ENT6073 – ENTERPRISE AND SMALL

BUSINESS MANAGEMENT

EXERCISE 11 – CHAPTER 11: GLOBAL OPPORTUNITIES FOR SMALL BUSINESS

TRUE FALSE QUESTIONS

1. International dissimilarities in language and culture, business practices, and government

regulations are increasing over time.
a. True
b. False

2. Globalization explains the increasing similarity of markets around the world.

a. True
b. False

3. Entrepreneurs decide to go global to expand their opportunities, but sometimes they are
forced to enter foreign markets to compete with firms that have already done so.
a. True
b. False

4. While a small firm can have global operations, size will limit growth.
a. True
b. False

5. The motivation to take domestic products to foreign markets is more relevant today than
in the past.
a. True
b. False

6. Today, products that sell at home are more likely to be well received in foreign markets
with little or no adaptation.
a. True
b. False

7. By informing consumers about the lifestyles of others, globalization is leading toward more
diverse consumer preferences.
a. True
b. False

8. Efforts to exploit the competitive advantage of specialized products across several

international markets are more important to small businesses than to their large corporate
competitors.
a. True
b. False

9. Learning effects occur when the insight an employee gains from experience leads to
improved work performance.
a. True
b. False
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BUSINESS MANAGEMENT

10. Increasingly, small firms are going global in search of needed resources.
a. True
b. False

MULTIPLE CHOICE QUESTIONS

10. When Wayne opened his business many years ago, most businesses operated only within
one country. Thanks to _____, businesses now increasingly take advantage of cross-border
activities.
a. born-global businesses
b. globalization
c. economic freedom
d. economic liberty

11. For most small businesses, the primary motivation for going global is to
a. develop new market opportunities.
b. reduce the costs of doing business.
c. gain access to resources that are important to the firm's operations.
d. capitalize on special features of location.

12. Seeking to extend the product life cycle by expanding into international markets has become
a less effective strategy because
a. customer preferences have become more similar around the world.
b. income levels in many countries are insufficient to support this strategy.
c. international delivery systems cannot handle the variety of company distribution
systems.
d. product life cycles have already been growing over the years.

13. International markets are increasingly demanding

a. the same products that are distributed to other national markets.
b. differentiated products that satisfy their unique needs and interests.
c. direct access to products sold elsewhere in the world.
d. more expensive products and fewer inexpensive products.

14. To expand a market, an emerging motivation for going global is to

a. take advantage of unique features of the local market.
b. find buyers for highly specialized products.
c. obtain tariff reductions.
d. extend the product life cycle.

15. A company with the most experienced production employees and the lowest unit costs in
its industry indicates that it has benefited from
a. learning effects.
b. experience curve efficiencies.
c. economies of scope.
d. economies of scale.
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BUSINESS MANAGEMENT

16. Learning effects occur when

a. mistakes are made and then new solutions are found.
b. insights gained by employees enhance their work performance.
c. economies of scale are present.
d. companies take advantage of experience curve efficiencies.

17. A company that operates a customer service call center is likely to contract with a company
in India to
a. capitalize on the special features of location.
b. cut costs.
c. expand its market.
d. gain access to resources.

18. Some small firms choose to outsource internationally in order to

a. avoid domestic taxes.
b. avoid competition from other U.S. companies.
c. cut costs and access talented foreign employees.
d. take advantage of legal loop-holes in foreign countries.

19. When it comes to cutting costs, many foreign companies have chosen to locate production
facilities in Mexico to
a. obtain tariff reductions.
b. find raw materials.
c. follow large client firms that locate abroad.
d. find suppliers offering highly specialized products.

20. A fundamental activity for global small business success is

a. avoiding rigid planning that commits the firm's resources to a single plan of action.
b. finding international markets that fit the company's unique potential.
c. figuring out which of the firm's competitors is capable of copying its strategy.
d. tapping government programs that provide incentives for international expansion.

STRUCTURE QUESTIONS

21. Identify each of the FOUR (4) driving forces that encourage entrepreneurs
to go global and discuss the change in traditional to emerging perspectives. (8 marks)

Although the motives for global expansion vary, these basic forces can be divided into four general
categories. Within each category fall some tried and true motivations, as well as some newer
perspectives that have emerged in more recent years.

1. Expanding markets. A traditional motivation would be using international expansion to extend a

product's life cycle, but an emerging motivation is to find buyers for highly specialized products.

2. Gaining access to resources. A traditional motivation would be to obtain raw materials, but an
emerging motivation is to find skilled labor.
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BUSINESS MANAGEMENT

3. Cutting costs. A traditional motivation would be to reduce labor costs, but an emerging
motivation is to reduce tariffs.

4. Capitalizing on special features of location. A traditional motivation would be to profit from

unique locations, but an emerging motivation is to follow large client firms that locate abroad.

22. Describe SIX (6) strategies that a small firm can use to go global. (12 marks)

Strategy options for global firms include the following:

1. Exporting. Exporting involves the sale of products produced in the home country to customers
in another country.

2. Importing. Importing involves selling products from abroad in the firm's home market.

3. Foreign licensing. Foreign licensing allows a company in another country to purchase the rights
to manufacture and sell a different firm's products in overseas markets. The firm buying these rights is
called the licensee. The licensee makes payments to the licensor, or the firm selling those rights,
normally in the form of royalties, which is a fee paid for each unit produced.

4. International franchising. With international franchising, the franchisor offers a standard

package of products, systems, and management services to the franchisee, which provides capital,
market insight, and hands-on management.

5. International strategic alliances. An international strategic alliance allows firms to share risks
and pool resources as they enter a new market, usually matching the local partner's understanding of
the target market (culture, legal system, competitive conditions, etc.) or its access to low-cost labor with
the technology or product knowledge of its alliance counterpart.

6. Locating facilities abroad. A small business may choose to establish a foreign presence of its
own in strategic markets, especially if the firm has already developed an international customer base.
Most small companies start by locating a production facility or sales office overseas, often as a way to
reduce the cost of operations.