Q&A Hero

Q: When considering the export decision, firms should not partner with local distributors because many foreign markets are nationally regulated.

Q: When considering the exporting decision, companies should consider that the ability to tailor their products to meet local market needs typically is very limited.

Q: Exporting is an expensive way to enter foreign markets.

Q: Typically, the least risky method of entry into a foreign market is through the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control.

Q: Typically, joint ventures involve less control and risk than franchising.

Q: A franchise generally expires after a few years, whereas a license is designed to last into perpetuity.

Q: Trading blocs and free trade zones promote the rise of international expansion.

Q: According to studies by Rugman and Verbeke, most of the 500 largest companies in the world are global.

Q: A key tenet of a transnational strategy is improved adaptation to all competitive situations as well as flexibility by capitalizing on communication and knowledge flows throughout the organization.

Q: Multinational firms following a transnational strategy strive to optimize the trade-offs associated with efficiency, local adaptation, and learning.

Q: A limitation of a multidomestic strategy is that it may lead to overadaptation as conditions change.

Q: A multidomestic strategy would likely include the use of high volume, centralized production facilities to maximize economies of scale.

Q: Corporations with multiple foreign operations that act very independently of one another are following a multidomestic strategy.

Q: The need to attain economies of scale encourages multinational firms to operate under a multidomestic strategy.

Q: A multidomestic strategy is the most appropriate strategy for international operations, because it drives economies of scale as far as possible and provides a middle-of-the-road product that appeals to the largest number of consumers in every market.

Q: In a global strategy a firm operates all of its businesses under a single common strategy, regardless of location.

Q: Industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy than those in which more value is added downstream (closer to the customer).

Q: Within a worldwide market, the most effective strategies are neither purely multidomestic nor purely global.

Q: Among Theodore Levitt's assumptions that would favor a global strategy is that consumers around the world are becoming less price-sensitive.

Q: Theodore Levitt, a marketing strategist, argued that people around the world are willing to sacrifice preferences in product features, functions, and design for lower prices and high quality.

Q: Two opposing pressures that managers face when they compete in foreign markets are cost reduction and adaptation to local markets.

Q: Offshoring takes place when a firm decides to shift an activity that they were previously performing in a domestic location to a foreign location.

Q: Differences in foreign markets such as culture, language, and customs can represent significant management risks when firms enter foreign markets.

Q: When the U.S. currency appreciates against other currencies, it becomes more expensive for American companies that have branch operations overseas, when they declare foreign profits in the United States.

Q: When U.S. currency appreciates against other currencies, U. S. goods can be less expensive to consumers in foreign countries.

Q: Firms can eliminate political instability and adverse government actions risks by: competing in a range of geographic markets, developing stakeholder coalitions, cultivating relationships with key influences, and including key public/private stakeholders in their boards.

Q: The World Bank publishes the Euromoney magazine Country Risk Rating semiannual report. In the text, the January 2013 sampling of these ratings indicates that Norway is the best country in which to invest in terms of its expected level of risk based on the evaluation of its political, economic and structural risks and debt indicators and access to capital.

Q: Reverse innovation occurs when a company develops a product that meets the needs of a developed country and then adapts it to the needs of the developing country.

Q: The laws and the enforcement of laws associated with the protection of intellectual property rights, represent a significant currency and management risk to multinational firms.

Q: An advantage of international expansion is that it can enable a firm to optimize the location of every activity in its value chain.

Q: International expansion can extend the life cycle of a product that is in its maturity stage in the company home country.

Q: Arbitrage opportunities in global financial markets are more attractive to local companies than global corporations, because they enable them to buy in huge volume and therefore increase their bargaining power with suppliers.

Q: Arbitrage opportunities are more than simple trading opportunities and account for a large part of the success Walmart experiences.

Q: Expanding the global presence of a firm does not automatically increase its scale of operations.

Q: Many international firms are increasing their efforts to market their products and services to countries such as India and China as the ranks of their middle class continue to increase.

Q: Typically, intense rivalry in domestic markets does not force firms to look outside their national boundaries for new markets.

Q: Countries with a strong supplier base benefit by adding efficiency to downstream activities.

Q: High levels of environmental awareness in Denmark have led to a decline in Danish industrial competitiveness in the international marketplace.

Q: Demanding domestic consumers tend to push firms to move ahead of companies in other countries where consumers are less demanding and more complacent.

Q: With regard to factor conditions, the pool of resources that a firm (or nation) has is much more important than the speed and efficiency with which these resources are deployed.

Q: The factor endowments of a country are inherited and cannot be created.

Q: The Michael Porter Diamond of National Advantage is a framework that explains why countries foster successful multinational corporations based on factor endowments and demand conditions only.

Q: Emerging markets are growing slower than developed markets, thus shifting the structure of the global economy.

Q: There are risks associated with the Bottom of the Pyramid strategy. One of them is that the new low-cost products that are developed may cannibalize the sales of the core products of the company using the strategy.

Q: By 2015, it is predicted that trade within nations will exceed trade across nations.

Q: Increasing international exchange in goods and services can run into the difficulty of having one offer that meets the needs of customers at differing income levels.

Q: Because many countries are investing in countries other than their own, each country is becoming more autonomous and independent.

Q: The trend towards worldwide markets makes it easier to predict where competitors will spring up.

Q: The acquisition of two or more counter-cyclical businesses is an example of using diversification to reduce risk.

Q: Portfolio management matrices generally consist of two axes that reflect industry or market growth and the market share of a business.

Q: Portfolio management should be considered as the primary basis for formulating corporate-level strategies.

Q: Restructuring requires the corporate office to find either poorly performing firms with unrealized potential or firms in industries on the threshold of significant, positive change.

Q: With unrelated diversification, potential benefits can be gained from vertical or hierarchical relationships; that is, the creation of synergies from the interaction of the corporate office with outside stakeholders.

Q: Vertical integration is attractive when market transaction costs are higher than internal administrative costs.

Q: According to the transaction cost perspective in analyzing vertical integration, every market transaction involves some transaction cost.

Q: The main reason that automobile manufacturers have increased the amount of outsourced inputs is because of the importance of boom and bust cycles in the industry.

Q: One of the risks of vertical integration is that there may be problems associated with unbalanced capacities along the value chain of a firm.

Q: A car manufacturer controls its own system of dealerships to ensure retail outlets for its products. This is an example of backward integration.

Q: An oil refinery secures land leases and develops its own drilling capacity to ensure a constant supply of crude oil. This is an example of forward integration.

Q: Although acquiring related businesses can enhance the bargaining power of a corporation, there is a risk of retaliation by competitors that can result in a diminishing of the desired bargaining power.

Q: Similar businesses working together or the affiliation of a business with a strong parent can strengthen the bargaining position of a company relative to suppliers and customers.

Q: The two principal means by which firms achieve synergy through market power are pooled negotiating power and corporate parenting.

Q: (p. 209) Market power refers to cost savings from leveraging core competencies or sharing activities among the businesses in a corporation.

Q: Starbucks acquired the baker chain, La Boulange, with the intention of selling the bakery products at its coffee cafes. The increased market exposure for La Boulange is an example of a revenue enhancing benefit that can arise from the differentiation strategy.

Q: Shared activities among businesses in a corporation do not always have a positive effect on a differentiation strategy of a corporation.

Q: If a corporation is to achieve synergy by sharing activities across its business units, it is not important to compromise on the design or performance of an activity that is to be shared.

Q: When sharing activities across business units, a company can attain the highest cost savings when it acquires another from the same industry in the same country.

Q: Sharing activities across business units can provide two primary benefits: cost savings and revenue enhancements.

Q: IBM leverages its competencies in computing technology to provide health care services. This is an example of a core competence being used across dissimilar businesses within the same corporation.

Q: It is not necessary for a core competence to be difficult to imitate or to be nonsubstitutable.

Q: One of the criteria for a core competence is that the different businesses in the corporation must be similar in at least one important way related to the core competence.

Q: Gillette developed the Fusion and Mach 3 shaving systems that created superior customer value as a result of their core competency in research and development.

Q: For a core competency to create value and provide a viable basis for synergy among the businesses in a corporation it must at least create superior customer value and it must be difficult to imitate.

Q: Core competencies do not create value in a business.

Q: Economies of scope in a related diversification strategy result from the leveraging of core competencies and the sharing of activities such as production.

Q: Related diversification enables a firm to benefit from horizontal relationships across different businesses in the diversified corporation by leveraging core competencies and sharing activities.

Q: Cooper Industries has followed a successful strategy of related diversification. There are few similarities in the products it makes or the industries in which it competes.

Q: Economies of scope are cost savings from leveraging core competencies or sharing unrelated activities among businesses in a corporation.

Q: Benefits derived from horizontal and hierarchical relationships are mutually exclusive.

Q: When firms diversify into related businesses, the primary potential benefits come from horizontal relationships, which are businesses sharing intangible and tangible resources.