chapter 7 and 8

(1)

Your Results:

The correct answer for each question is indicated by a .

1

INCORRECT In Michael Porter's framework, which of the following factors does not affect a nation's _{competitiveness?}

A) factor conditions

B) policies that protect the nation's domestic competitors C) demand characteristics

D) related and supported industries

2

INCORRECT The sale of Boeing's commercial aircraft and Microsoft's operating systems in many _{countries enable these companies to benefit from}

A) higher prices in their domestic markets. B) economies of scale.

C) optimizing the location for many activities in their value chain. D) reducing their exposure to currency risks.

3

INCORRECT Demands to "reduce costs" require that

A) the company needs to supplement the local foreign economy in a manner specified by the local government.

B) a company should not trade idiosyncratic preferences in product features for higher economic returns.

C) a company must pursue what is economically beneficial to the company including maximizing economies of scale and learning curve effects.

D) the manager should follow a multidomestic strategy to maximize the economic benefits to the company.

4

INCORRECT High pressure for lower costs combined with high pressure for local adaptation would _{imply what type of international strategy:}

A) global B) multidomestic C) differentiation D) transnational

5

CORRECT All of the following are global strategy limitations except

A) ability to locate activities in optimal locations. B) limited ability to adapt to local markets.

C) concentration of activities may increase dependence on a single facility. D) single locations may lead to higher tariffs and transportation costs.

6

INCORRECT Which of the following is not a limitation of a multidomestic strategy?

A) less ability to realize cost savings through scale economies B) greater difficulty in transferring knowledge across countries C) may lead to "overadaptation" as conditions change

D) single locations may lead to higher tariffs and transportation costs

7

INCORRECT Which of the following describes the most standard order of entry into foreign markets?

(2)

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

8

INCORRECT ____________ involve the creation of a third-party legal entity, whereas __________ _{do not.}

A) Licensing agreements, joint ventures B) Franchising agreements; strategic alliances C) Strategic alliances; joint ventures

D) Joint ventures; strategic alliances

Your Results:

1

INCORRECT In Michael Porter's "diamond of competitive advantage," there are three broad _{attributes that, as a system, constitute a nation's competitiveness in an industry.}

A) TRUE B) FALSE

2

INCORRECT Intense rivalry in domestic markets does not typically force firms to look outside their _{national boundaries for new markets.}

A) TRUE B) FALSE

3

CORRECT Variations in foreign markets such as culture, language and customs can represent _{major management risks when firms enter foreign markets.}

A) TRUE B) FALSE

4

INCORRECT

Because it drives economies of scale as far as possible and offers a middle of the road product appealing to the largest number of consumers in every market, a global strategy is the most suitable strategy for international operations.

5

INCORRECT Corporations with multiple foreign operations that act very dependently on one another _{are following a multidomestic strategy.}

6

CORRECT Improved adaptation to all competitive situations is a key tenet of a transnational strategy, as well as flexibility by capitalizing on communication and knowledge flowing

throughout the organization.

7

INCORRECT The top method of entry into a foreign market is characteristically the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high

level of control.

(3)

Your Results:

1

INCORRECT The Garden.com start-up, the opening case in this chapter, failed because

A) it spent heavily on content and capabilities that customers did not value.

B) its reputation was damaged by rumors that spread via word of mouth. C) it was unable to turn shoppers into buyers.

D) all of the above

2

INCORRECT The types of industries that are expected to be most radically transformed by the _{Internet, according to the text are:}

A) information-intensive such as financial services B) research-intensive industries such as pharmaceuticals C) manufacturing-intensive such as microprocessors D) all of the above

3

INCORRECT End users are

A) usually the AC in B2C.

B) the final consumers in a distribution channel.

C) likely to have greater bargaining power because of the Internet. D) all of the above

4

INCORRECT One of the utmost threats to supplier power that has materialized because of the _{Internet is}

A) Internet technologies cannot easily be imitated.

B) the Internet inhibits the ability of suppliers to offer highly differentiated products or services.

C) procurement technologies eliminate the need for suppliers. D) the cost of accessing business customers has increased.

5

INCORRECT On the whole, the threat of substitutes is heightened because the Internet:

A) lowers switching costs. B) lowers barriers to entry.

C) introduces new ways to accomplish the same tasks. D) increases output per unit of cost.

6

CORRECT All of the following are reasons the Internet increases the intensity of competitive _{rivalry except:}

A) the Internet has made it more difficult to imitate the advantages achieved by competitors.

B) the Internet makes it more difficult for firms to differentiate themselves. C) the Internet has Acommoditized@ products that previously were

regarded as rare or unique.

D) the Internet has eliminated the importance of location by making geographically distant products available online.

(4)

A) Direct access to progress reports and the ability for customers to periodically check work-in-progress is minimizing rework.

B) Online bidding and order processing are eliminating the need for sales calls and minimizing sales force expenses.

C) Quick online responses to service requests and rapid feedback to customer surveys and product promotions are enhancing marketing efforts.

D) Online purchase orders are making many transactions paperless, reducing the costs of procurement and paper.

8

INCORRECT Which of the following phrases best completes the following sentence: Because of the Internet, firms that utilize a focus strategy have new opportunities to

_____________________

A) respond quickly to customer requests.

B) access niche markets in a highly specialized fashion. C) provide more services and features.

D) access markets less expensively.

9

CORRECT An enormous amount of money was spent promoting Pets.com's brand, but the company ultimately closed during the dot-com downturn. Which of the following was

not one of the reasons Pets.com failed:

A) it overextended its focus on a market niche and tried to appeal to an overly broad audience.

B) it was based on a faulty business model with overly thin margins. C) despite its efforts, the Pets.com marketing campaign was ill-conceived

and did not create name recognition.

D) its strategy was based on a value proposition that customers did not value.

Your Results:

1

CORRECT By using the Internet to launch their businesses, new entrants can use _{overall low cost and/or differentiation strategies to compete.}

2

INCORRECT The bargaining power of distribution channel buyers may increase because _{of the Internet.}

3

INCORRECT An overall reduction in business opportunities is due to reintermediation.

4

INCORRECT Few analysts agree that use of the Internet will lower transactions costs.

(5)

6

CORRECT The Internet diminishes many differentiation advantages.

Your Results:

1 INCORRECT

Which factor in the diamond of national advantage is exemplified by the

development of just-in-time inventory management by Japanese companies who lacked available physical land space for warehousing?

A) demand conditions

B) related and supporting industries C) firm strategy, structure, and rivalry

D)factor endowments

Classical economics suggests that factors of production such as land, labor, and capital are the building blocks that create usable consumer goods and services. However, companies in advanced nations seeking competitive advantage over firms in other nations create many of the factors of production. The island nation of Japan has little land mass, making warehouse space needed for inventory prohibitively expensive. But by pioneering just-in-time inventory management, Japanese

companies created a resource from which they gained advantage over companies in other nations that spent large sums to warehouse

inventory.

2 INCORRECT

What benefit of international expansion motivates a firm to locate its call centers in India, its manufacturing plants in China, and its R&D in Europe, where specific personnel talents may be available at the lowest price? A) extending a product life cycle

B) applying arbitrage C) avoiding arbitrage

D)shortening a product life cycle

Taking advantage of arbitrage opportunities is an advantage of

(6)

something from where it is cheap and selling it somewhere where it commands a higher price. For example, a firm may locate its call centers in India, its manufacturing plants in China, and its R&D in Europe,

where the specific types of talented personnel may be available at the lowest possible price.

3 INCORRECT

Which of the following forms of risk makes it difficult for foreign firms to conduct business, when there is an absence of rules or a lack of uniform enforcement of existing rules that leads to inconsistent and arbitrary government decisions?

A) economic B) political C) currency

D)management

Another source of political risk in many countries is the absence of the rule of law. The absence of rules or the lack of uniform enforcement of existing rules leads to what might often seem to be arbitrary and

inconsistent decisions by government officials. This can make it difficult for foreign firms to conduct business.

4 INCORRECT

As an alternative to offshoring technology services, many companies are

considering which of the following alternative solutions that may overcome the pitfalls of offshoring?

A) increased homogeneity of offerings B) eliminating customer service functions C) moving production facilities to foreign soil

D)rural outsourcing in the US

While there is a compelling logic for companies to engage in offshoring, there can be many pitfalls. This has spurred many companies to

outsource tech services to low-cost locations within the United States, instead of offshoring to foreign countries. This trend is discussed in Strategy Spotlight 7.6.

5 INCORRECT

One of marketing strategist Theodore Levitt's assumptions in support of global products and brands was that people around the world are not willing to sacrifice preferences in product features, functions, and design for lower prices and high quality.

(7)

A) True B) False

Marketing strategist Theodore Levitt advocated strategies that favored global products and brands. He suggested that firms should standardize their products and services for all of their worldwide markets. Levitt's approach rested on three key assumptions, one of which is that people around the world are willing to sacrifice preferences in product

features, functions, design, and the like for lower prices at high quality.

6 INCORRECT

In choosing optimal locations for operations under the ________ strategy

for expanding into global markets, managers must realize that location alone cannot guarantee that the quality and cost of factor inputs will be optimal unless potential weaknesses of the locations are managed. A) global

B) transnational C) international

D)multidomestic

There are some unique risks and challenges associated with a transnational strategy. The choice of a seemingly optimal location cannot guarantee that the quality and cost of factor inputs (i.e., labor, materials) will be optimal. Managers must ensure that the relative advantage of a location is actually realized, not squandered because of weaknesses in productivity and the quality of internal operations.

7 CORRECT

According to a study by Rugman and Verbeke, few of the world's largest firms today can be considered completely global in terms of sales. A) True

B) False

Alan Rugman and Alain Verbeke conclude that there is a stronger case to be made in favor of regionalization than globalization. With a

criterion of 20 percent of sales each in at least two of the three

economic regions, only 25 of the 500 largest firms could be considered global. Even today, most companies are considered to be regional or at best, bioregional, but not global.

8 CORRECT

When expanding internationally, licensing offers a firm a lower investment and risk, and degree of ownership and control than does a joint venture.

(8)

A) B) False

Refer to: Exhibit 7.10

Exhibit 7.10 illustrates a wide variety of modes of foreign entry, including exporting, licensing, franchising, joint ventures, strategic alliances, and wholly owned subsidiaries. As the exhibit indicates, licensing offers a lower investment and risk, and degree of ownership and control than does a joint venture.

9 INCORRECT

In considering countries with weak laws protecting intellectual property, which of the following entry modes for international expansion would be the best choice?

A) exporting

B) strategic alliance

C) wholly owned subsidiary D)licensing

With licensing, the licensee may eventually become so familiar with the patent and trade secrets that it may become a competitor; that is, the licensee may make some modifications to the product and manufacture and sell it independently of the licensor, without having to pay a royalty fee. This potential situation is aggravated in countries that have

relatively weak laws for protecting intellectual property.

10 CORRECT

The risks associated with using a wholly owned subsidiary for expansion can be lessened by hiring local talent.

A) True B) False

With franchising, joint ventures, or strategic alliances, the risk is shared with the firm's partners. With wholly owned subsidiaries, the entire risk is assumed by the parent company. The risks associated with doing business in a new country (e.g., political, cultural, and legal) can be lessened by hiring local talent.

Your Results:

1 INCORRECT

In recognizing opportunities, what two phases of activity are involved that lead to viable new venture opportunities?

A) brainstorming and identification discovery and evaluation

(9)

B)

C) start-up and development D)resource collection and start-up

Opportunity recognition refers to more than just the Eureka feeling that people sometimes experience at the moment they identify a new idea. Although such insights are often very important, the opportunity recognition process involves two phases of activity (discovery and evaluation) that lead to viable new venture opportunities.

2 INCORRECT

Young, small firms get start-up funding most frequently from which of the following?

A) peer-to-peer lending via the Internet

B) personal savings or contributions from family and friends C) bank or public financing

D)venture capital or "angel" investors

The funding available to young and small firms tends to be quite limited. In fact, the majority of new firms are low-budget start-ups, launched with personal savings and the contributions of family and friends. Among firms included in the Entrepreneur list of the 100

fastest-growing new businesses in a recent year, 61 percent reported that their start-up funds came from personal savings.

3 INCORRECT

Which of the following are benefits of social capital for new firms?

A) offering contracts and providing training

B) providing a base of experience and loan guarantees C) gaining exposure and building legitimacy faster

D)underwriting loans and providing counseling

New ventures founded by entrepreneurs who have extensive social contacts are more likely to succeed than are ventures started without the support of a social network. Even though a venture may be new, if the founders have contacts who will vouch for them, they gain exposure and build legitimacy faster.

(10)

4 INCORRECT

Three characteristics of leadership for entrepreneurs defined by the text are

vision, dedication and drive and relevant experience. A) True

B) False

Entrepreneurs put themselves to the test and get their satisfaction from acting independently, overcoming obstacles, and thriving financially. To do so, they must embody three characteristics of leadership, vision, dedication and drive, and commitment to excellence, and pass these on to all those who work with them.

5 INCORRECT

In applying the five-forces model to new ventures, the threat of retaliation by established firms is not an important consideration.

A) True B) False

A second factor that may be especially important to a young venture is the threat of retaliation by incumbents. In many cases, entrepreneurial ventures are the new entrants that pose a threat to incumbent firms. Therefore, in applying the five-forces model to new ventures, the threat of retaliation by established firms needs to be considered.

6 INCORRECT

When automakers introduced electric vehicles such as the Chevy Volt and the Nissan Leaf in 2010 and 2011, Tesla had been in the design and manufacture electric cars since 2003. These later to market offers represent what type of entry strategy?

A) pioneering B) prospective C) imitative

D)comparative

An imitative new entry strategy is used by entrepreneurs who see products or business concepts that have been successful in one market niche or physical locale and introduce the same basic product or service in another segment of the market. Tesla's car is a high performance vehicle, while the latter entrants are mainstream offerings using electric technology.

7 CORRECT

New ventures can achieve overall cost leadership relative to competitors through the use of nimble organizational structures.

(11)

A) True B) False

Because new ventures are typically small, they usually don't have high economies of scale relative to competitors. Because they are usually cash strapped, they can't make large capital investments to increase their scale advantages. Because many are young, they often don't have a wealth of accumulated experience to draw on to achieve cost

reductions. Compared to large firms, new ventures often have simple organizational structures that make decision making both easier and faster. The smaller size also helps young firms change more quickly when upgrades in technology or feedback from the marketplace indicate that improvements are needed. They are also able to make decisions at the time they are founded that help them deal with the issue of

controlling costs. Thus, new firms have several avenues for achieving low cost leadership.

8 INCORRECT

Which types of strategies often are associated with entrepreneurial

ventures because there is a natural fit between the scope of the strategy and the size of the firm?

A) Cost leadership B) Combination C) Differentiation

D)Focus

Focus strategies are often associated with small businesses because there is a natural fit between the narrow scope of the strategy and the small size of the firm. Young firms can often succeed best by finding a market niche where they can get a foothold and make small advances that erode the position of existing competitors. From this position, they can build a name for themselves and grow.

9 CORRECT

The model of competitive dynamics includes new competitive action, threat analysis, motivation and capability to respond, types of competitive actions, and likelihood of competitive reaction.

A) True B) False

According to Exhibit 8.7, the components of competitive dynamics analysis are: new competitive action, threat analysis, motivation and capability to respond, types of competitive actions, and likelihood of competitive reaction.

(12)

10 CORRECT

Smaller, less established firms tend to be better at surprise competitive

attacks because of their superior mobility. A) True

B) False

Most entrepreneurial new ventures start out small. The smaller size makes them more nimble compared to large firms so they can respond quickly to competitive attacks. Because they are not well-known, start-ups also have the advantage of the element of surprise in how and when they attack. Large firms tend to be slower to respond. Older firms tend to be predictable in their responses because they often lose touch with the competitive environment and rely on strategies and actions that have worked in the past.