: 67
Topic: Forces for Global Integration and Coordination (subtopic: Forces of Change: Free Trade).
12
Ch. 1
Study online at quizlet.com/_5bg2q2
1. 1. Multinational enterprises (MNEs) are firms that: D 7. 7. Many BRIC local firms are: D
a. Engage in foreign direct investment (FDI). a. Effectively competing at home.
b. Directly control value-adding activities in other b. Launching offensives abroad.
countries. c. Creating serious ramifications for Triad-based MNEs.
c. Manage value-adding activities in other countries. d. All of the above.
d. All of the above. e. BRIC local firms have yet to become significant
e. None of the above. globally.
2. 2. Which of the following best describes foreign direct A 8. 8. Strategy: D
investment (FDI)? a. Dates back to 500bc and the work of the strategist
a. A firm's direct investment in production and/or Sun Tzu of China.
service activities abroad. b. Applies concepts developed by the strategist von
b. The purchases of foreign securities by people within Clausewitz.
the U.S. c. Includes application of principles of military strategy
c. The purchases of U. S. securities by people from other to business competition.
countries. d. All of the above.
d. Avoidance of brokers or other financial e. In this century, civilian companies no longer apply
intermediaries when making foreign investments. military theories and principles in dealing with
e. B and C above. competition.
3. 3. Which of the following best defines "Triad" as the C 9. 9. A hallmark of theory building and development is: B
term is used in the text? a. The outcome of a test.
a. The U.S., Japan, and Germany. b. Replication.
b. The U.S., Canada, and Mexico. c. Intuition.
c. North America, Europe, and Japan. d. Consensus.
d. North America, Europe, and Asia. e. Lack of controversy.
10. 10. Overall, strategy is: E
4. 4. According to the text, the current brand of "global B a. A rulebook.
strategy" seems relevant only for MNEs from: b. A blueprint.
a. BRIC. c. A set of programmed instructions.
b. The Triad. d. All of the above.
c. OPEC nations. e. None of the above.
d. NAFTA.
11. 11. Much of our knowledge about "the firm" is from A
e. The E. U.
research on firms in:
5. 5. Emerging economies (or emerging markets): C a. Anglo-American capitalism.
a. Now command a full one-third of the worldwide FDI b. Japan after World War II.
flow. c. German mathematical models.
b. Command half of the global gross domestic product d. Emerging markets.
(GDP) measured at purchasing power parity. e. The early industrial era.
c. A and B above
12. 12. The word _______has now become the most famous B
d. Despite their growth, they still command less than
Chinese business word to appear in English-language
10% of global GDP.
media.
e. Consist of countries which are in a state of decline
a. Keiretsu
but which are believed to have potential for growth.
b. Guanxi
6. 6. BRIC refers to: E c. Chaebol
a. Bahrain, Russia, Iran, and China. d. Blat
b. Bolivia, Romania, India, and Columbia. e. None of the above.
13. 13. The _______ view primarily focuses on the ______ in a A
SWOT analysis.
14. 14. As shown in the closing case, the informal rules of D 19. 19. The current era of globalization originated in the B
the game: aftermath of:
a. Must be avoided because global business is not a a. World War I.
mere game. b. World War II.
b. Are not applicable in cultures in which tend to be c. The Korean Conflict.
very formal. d. The Vietnam Conflict.
c. Often require that the firm seek to change the e. The Gulf War.
informal rules instead of going along with those rules.
20. 20. At the dawn of the 21st century, __________ had D
significant ramifications for companies and strategists
around the world.
15. 15. Diversification: E a. Antiglobalization protests
a. Was acclaimed in the West during the 1960s and b. Terrorist attacks
1970s but was discredited twenty years later. c. Corporate governance crisis
b. Is believed by Western media to destroy value in d. All of the above
emerging economies. e. None of the above
c. Has resulted in higher profitability for some in
emerging economies than independent firms.
d. In emerging economies may be a function of the
level of institutional (under) development.
16. 16. "Global strategy" refers to: E
b. Offering standardized products and services on a
worldwide basis.
c. Any strategy outside one's home country.
d. Strategy of firms around the globe—essentially
various firms' theories about how to compete
successfully.
17. 17. Globalization is viewed as: D
a. A new force sweeping through the world in recent
times.
b. A long-run historical evolution since the dawn of
human history.
c. A pendulum that swings from one extreme to
another from time to time.
18. 18. Which of the following were the first to express E
concern about international competition from low-cost
countries?
b. Union leaders in the last half of the twentieth
century.

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Chapter 1 - Strategizing Around The Globe Test Bank True/False Questions

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GLOBAL STRATEGY: Test Bank/Chapter One

CHAPTER 1 – STRATEGIZING AROUND THE GLOBE

3. In China, political correctness may need to be considered when making reference

5. A SWOT analysis resonates very well with Sun Tzu’s teachings.

9. The industry-based view posits that the degree of competitiveness in an industry

17. Semiglobalization involves doing business in either the northern or southern

20. A lot of opponents of globalization are nongovernmental organizations (NGOs),

MULTIPLE CHOICE QUESTIONS

1. Multinational enterprises (MNEs) are firms that:

e. None of the above.

2. Which of the following best describes foreign direct investment (FDI)?

5. Emerging economies (or emerging markets):

6. BRIC refers to:

c. Bulgaria, Romania, Iraq, and China.

7. Many BRIC local firms are:

9. A hallmark of theory building and development is:

10. Overall, strategy is:

e. The early industrial era.

16. “Global strategy” refers to:

17. Globalization is viewed as:

19. The current era of globalization originated in the aftermath of:

SHORT ANSWER ESSAY QUESTIONS

1. How can principles of military strategy be useful in developing a global business

3. Having valuable, unique, and hard to imitate capabilities may be advantageous in

governance, long regarded as “backburners,” have now increasingly become

3. In China, political correctness may need to be considered when making reference

5. A SWOT analysis resonates very well with Sun Tzu’s teachings.

9. The industry-based view posits that the degree of competitiveness in an industry

17. Semiglobalization involves doing business in either the northern or southern

20. A lot of opponents of globalization are nongovernmental organizations (NGOs),

MULTIPLE CHOICE QUESTIONS

1. Multinational enterprises (MNEs) are firms that:

2. Which of the following best describes foreign direct investment (FDI)?

LO: 1-1; Bloom’s Knowledge;

5. Emerging economies (or emerging markets):

7. Many BRIC local firms are:

9. A hallmark of theory building and development is:

10. Overall, strategy is:

16. “Global strategy” refers to:

17. Globalization is viewed as:

19. The current era of globalization originated in the aftermath of:

1. How can principles of military strategy be useful in developing a global business

3. Having valuable, unique, and hard-to-imitate capabilities may be advantageous in

Conditions that lead to intense rivalry

2. Barriers to New Entrants

3. Bargaining Power of Suppliers

- Unique differentiated products

- Focal firm not an important customer

- Ability and willingness to Integrate Forward

4. Bargaining Power of Buyers

1. Mass markets tend to be characterized by low profit margins.

2. An industry is defined as a group of firms producing goods and/or services

3. A key proposition of the five forces framework is that industry structure is

4. A key indicator of intense rivalry among firms is low cost competitive

6. Product proliferation is a potential strategy used to reduce the threat of

7. Substantial switching costs reduce the threat of potential entry.

16. Choosing whether to perform activities differently than rivals or to perform

17. Telecommunications is an example of one industry in which one can

18. Strategic alliances are on the decline.

24. The traditional view recommends avoidance of integration.

25. Recent work favors outsourcing and willingness to collaborate with

MULTIPLE CHOICE QUESTIONS