COB 487 EXAM #2 (CH. 7,8,9,10,12) QUESTIONS
A company pursues international expansion and become a __________ for many
reasons - Answer -multinational firm
reasons that a firm becomes multinational firm/pursues international expansion is
because: - Answer -- Increase size of potential markets.
- Take advantage of arbitrage opportunities and optimize the location of value chain
activities
- Explore reverse innovation
what is the outcome of Increase size of potential markets - Answer -Increase revenue,
attain economies of scale
Take advantage of arbitrage opportunities and optimize the location of value chain
activities is to do what: - Answer -• Reduce cost
• Enhance performance.
• Reduce risk
what does Explore reverse innovation do: - Answer -• Design and manufacture
products locally.
• Export no-frills products to developed markets
Spreading of value chain activities acrossvarious countries via: - Answer -- outsourcing
- offshoring
external firm performing some value-creating activities for the company - Answer -
outsourcing
locating some value-creating activities in company's foreign location - Answer -
offshoring
International Expansion: Risks - Answer -political, economic, currency, management
**also risks on both customer and supplier sides of the value chain
_______ risk due to social unrest, military turmoil, demonstrations, terrorism, absence
of the rule of law can lead to:
• Destruction of property.
• Disruption of operations.
• Non-payment for goods and services.
• Arbitrary government decisions. - Answer -political
______ risk due to GDP fluctuations, economic policies, piracy & counterfeiting -
Answer -economic
,_______ due to fluctuations in the local currency's exchange rate.
• Affects cost of production or net profit. - Answer -currency
__________ risk due to culture, customs, language, income level, customer
preferences, distribution systems.
• Could lead to the need for local adaptation of apparently standard products.
• Differences between local employee/partner national culture and firm home culture -
Answer -management
Two opposing forces at play when expanding into global markets - Answer -1. Cost
reduction
2. Adaptation to local markets
Strategies favoring global products & brands: - Answer -• Standardize products for all
markets.
• Reduce costs by spreading investments over larger market.
Strategies favoring adaptation to local markets: - Answer -• Customize products and
processes to fit local requirements
• Tend to increase costs & expenses from local differentiation
Need ________ &_______ to assess the strengths of the 2opposite pressures -
Answer -- analysis of customer expectations
- purchasing criteria
the 4 strategies - Answer -1. Global strategy
2. Transnational strategy
3. International strategy
4. Multi-domestic strategy
An _________ strategy puts emphasis on diffusing and exploiting the parent company's
core products &capabilities into foreign markets. - Answer -international
What strategy is this:
▪ Pressure for both local adaptation & low costs are rather low.
▪ All sources of core competencies are centralized.
▪ Enables lower cost from lesser need to customize products and processes
▪ However, limited ability to adapt to local markets and/or to take advantage of new local
ideas and innovations - Answer -international strategy
How is the international strategy positioned? - Answer -low pressures for local
adaptation/ low pressures to lower costs
A ________ strategy puts emphasis on lowering worldwide costs and expense -
Answer -global
, What strategy is this:
▪ Pressure for adaptation to local markets is low, but high for reducing costs
▪ Competitive strategy is centralized & controlled by the corporate office.
▪ Products are standardized and operations centralized(low-cost locations), producing
economies of scale and uniform quality standards.
▪ Value chain activities are targeted in lower-cost countries
▪ Leads to potential increase in international risks - Answer -global
How is the global strategy positioned? - Answer -low pressures for local adaptation/
high pressures to lower costs
A ______ strategy puts emphasis on differentiating products & services to adapt to local
markets - Answer -multi-domestic
What strategy is this:
▪ Pressure for local adaptation is high, but low on reducing costs
▪ Decisions are decentralized, driving products & services to be tailored to local use,
with price differentiation by market
▪ Revenue can expand rapidly, from leveraging local opportunities
▪ However, harder to realize cost reductions through economies of scale. Also,
possibility of "over-adaptation" and unsustainable cost structures - Answer -multi-
domestic
How is the multi-domestic strategy positioned? - Answer -high pressures for local
adaptation/ low pressures to lower costs
A _______ strategy seeks global competitiveness via tradeoffs: Efficiency vs Local
Adaptation vs Organizational Learning - Answer -transnational
What strategy is this:
▪ High pressures for both local adaptation and lowering costs
▪ Assets and capabilities disbursed according to the most beneficial location for a
specific activity
▪ Value chain activities split between centralized and decentralized (level of customer
proximity)
▪ Systematic capitalization and integration of worldwide organizational contributions
▪ However, unique managerial challenges in overall coordination of operations and
knowledge transfer - Answer -transnational
How is the transnational strategy positioned? - Answer -high pressures for local
adaptation/ high pressures to lower costs
A company pursues international expansion and become a __________ for many
reasons - Answer -multinational firm
reasons that a firm becomes multinational firm/pursues international expansion is
because: - Answer -- Increase size of potential markets.
- Take advantage of arbitrage opportunities and optimize the location of value chain
activities
- Explore reverse innovation
what is the outcome of Increase size of potential markets - Answer -Increase revenue,
attain economies of scale
Take advantage of arbitrage opportunities and optimize the location of value chain
activities is to do what: - Answer -• Reduce cost
• Enhance performance.
• Reduce risk
what does Explore reverse innovation do: - Answer -• Design and manufacture
products locally.
• Export no-frills products to developed markets
Spreading of value chain activities acrossvarious countries via: - Answer -- outsourcing
- offshoring
external firm performing some value-creating activities for the company - Answer -
outsourcing
locating some value-creating activities in company's foreign location - Answer -
offshoring
International Expansion: Risks - Answer -political, economic, currency, management
**also risks on both customer and supplier sides of the value chain
_______ risk due to social unrest, military turmoil, demonstrations, terrorism, absence
of the rule of law can lead to:
• Destruction of property.
• Disruption of operations.
• Non-payment for goods and services.
• Arbitrary government decisions. - Answer -political
______ risk due to GDP fluctuations, economic policies, piracy & counterfeiting -
Answer -economic
,_______ due to fluctuations in the local currency's exchange rate.
• Affects cost of production or net profit. - Answer -currency
__________ risk due to culture, customs, language, income level, customer
preferences, distribution systems.
• Could lead to the need for local adaptation of apparently standard products.
• Differences between local employee/partner national culture and firm home culture -
Answer -management
Two opposing forces at play when expanding into global markets - Answer -1. Cost
reduction
2. Adaptation to local markets
Strategies favoring global products & brands: - Answer -• Standardize products for all
markets.
• Reduce costs by spreading investments over larger market.
Strategies favoring adaptation to local markets: - Answer -• Customize products and
processes to fit local requirements
• Tend to increase costs & expenses from local differentiation
Need ________ &_______ to assess the strengths of the 2opposite pressures -
Answer -- analysis of customer expectations
- purchasing criteria
the 4 strategies - Answer -1. Global strategy
2. Transnational strategy
3. International strategy
4. Multi-domestic strategy
An _________ strategy puts emphasis on diffusing and exploiting the parent company's
core products &capabilities into foreign markets. - Answer -international
What strategy is this:
▪ Pressure for both local adaptation & low costs are rather low.
▪ All sources of core competencies are centralized.
▪ Enables lower cost from lesser need to customize products and processes
▪ However, limited ability to adapt to local markets and/or to take advantage of new local
ideas and innovations - Answer -international strategy
How is the international strategy positioned? - Answer -low pressures for local
adaptation/ low pressures to lower costs
A ________ strategy puts emphasis on lowering worldwide costs and expense -
Answer -global
, What strategy is this:
▪ Pressure for adaptation to local markets is low, but high for reducing costs
▪ Competitive strategy is centralized & controlled by the corporate office.
▪ Products are standardized and operations centralized(low-cost locations), producing
economies of scale and uniform quality standards.
▪ Value chain activities are targeted in lower-cost countries
▪ Leads to potential increase in international risks - Answer -global
How is the global strategy positioned? - Answer -low pressures for local adaptation/
high pressures to lower costs
A ______ strategy puts emphasis on differentiating products & services to adapt to local
markets - Answer -multi-domestic
What strategy is this:
▪ Pressure for local adaptation is high, but low on reducing costs
▪ Decisions are decentralized, driving products & services to be tailored to local use,
with price differentiation by market
▪ Revenue can expand rapidly, from leveraging local opportunities
▪ However, harder to realize cost reductions through economies of scale. Also,
possibility of "over-adaptation" and unsustainable cost structures - Answer -multi-
domestic
How is the multi-domestic strategy positioned? - Answer -high pressures for local
adaptation/ low pressures to lower costs
A _______ strategy seeks global competitiveness via tradeoffs: Efficiency vs Local
Adaptation vs Organizational Learning - Answer -transnational
What strategy is this:
▪ High pressures for both local adaptation and lowering costs
▪ Assets and capabilities disbursed according to the most beneficial location for a
specific activity
▪ Value chain activities split between centralized and decentralized (level of customer
proximity)
▪ Systematic capitalization and integration of worldwide organizational contributions
▪ However, unique managerial challenges in overall coordination of operations and
knowledge transfer - Answer -transnational
How is the transnational strategy positioned? - Answer -high pressures for local
adaptation/ high pressures to lower costs
