chapter 7 practice questions

Question 1

1. China is pressuring Airbus to increase its productions facilities in China by using which
   technique?

A) decreasing political risk through a multidomestic strategy
B) reducing potential loss from counterfeiting
C) using political favors in exchange for influence
D) increasing bottom line returns through outsourcing

Answer 1

C) using political favors in exchange for influence

Question 2

2. Building production capacity in locations outside of Europe can threaten ________, an
   issue typically raised when investing in China.

A) European economic risk
B) intellectual property rights protection
C) European investment potential
D) balance of trade

Answer 2

B) intellectual property rights protection

Question 3

3. Indian Coke, a subsidiary of Coca-Cola, offers a drink called Maaza Chunky. Production
   required modification of the production technique and the introduction of newly designed cans.
   These represent aspects of a ________ strategy.

A) production
B) global
C) multidomestic
D) consumer

Answer 3

C) multidomestic

Question 4

4. One of the reasons Ford found it difficult to increase sales in China is that

A) its cars are too expensive.
B) its cars did not meet customer expectations.
C) it kept all of the manufacturing in China.
D) it kept all engineering and design in China

Answer 4

B) its cars did not meet customer expectations.

Question 5

5. Community hospitals in Mississippi can video conference with the specialists at the
   University of Mississippi Medical Center thus lowering health care delivery costs and increasing
   the quality of medical care. This system mirrors that of the Indian health care delivery system for
   reaching rural areas. This is an example of

A) vertical innovation.
B) forward innovation.
C) reverse innovation.
D) arbitrage.

Answer 5

C) reverse innovation.

Question 6

6. According to Michael Porter, firms that have experienced intense domestic competition
   are

A) unlikely to have the time or resources to compete abroad.
B) more likely to demand protection from their governments.
C) most likely to design strategies aimed primarily at the domestic market.
D) more likely to design strategies that will allow them to successfully compete abroad.

Answer 6

D) more likely to design strategies that will allow them to successfully compete abroad.

Question 7

7. In reviewing the Indian software industry and the diamond of national advantage, which
   of the following is a relatively weak set of factors in the national competitive advantage in this
   industry?

A) U.S. demand conditions
B) factor endowments
C) domestic rivalry
D) domestic demand conditions

Answer 7

D) domestic demand conditions

Question 8

8. Which of the following is not a source of political risk in many countries?

A) the presence of social unrest
B) the presence of the rule of law
C) the presence of military turmoil
D) the presence of violent conflict

Answer 8

B) the presence of the rule of law

Question 9

9. When the U.S. dollar appreciates against other currencies, U.S. goods can be ________ to
   consumers in foreign countries but can have ________ implications for American companies
   with branch operations overseas.

A) less expensive, positive
B) more expensive, negative
C) less expensive, negative
D) more expensive, positive

Answer 9

B) more expensive, negative

Question 10

10. The sale of Boeing commercial aircrafts and Microsoft operating systems in many
    countries enables these companies to benefit from

A) higher prices in their domestic markets.
B) reducing their exposure to currency risks.
C) economies of scale.
D) optimizing the location for many activities in their value chain

Answer 10

C) economies of scale.

Question 11

11. Exemplifying the phenomenon of ________, companies like GE have committed
    significant resources to developing products that meet the needs of developing nations, products
    that deliver adequate functionality at a fraction of the cost. Interestingly, these products have
    subsequently found considerable success in value segments in wealthy countries as well.

A) total wage costs and indirect costs
B) risk reduction
C) reverse innovation
D) the optimization of value-chain activity locations

Answer 11

C) reverse innovation

Question 12

12. Renault paid 1 billion USD to acquire a 25 percent ownership stake in the Russian
    automaker AvtoVAZ in 2008. Just one year later, Russian Prime Minister Vladimir Putin
    threatened to dilute the Renault ownership stake unless it contributed more money to prop up
    AvtoVAZ, which was then experiencing a significant slide in sales. This is an example of
    ________ risk.

A) currency
B) economic
C) political
D) management

Answer 12

C) political

Question 13

13. When firms expand into global markets, they are faced with the choice of reducing costs
    and/or adapting to the local market. When high pressures exist to lower costs, companies should
    choose a(n) ________ strategy or ________ strategy in order to compete in the global
    marketplace.

A) global; transnational
B) global; multidomestic
C) international; multidomestic
D) international; transnational

Answer 13

A) global; transnational

Question 14

14. To be responsive to local pressures, companies must ________ their offerings and
    strategies from country to country to reflect local consumer preferences.

A) internationalize
B) globalize
C) differentiate
D) standardize

Answer 14

C) differentiate

Question 15

15. Which would be the appropriate strategy for companies to use to compete in the global
    marketplace if both the pressures to lower costs and adapt locally are low?

A) international strategy
B) global strategy
C) multidomestic strategy
D) transnational strategy

Answer 15

A) international strategy

Question 16

16. Firms following a global strategy strive to offer ________ products and services as well
    as locate manufacturing, research and development, and marketing activities in a limited number
    of locations.

A) widely differentiated
B) more expensive local
C) internationally differentiated
D) standardized

Answer 16

D) standardized

Question 17

17. Which one of the following is not a limitation of a global strategy?

A) limited ability to adapt to local markets
B) the ability to locate activities in optimal locations
C) the concentration of activities may increase dependence on a single facility
D) single locations may lead to higher tariffs and transportation costs

Answer 17

B) the ability to locate activities in optimal locations

Question 18

18. Which one of the following is not a strength of transnational strategies?

A) ability to attain economies of scale
B) ability to adapt to local markets
C) ability to locate activities in optimal locations
D) ability to decrease knowledge flows and learning

Answer 18

D) ability to decrease knowledge flows and learning

Question 19

19. Which of the following is a reason for the rise in regional expansion?

A) increase in the number of trading blocs and free trade zones
B) decrease in the number of trading blocs and free trade zones
C) increasing national trade restrictions
D) increasing local taxes and tariffs

Answer 19

A) increase in the number of trading blocs and free trade zones

Question 20

20. Regionalization is most important because it permits companies to organize their
    activities based upon

A) physical distance between the home country and the foreign country.
B) the extrinsic distance between the home country and the foreign country.
C) the true distance between the home country office and the foreign country.
D) shareholder expectations

Answer 20

C) the true distance between the home country office and the foreign country.

Question 21

21. Which of the following describes the most typical order of entry into foreign markets?

A) franchising, licensing, exporting, joint venture, and wholly owned subsidiary
B) exporting, franchising, licensing, joint venture, and wholly owned subsidiary
C) licensing, exporting, franchising, joint venture, and wholly owned subsidiary
D) exporting, licensing, franchising, joint venture, and wholly owned subsidiary

Answer 21

D) exporting, licensing, franchising, joint venture, and wholly owned subsidiary

Question 22

22. What agreement entails the creation of a third-party legal entity?

A) strategic alliance
B) joint venture
C) licensing
D) exporting

Answer 22

B) joint venture