Which of the following is least likely to add to the pressure for a firm to be locally responsive?

International Business: Environments and Operations, 15e (Daniels et al.)

Chapter 12 The Strategy of International Business

1) Which of the following statements about Zara is most likely FALSE?

A) Zara puts fewer products on clearance racks than most of its competitors in the industry.

B) Zara's large advertising budget generates word-of-mouth and attracts new buyers.

C) New products and designs are delivered to Zara stores every three to four weeks.

D) Most of Zara's products move through the firm's distribution center in Spain.

Answer: B

Diff: 3

Learning Outcome: Describe the process of selecting and developing an international business

strategy

Skill: Concept

Objective: 4

AACSB: Analytical thinking

2) Political, legal, economic, monetary, and institutional forces comprise the ________ of

international business and influence managers' actions.

A) environment

B) competition

C) culture

D) threat

Answer: A

Diff: 2

Learning Outcome: Describe the process of selecting and developing an international business

strategy

Skill: Concept

Objective: 1

AACSB: Application of knowledge

3) Phillip is an international business manager with Corbin Manufacturing. Which of the

following serves as an external influence on the business decisions that Phillip makes?

A) production plant locations

B) host country monetary policy

C) supply chain linkages

D) product design standards

Answer: B

Diff: 2

Learning Outcome: Describe the process of selecting and developing an international business

strategy

Skill: Application

Objective: 1

AACSB: Analytical thinking

1

Copyright © 2015 Pearson Education, Inc.

Firms usually respond to pressures for cost reduction by trying to

undertake product differentiation.

be locally responsive.

diversify product lines.

lower the costs of value creation

lower the costs of value creation

Changing a firm's strategic posture to build an organization capable of supporting a transnational strategy is a relatively simple task.

The _____ shows all of the different positions a firm can adopt with regard to adding value to the product and low cost assuming the firm's internal operations are configured efficiently to support a particular position.

strategic choice curve

strategy convex

efficiency frontier

experience curve

efficiency frontier

The efficiency frontier shows all of the different positions that a firm can adopt with regard to adding value to the product (V) and low cost (C) assuming that its internal operations are configured efficiently to support a particular position.

Which of the following is less likely to add to the pressure for a firm to be locally responsive?

Host-government demands

Switching costs for consumers

Differences in infrastructure and traditional practices

National differences in consumer tastes and preference

Switching costs for consumers

Pressures for local responsiveness arise from national differences in consumer tastes and preferences, infrastructure, accepted business practices, and distribution channels, and from host-government demands. Responding to pressures to be locally responsive requires a firm to differentiate its products and marketing strategy from country to country to accommodate these factors, all of which tends to raise the firm's cost structure.

Which of the following does global expansion allow firms to achieve?

Standardize their product offering, marketing strategy, and business strategy for all national conditions.

Realize location economies from experience effects generated by serving a larger market from a central location.

Realize cost economies by dispersing value creation activities to the optimal location.

Expand the market for their domestic product offerings by selling those products in international markets.

Expand the market for their domestic product offerings by selling those products in international markets.

Expanding globally allows firms to increase their profitability and rate of profit growth in ways not available to purely domestic enterprises. However, a firm's ability to increase its profitability and profit growth by pursuing these strategies is constrained by the need to customize its product offering, marketing strategy, and business strategy to differing national conditions, that is, by the imperative of localization.

Which of the following is true about core competence?

The term core competence refers to the design, creation, and delivery of the product.

R&D, human resources, logistics, and general management are not a part of core competencies.

Core competence skills are typically expressed in product offerings that other firms find difficult to match or imitate.

Firms that transfer of core competencies to foreign markets can realize location economies.

Core competence skills are typically expressed in product offerings that other firms find difficult to match or imitate.

The term core competence refers to skills within the firm that competitors cannot easily match or imitate. These skills may exist in any of the firm's value creation activities—production, marketing, R&D, human resources, logistics, general management, and so on. Such skills are typically expressed in product offerings that other firms find difficult to match or imitate.

The experience curve refers to

cost savings that come from learning by doing.

reductions in unit cost achieved by producing a large volume of a product.

reductions in unit cost achieved by core competence.

systematic reductions in production costs that have been observed to occur over the life of a product.

systematic reductions in production costs that have been observed to occur over the life of a product.

The experience curve refers to systematic reductions in production costs that have been observed to occur over the life of a product. A number of studies have observed that a product's production costs decline by some quantity about each time cumulative output doubles.

Which strategy makes most sense when there are strong pressures for cost reductions and minimal demands for local responsiveness?

Global standardization strategy

Transnational strategy

Localization strategy

International strategy

Global standardization strategy

Firms that pursue a global standardization strategy focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies; that is, their strategic goal is to pursue a low-cost strategy on a global scale.

A localization strategy focuses on increasing profitability by

using cost advantage to support aggressive pricing in world markets.

offering standardized goods and services.

customizing the firm's goods or services to local conditions.

capturing the cost reductions associated with mass-production.

customizing the firm's goods or services to local conditions.

A localization strategy 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.

Firms that pursue a transnational strategy are trying to simultaneously do many things. Which of the following is one of those things?

Achieve higher costs through location economies.

Standardize their product offering for the global market.

Foster a multidirectional flow of skills between different subsidiaries.

Achieve higher costs through learning effects.

Foster a multidirectional flow of skills between different subsidiaries.

Firms that pursue a transnational strategy are trying to simultaneously achieve low costs through location economies, economies of scale, and learning effects; differentiate their product offering across geographic markets to account for local differences; and foster a multidirectional flow of skills between different subsidiaries in the firm's global network of operations.

Unlike firms pursuing a global standardization strategy, firms pursuing an international strategy

face significant competition.

pursue a low-cost strategy on a global scale.

increase profitability by customizing goods or services to local needs.

are not confronted with pressures to reduce their cost structure.

are not confronted with pressures to reduce their cost structure.

The distinguishing feature of many firms pursuing an international strategy is that they are selling a product that serves universal needs, but they do not face significant competitors, and thus unlike firms pursuing a global standardization strategy, they are not confronted with pressures to reduce their cost structure.

Learning effects

tend to be less significant when a technologically complex task is repeated.

will be less significant in an assembly process involving 1,000 complex steps than in one of only 100 simple steps.

typically disappear after a while, in spite of the complexity of the task.

are more significant after two or three years of the introduction of a new process.

typically disappear after a while, in spite of the complexity of the task.

Learning effects tend to be more significant when a technologically complex task is repeated, because there is more that can be learned about the task. No matter how complex the task, however, learning effects typically disappear after a while.

_____ exists when the tastes and preferences of consumers in different nations are similar if not identical.

Universal needs

Homogenous needs

Basic needs

Bundled needs

Universal needs

Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical. This is the case for conventional commodity products such as bulk chemicals, petroleum, steel, sugar, and the like.

Firms usually respond to pressures for cost reduction by trying to

undertaking product differentiation.

diversifying product lines.

lower the costs of value creation.

be locally responsive.

lower the costs of value creation.

In competitive global markets, international businesses often face pressures for cost reductions. Responding to pressures for cost reduction requires a firm to try to lower the costs of value creation.

A firm's strategy is defined as the actions managers take to attain the goals of the firm.

T

A firm's strategy can be defined as the actions that managers take to attain the goals of the firm.

Profitability is calculated by dividing the total sales of the firm by total invested capital.

F

Profitability can be defined as the rate of return that the firm makes on its invested capital (ROIC), which is calculated by dividing the net profits of the firm by total invested capital.

The way to increase the profitability of a firm is to create less-expensive products.

F

The way to increase the profitability of a firm is to create more value. 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.

Superior value creation relative to rivals does not necessarily require a firm to have the lowest cost structure in an industry, or to create the most valuable product in the eyes of consumers.

T

Superior value creation relative to rivals does not necessarily require a firm to have the lowest cost structure in an industry, or to create the most valuable product in the eyes of consumers. However, it does require that the gap between value (V) and cost of production (C) be greater than the gap attained by competitors.

When a firm creates a global web of value creation activities, the company disperses different stages of the value chain to those locations in the world where perceived value is maximized or where the costs of value creation are minimized.

T

The creation of a global web of value creation activities involves different stages of the value chain being dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized.

Responding to pressures to be locally responsive requires a firm to standardize its products.

F

Pressures for local responsiveness arise from national differences in consumer tastes and preferences, infrastructure, accepted business practices, and distribution channels, and from host-government demands. Responding to pressures to be locally responsive requires a firm to differentiate its products and marketing strategy from country to country to accommodate these factors, all of which tends to raise the firm's cost structure.

Changing a firm's strategic posture to build an organization capable of supporting a transnational strategy is a relatively simple task.

F

Changing a firm's strategic posture to build an organization capable of supporting a transnational strategy is a complex and challenging task. Some would say it is too complex, because the strategy implementation problems of creating a viable organizational structure and control systems to manage this strategy are immense.

What is the pressure for local responsiveness?

Which strategy makes sense when pressures are high for local responsiveness but low for cost reductions?

What strategy increases the value of a product in the local market through customization that allows for tastes and preferences in different national or regional markets?

What are three things a firm must do to maximize profitability according to the basic strategy paradigm?