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Chapter 12: The Strategy of International Business: True / False Questions
Chapter 12: The Strategy of International Business: True / False Questions
1. The actions that managers take to attain the goals of the firm are referred to as a firm's
strategy.
True False
2. Profit growth is measured by the percentage increase in net profits over time.
True False
3. The amount of value a firm creates is measured by the difference between its costs of
production and the value that consumers perceive in its products.
True False
4. The price a firm charges for a good or service is typically more than the value placed on that
good or service by the customer.
True False
5. Consumer surplus captures some of the value of a product thereby reducing the price a firm
can charges for it.
True False
6. The greater the consumer surplus, the lower the value for the money the consumer gets.
True False
7. The higher the firm’s profit per unit sold is, the greater its profitability will be, all else being
equal.
True False
8. A strategy that focuses primarily on increasing the attractiveness of a product is referred to as
a low-cost strategy.
True False
9. Superior value creation relative to rivals requires that the gap between the value and cost of
production achieved by a company be lesser than the gap attained by its competitors.
True False
10. Diminishing returns imply that when a firm already has significant value built into its
product offering, increasing value by a relatively small amount requires only minimal
additional costs.
True False
11. According to Michael Porter, all positions on the efficiency frontier are viable.
True False
12. The various value creation activities that a firm undertakes are referred to as operations.
True False
13. For services such as banking or health care, production typically occurs when the service is
being designed by in-house professionals.
True False
14. In terms of attaining a competitive advantage, support activities can be as important as the
primary activities of the firm.
True False
15. The human resource function controls the transmission of physical materials through the
value chain.
True False
16. Maintaining the company infrastructure is a support activity.
True False
17. The term organizational structure refers to the totality of a firm's organization, including
organization architecture, control systems and incentives, organizational culture, processes,
and people.
True False
18. Processes are the manner in which decisions are made and work is performed within the
organization.
True False
19. Firms that operate internationally are able to realize location economies by dispersing
individual value creation activities to locations where they are performed most efficiently
and effectively.
True False
20. Successful global expansion requires the transfer of core competencies to foreign markets
where indigenous competitors lack them.
True False
21. Location economies are the economies that arise from performing a value creation activity in
the optimal location for that activity, wherever in the world that might be.
True False
22. The experience curve refers to systematic increase in production costs that have been
observed to occur over the life of a product.
True False
23. Learning effects will be more significant in an assembly process which involves 100 simple
steps than in an assembly process which involves 1,000 complex steps.
True False
24. The ability to spread fixed costs over a large volume is one of the sources of economies of
scale.
True False
25. The firm that moves up the experience curve most rapidly will have a cost advantage vis-à-
vis its competitors.
True False
26. One key to progressing downward on the experience curve is to decrease the volume
produced by a single plant.
True False
27. Strategies that increase profitability can also expand a firm's business and thus enable it to
attain a higher rate of profit growth.
True False
28. Responding to pressures for cost reduction requires a firm to try to lower the costs of value
creation.
True False
29. Universal needs exist when the tastes and preferences of consumers in different nations are
different.
True False
30. Pressures for local responsiveness imply that it may not be possible to leverage skills and
products associated with a firm’s core competencies wholesale from one nation to another.
True False
31. Firms that pursue an international strategy focus on increasing profitability by reaping the
cost reductions that come from economies of scale, learning effects, and location economies.
True False
32. A global standardization strategy makes most sense when there are strong pressures for cost
reductions and demands for local responsiveness are minimal.
True False
33. A localization strategy involves some duplication of functions and smaller production runs.
True False
34. According to researchers, firms facing strong pressures for local responsiveness should
pursue a global standardization strategy.
True False
35. An international strategy involves taking products first produced for their domestic market
and selling them internationally with only minimal local customization.
True False
36. Strategic alliances allow firms to share the fixed costs of developing new products or
processes.
True False
B. Production
D. Logistics
E. Customer service
38. The rate of return that a firm makes on its invested capital is referred to as _____.
A. stakeholder return
B. profitability
C. profit growth
D. process value
E. strategic fit
39. Profit growth is measured by:
B. subtracting the previous years gross profit from the current year's gross profit.
C. calculating the difference between the previous year's profitability and the current year's
profitability.
B. increase costs.
A. the difference between the previous year's profitability and the current year's profitability.
B. dividing the market price of its products by the price that customers are actually willing to
pay.
C. the difference between its costs of production and the value that consumers perceive in its
products.
E. the higher the price the firm can charge for those products.
43. Typically, the price a firm charges for a good or service is:
A. less than the value placed on that good or service by the customer.
D. the same as the value placed on that good or service by the customer.
E. less than the lowest priced similar good or service in the market.
44. The price a firm charges for a good or service is typically less than the value placed on that
good or service by the customer. This is because the consumer captures some of that value in
the form of what economists call a _____.
A. firm value
B. consumer surplus
C. customer loyalty
D. firm deficit
E. profit growth
45. As a result of consumer surplus, a firm typically charges less price for a good or service than
the value placed on it by customers because:
B. it is highly unlikely that the same good or service will be available to the customers from
other firms.
C. the firm is competing with other firms for the customer's business.
D. the firm charges a price that reveals a consumer's assessment of the product's value.
E. the firm creates value for the customer by producing a wide range of products
46. One of the reasons why a firm typically charges for a good or service less than the value
placed on that good or service by the customer is because:
A. the firm attempts to create value for the consumers by providing them a wide range of
products
B. it is normally impossible to segment a market based on each customer's reservation price.
D. the firm frequently modifies its products to compete with the products introduced by other
firms.
E. it is highly unlikely that the same good or service will be available to the customers from
other firms.
47. The price that reflects an individual's assessment of the value of a product is referred to as:
D. The higher the intensity of competitive pressure, the higher the price charged relative to
V.
E. The lower the consumer surplus the greater the value for the money the consumer gets.
49. The _____ of a firm is measured by the difference between the value of a product to an
average consumer and the average unit cost of producing that product.
A. customer surplus
B. value creation
C. cost curve
D. value efficiency
E. customer reservation
50. A company can create more value for a product by:
A. standardization
B. differentiation
C. target-identification
D. low-cost
E. profitability
52. According to Michael Porter, _____ and _____ are the two basic strategies for improving
creating value and attaining a competitive advantage in an industry.
A. differentiation; low-cost
C. one-size-fits-all; zero-sum
D. comparison; standardization
B. keeps the gap between value and cost of production smaller than the gap attained by
competitors.
A. creates similar products as its competitors so that consumers do not have to pay a
premium price.
D. ensures that the gap between value and cost of production is greater than the gap attained
by competitors.
A. demand-value model
B. experience curve
C. efficiency
frontier
E. surplus curve
56. The efficiency frontier has a convex shape because of:
B. diminishing returns.
A. To maximize its profitability, a firm should avoid a position that lies on the efficiency
frontier.
D. Positions inside the frontier are more efficient than the positions that are located on the
frontier.
E. configures its internal operations to support the position selected by it on the efficiency
frontier.
60. A firm's profitability maximizes when it:
C. ensures that it has the right organization structure in place to execute its strategy.
A. support
B. tertiary
C. ancillary
D. primary
E. secondary
63. Which of the following is a primary activity in the operations of a firm?
A. Logistics function
C. Information systems
E. Company infrastructure
64. Which of the following operations of a firm is concerned with the design of products and
production processes?
A. Human resources
D. Materials management
E. Company infrastructure
65. For services such as banking or health care, "production" typically occurs when:
B. Customer service
E. Production
67. Of all the value creation activities in a firm, _____ create(s) value by discovering consumer
needs and communicating them back to the R&D function of the company, which can then
design products that better match those needs.
A. production
C. human resources
D. logistics
E. information systems
68. Which of the following functions creates a perception of superior value in the minds of
consumers by solving consumer problems and by supporting them after they have purchased
the product?
A. Production
C. Human resources
D. Customer service
E. Logistics
69. The _____ of a value chain provide inputs that allow the primary activities to occur.
A. lateral functions
B. support activities
C. core activities
D. central activities
E. secondary activities
70. _____ is a value creation activity which falls into the category of primary activities.
B. Customer service
C. Human resources
D. Logistics
A. human resource
B. finance
C. marketing
D. logistics
A. finance
B. marketing
C. human resource
D. logistics
B. Logistics
C. Information systems
D. Company infrastructure
E. Inventory management
74. Who among the following should be viewed as part of a firm’s infrastructure?
A. Procurement manager
B. Top management
C. Production manager
E. Marketing personnel
75. The term _____ refers to the totality of a firm's organization, including its organizational
structure, control systems, incentives, processes, and people.
A. primary structure
B. organization architecture
C. organizational hierarchy
D. organizational model
E. management structure
76. Which of the following is a part of the organization architecture that consists of the metrics
used to measure the performance of subunits and make judgments about how well managers
are running those subunits?
A. Reports
B. Controls
C. Rewards
D. Knowledge flows
E. Dominions
77. _____ are considered a part of an organization architecture and are used to reward
appropriate managerial behavior.
A. Knowledge flows
B. Reports
C. Processes
D. Incentives
E. Controls
78. Processes are:
A. the manner in which decisions are made and work is performed within the organization.
D. the metrics used to make judgments about how well managers are running the subunits.
E. the norms and value systems that are shared among the employees of an organization.
79. Which of the following terms best represents the norms and value systems that are shared
among the employees of an organization?
A. Process scenario
B. Organizational structure
C. Business structure
D. Organizational culture
E. Management structure
80. A firm's ability to increase its profitability and profit growth by expanding globally is
constrained:
A. the product is already being offered by local companies in the nations that the company
enters.
C. indigenous competitors in the nations that the company enters lack comparable products.
E. the product is perceived to be very costly in the home country of the company.
82. Skills within a firm that competitors cannot easily match or imitate are referred to as _____.
A. core competencies
B. barriers to entry
C. internalities
D. externalities
E. premium skills
83. How does possessing a core competence help a firm?
A. It helps a firm to create value in such a way that premium pricing is impossible.
C. economies of scale.
D. location economies.
E. demographic advantages.
85. _____ are the economies that arise from performing a value creation activity in the optimal
place for that activity, wherever in the world that might be.
A. Diversification economies
B. Value-building economies
C. Location economies
D. Support economies
E. Core economies
86. Which of the following is most likely to be the advantage of locating a value creation activity
in the optimal location for that activity?
E. It enable a firm to differentiate its product offering from those of competitors.
87. A firm creates a(n) _____ by dispersing different stages of its value chain to those locations
around the world where the value added is maximized or where the costs of value creation
are minimized.
A. integral circle
B. dispersal chain
C. global web
D. international mesh
E. worldwide circle
88. In theory, which of the following advantages can be realized by a firm by implementing a
global web of operations?
A. It will be able to raise the perceived value of its goods and services.
B. It will be able to decrease consumers' reservation price for its products.
E. It will be able to sell its products at a price which is below its cost price in its home
country.
89. Which of the following caveats is most likely to discourage global expansion of businesses?
A. Economies of scale
C. Trade barriers
D. Mass customization
A. experience curve
B. learning effects
C. location economies
D. efficiency slope
E. economies of scale
91. A number of studies have observed that a product's production costs decline by some
quantity about each time _____ doubles.
A. annual output
B. cumulative output
C. workforce
D. fixed investment
A. Learning effects
B. Exponential effects
C. Ancillary effects
D. Economies of scale
E. Location economies
94. Labor productivity increases over time as individuals understand the most efficient ways to
perform particular tasks. This is as a result of _____.
A. diminishing returns
B. location economies
C. economies of time
D. learning effects
D. They are important only during the start-up period of a new process.
A. Location economies
B. Learning effects
C. Standardization economies
D. Core economies
E. Economies of scale
99. Spreading fixed costs over a large volume results in a cost-savings phenomenon which is
referred to as:
A. volume synergies.
B. economies of scale.
C. captured savings.
D. size effects.
E. location economies.
100 Which of the following statements is true about economies of scale?
.
C. The ability to spread variable costs over a large volume is a source of economies of scale.
D. Economies of scale result due to the increase in the perceived value of a product.
E. Economies of scale refer to cost savings that come from learning by doing.
101 Which of the following terms best represents the systematic reductions in production costs
. that have been observed to occur over the life of a product?
A. Global web
B. Dispersion linkage
C. Economies of scale
D. Experience curve
E. Efficiency frontier
102 Serving a global market from a single location is consistent with:
.
D. As the quantity produced goes on increasing, it becomes more difficult for a company to
achieve economies of scale.
A. Universal needs
B. Efficiency frontier
C. Global web
D. Lateral requirements
E. Supreme needs
107 Pressures for cost reduction are intense in:
.
B. High costs of local customization are deterring companies from doing so.
E. Host-government demands
113 For an international business, which of the following is most likely to be an outcome of
. protectionism and nationalism in a host-country?
A. international
B. transnational
C. localization
D. global standardization
E. nationalization
116 Which of the following is true of a firm that pursues a global standardization strategy?
.
B. It has its production, marketing, and R & D activities in only one optimum location.
E. It reaps maximum benefits from economies of scale and learning effects.
117 A firm is most likely to pursue a global standardization strategy when:
.
A. Domestic strategy
C. International strategy
D. Transnational strategy
E. Nationalization strategy
119 Which of the following strategies focuses on increasing profitability by customizing the
. firm's goods or services so that they provide a good match to tastes and preferences in
different national markets?
A. International strategy
C. Localization strategy
D. Transnational strategy
E. Nationalization strategy
120 Which of the following is true of a localization strategy?
.
A. It allows a firm to capture the cost reductions of mass-producing a standardized product.
D. It makes sense if the value added by customization supports higher pricing.
B. Use common vehicle platforms and components across many different models
E. Manufacture only one type of car and sell it in all the international markets
122 Which of the following strategies is a firm most likely to pursue when it simultaneously
. faces both strong cost pressures and strong pressures for local responsiveness?
B. Localization strategy
C. International strategy
D. Transnational strategy
E. Nationalization strategy
123 Which of the following is an observation made by researchers Bartlett and Ghoshal
. regarding modern multinational enterprises?
A. Global logistics industry makes the concept of "location economies" redundant for
international firms.
B. Core competencies and skills can develop in any of the firm's worldwide operations.
C. Flow of skills between a firm and its global subsidiaries should be unidirectional.
A. international
B. global standardization
C. transnational
D. multidomestic
E. nationalization
125 Which of the following is true of a transnational strategy?
.
A. It is easy to implement because it does not place any conflicting demands on a company.
B. It is used when the pressures for cost reductions are low.
C. It is usually used when the pressure for local responsiveness is relatively low.
E. It is used by firms that try to achieve low costs through location economies, economies of
scale, and learning effects.
126 Firms that pursue a(n) _____ strategy take products first produced for their domestic market
. and sell them across various markets with only minimal local customization.
A. nationalization
B. transnational
C. global standardization
D. international
E. localization
127 Pursuing a(n) _____ strategy makes sense if a firm has a valuable core competence that
. indigenous competitors in foreign markets lack.
A. global standardization
B. international
C. nationalization
D. transnational
E. nationalization
128 Xerox had a monopoly on photocopiers for several years as the technology underlying the
. photocopier was protected by strong patents. As it served a universal need, this favorable
position led Xerox to pursue a(n) _____ strategy.
A. global standardization
B. localization
C. international
D. transnational
E. nationalization
129 Mayer Life Systems, a manufacturer of surgical and medical appliances, invented and
. patented a new dialysis machine that radically reduced maintenance and operational issues.
Responding to a global demand, it decided to sell the machines manufactured at its plant in
the U.S. to various markets across the globe. Since the product features provided by Mayer
were not provided by any other competitor, Mayer did not feel any pressure for cost
reductions. Which of the following strategies is most likely being pursued by Mayer?
A. International strategy
B. Localization strategy
D. Transnational strategy
E. Nationalization strategy
130 Which of the following statements is true about an international strategy?
.
A. International strategy typically involves taking products first produced for foreign
markets and then customizing them for domestic markets.
C. When a firm pursues an international strategy, the head office of the firm retains fairly
tight control over marketing and product strategy.
D. Firms pursuing the international strategy tend to outsource their development functions
such as R&D.
A. tactical union
B. strategic alliance
C. political affiliation
D. economic association
E. nationalization
132 A _____ allows two or more firms to share the fixed costs (and associated risks) of
. developing new products or processes.
A. franchising agreement
B. global web
D. strategic alliance
E. dispersion linkage
133 Which of the following is a disadvantage of a strategic alliance?
.
A. Entering into a strategic alliance, makes it difficult for a firm to enter into a foreign
market.
B. As a result of strategic alliance, fixed costs of developing new products tend to increase.
C. Strategic alliance gives competitors a low-cost route to new technology and markets.
D. Firms that enter into a strategic alliance with a foreign firm tend to face higher trade
barriers.
B. it makes it difficult for the partner firms to enter into a foreign market.
A. relational capital.
B. interorganizational synergy.
C. power equilibrium.
D. symbiotics.
E. intraorganizational coordination.