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Chapter 10 Global Strategy: Competing Around the World Answer Key

Multiple Choice Questions

1. Disney's "Wedding Banned," a romantic comedy about a divorced couple trying to prevent
their daughter from getting married, was axed in the advanced production stage despite
several marquee stars (Robin Williams, Anna Faris, and Diane Keaton). Which of the following
statements best explains why this happened?

A. The purchasing power of the U.S. audience had reduced drastically.


B. There was a feeling that the movie was against traditional American values regarding
marriage.
C. The movie was a copy of an already existing French movie.
D. There were perceptions that this movie would not succeed outside of the American market.

As mentioned in Chapter Case 10, Disney's "Wedding Banned," a romantic comedy about a
divorced couple trying to prevent their daughter from getting married, was axed in the
advanced production stage despite several marquee stars (Robin Williams, Anna Faris, and
Diane Keaton) because of perceptions that it would not succeed outside of the American
market.

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
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Topic: What is Globalization?

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2. Today, Hollywood movies are banking more on foreign sales for their overall revenues.
Hollywood studios have been adapting scripts to appeal to global audiences, and casting
foreign actors in leading roles. Which of the following statements most accurately explains the
reason for this change?

A. The purchasing power of the U.S. audience has reduced drastically.


B. Hollywood is now a truly global enterprise with the vast majority of revenues coming from
outside the United States.
C. Hollywood actors and actresses are no longer willing to participate in domestic productions
since there is no money in this industry.
D. The movie industries of other countries are not doing so well.

As discussed in Chapter Case 10, Hollywood has always obtained some of its revenues from
international sales, but it is now a truly global enterprise, with the vast majority of revenues
coming from outside the United States. Today, largely due to the collapse of DVD/Blu-ray
sales, Hollywood would be unable to continue producing high-budget movies without foreign
revenues.

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
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Topic: What is Globalization?

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3. As a result of globalization, the:

A. economies around the world are becoming more independent.


B. cultural distance between countries is increasing.
C. cost of doing business around the world is increasing.
D. world's market economies are becoming more integrated.

Globalization allows companies to source supplies at lower costs and to further differentiate
products. Consequently, the world's market economies are becoming more integrated and
interdependent.

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

4. Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production
units in five different countries. The firm's shareholders ensure the proper management of
Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is
most likely a _____.

A. non-profit organization
B. nationalized firm
C. sole proprietorship
D. multinational enterprise

In this scenario, Diva Rule Inc. is most likely a multination enterprise (MNE). The MNE is the
engine behind globalization—a firm that deploys resources and capabilities in the
procurement, production, and distribution of goods and services in at least two countries.

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

5. European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners.
Which of the following statements best explains why it is employing this strategy?

A. To take advantage of the high labor costs in the southern United States
B. To take advantage of the high cost of living in the southern United States
C. To take advantage of the low impact of globalization in the United States
D. To take advantage of lower taxes in the southern United States

European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners.
It's doing so in order to avoid voluntary import restrictions, to take advantage of business-
friendly conditions such as lower taxes, labor cost, and cost of living, as well as other
incentives provided by host states in the southern United States, and to be closer to
customers in North America.

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
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Topic: What is Globalization?

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6. During the period of globalization 1.0, the mode of entry into foreign markets primarily
involved:

A. exporting goods.
B. making foreign direct investments.
C. making foreign institutional investments.
D. licensing production and distribution.

During Globalization 1.0, basically all the important business functions were located in the
home country. Typically, only sales and distribution operations took place overseas—
essentially exporting goods to other markets.

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
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Topic: What is Globalization?

7. Which of the following is a feature of the globalization 2.0 stage?

A. Huge investments in fiber-optic cable networks around the world enabled companies to
operate as global-collaboration networks.
B. Only sales and distribution operations took place overseas, while all the important business
functions were located in the home country.
C. Two-way knowledge flow between the local subsidiaries and their U.S. headquarters was
strong.
D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of
themselves in a few key countries.

From 1945 to the end of the 20th century, in the Globalization 2.0 stage, MNEs began to create
smaller, self-contained copies of themselves, with all business functions intact, in a few key
countries (notably, Western European countries, Japan, and Australia).

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

8. Which of the following is an observable feature in the globalization 3.0 stage?

A. Knowledge flow between the local replicas of the multinational enterprises and their U.S.
headquarters is limited.
B. Only sales and distribution functions of a multinational enterprise are located in a few key
countries.
C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate
business functions anywhere in the world.
D. Firms have reorganized from a global enterprise with different centers of expertise to a
multinational company with self-contained operations in a few selected countries.

Companies now freely locate business functions anywhere in the world based on an optimal
mix of costs, capabilities, and PESTEL factors. Multinational companies have reorganized
from self-contained operations in a few selected countries to a more seamless global
enterprise with centers of expertise.

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9. A trend observed during the globalization 3.0 stage involves:

A. countries around the globe becoming more self-sufficient and independent.


B. multinational companies organizing as global-collaboration networks.
C. privately-owned firms getting nationalized.
D. world's market economies becoming less integrated.

Based on an optimal mix of costs, skills, and PESTEL factors, multinational enterprises are
organized as global-collaboration networks that perform business functions throughout the
world.

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

10. How will an increase in coordinated economic and political integration between countries
affect the world economy?

A. The world's market economies will become self-sufficient and independent.


B. There will be gains in social welfare and living standards across the globe.
C. The cost of labor will further decline in emerging economies.
D. There will be a movement away from global-collaboration networks among multinational
enterprises (MNEs).

More gains in social welfare and living standards can be had through further globalization if
future integration is managed effectively through coordinated efforts by governments.

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Topic: What is Globalization?

11. How has China been affected by its one-child-per-family policy and appreciation of its
currency?

A. The purchasing power of its workforce has reduced.


B. The value added to production has reduced.
C. The standard of living within the economy has lowered.
D. The country's advantage in low-cost manufacturing has reduced.

Rising wages, fewer workers due to the effects of China's one-child-per-family policy, and
appreciation of the Chinese currency now combine to lessen the country's advantage in low-
cost manufacturing.

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Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
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Topic: What is Globalization?

12. GM entered China in 1997 through a joint venture with Shanghai Automotive Industrial Corp.
(SAIC). Which of the following factors best contributes to the fact that the Chinese market
already accounts for 25 percent of GM's total revenues?

A. Chinese workers cost only a fraction of what U.S. workers do.


B. The company operates a larger number of assembly plants in China than the U.S.
C. The China operation sells more vehicles while employing twice the number of employees.
D. GM's China operation has never been cost-competitive.

As mentioned in Strategy Highlight 10.1, today, the Chinese market already accounts for 25
percent of GM's total revenues. Chinese workers cost only a fraction of what U.S. workers do,
and GM is not weighed down by additional health care and pension obligations.

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Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
global strategy.
Topic: Going Global: Why?

13. Which of the following has been a key driver for firms to expand globally during the
globalization 3.0 stage?

A. Benefits from lower labor costs in manufacturing and services


B. Access to low-cost raw materials such as lumber and iron ore
C. Low levels of economic growth in emerging economies
D. Inefficient infrastructure in countries like China, which have brought down setting-up costs

Access to low-cost raw materials such as lumber, iron ore, oil, and coal was a key driver
behind Globalization 1.0 and 2.0. During Globalization 3.0, firms have expanded globally to
benefit from lower labor costs in manufacturing and services.

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Topic: Going Global: Why?

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14. India has been able to carve out a competitive advantage in business process outsourcing
(BPO) primarily because:

A. it has emerged as a manufacturing powerhouse.


B. of an efficient infrastructure and high labor costs.
C. it has an abundance of uneducated workers who are highly trainable.
D. of an abundance of well-educated, English-speaking young people.

India carved out a competitive advantage in business process outsourcing (BPO), not only
because of low-cost labor but because of an abundance of well-educated, English-speaking
young people.

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Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
global strategy.
Topic: Going Global: Why?

15. Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds
of eager volunteers to test the firm's latest product innovations onsite while Unilever
researchers monitor consumer reactions. In this example, Unilever is trying to reap the
benefits of _____.

A. location economies
B. economies of scope
C. learning races
D. network effects

In this example, Unilever is trying to reap the benefits of location economies, which are
benefits from locating value chain activities in the world's optimal geographies for a specific
activity, wherever that may be.

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Difficulty: 2 Medium
Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
global strategy.
Topic: Going Global: Why?

16. GearOne Autos Inc. has shifted its research and development unit from its home country to
Germany. This allows the company to be better informed about the latest developments in the
automotive industry by tapping into the highly advanced automotive industry in Germany. In
this scenario, GearOne Autos Inc. is reaping the benefits of _____.

A. economies of scope
B. location economies
C. resource immobility
D. resource ambiguity

In this scenario, GearOne Autos Inc. is reaping the benefits of location economies. Location
economies are benefits from locating value chain activities in the world's optimal geographies
for a specific activity, wherever that may be.

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Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
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Topic: Going Global: Why?

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17. A firm is said to be pursuing a polycentric innovation strategy when:

A. its research facility is situated in the headquarters and all other business activities are
located around the world.
B. it draws from multiple, equally important research facilities located throughout the world.
C. it restricts its innovation to Western economies and production to developing markets.
D. its knowledge flow takes a one-way path—from its headquarters to the subsidiaries.

Many multinational enterprises (MNEs) now are replacing the one-way innovation flow from
Western economies to developing markets with a polycentric innovation strategy—a strategy
in which MNEs now draw on multiple, equally important innovation hubs throughout the world.

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Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
global strategy.
Topic: Going Global: Why?

18. Which of the following statements accurately explains the primary reason behind Walmart's
failure in Germany?

A. Inability to implement its trademark focused-differentiation strategy in the German market


B. Significant differences between its U.S. personnel policies and Germany's culture
C. Germany's unfamiliarity with retail discount powerhouses
D. Metro's hostile takeover of Walmart in Germany

As mentioned in Strategy Highlight 10.2, Walmart attempted to implement its U.S. personnel
policies and procedures: the Walmart cheer, a door greeter, every associate within 10 feet of a
customer smiling and offering help, bagging groceries at the checkout, video surveillance, a
prohibition against dating co-workers, and so on. German employees, however, simply
refused to accept these policies.

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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
global strategy.
Topic: Going Global: Why?

19. Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has
approximately 300 stores across the country and is already active in three foreign countries. It
attempts to establish itself successfully in the country of Zevar, and uses its low-cost strategy
to do so. However, due to the additional costs associated with training, coordinating across
geographic distances, and other costs associated with doing business in an unfamiliar cultural
and economic environment, Silca Electronics Inc. incurs huge financial losses in Zevar. In this
scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most
likely because:

A. it overestimates its need to protect its intellectual property.


B. it underestimates its liability of foreignness when entering the Zevar market.
C. it underestimates its dwindling reputation before it enters the Zevar market.
D. it overestimates the geographic and cultural distance between Pelo and Zevar.

In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs
most likely because it underestimates its liability of foreignness when entering the Zevar
market. Liability of foreignness consists of the additional costs of doing business in an
unfamiliar cultural and economic environment, and of coordinating across geographic
distances.

AACSB: Reflective Thinking


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Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
global strategy.
Topic: Going Global: Why?

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20. Japanese and European engineering companies entered China to participate in building the
world's largest network of high-speed trains worth billions of dollars. Companies such as
Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint-
venture partners with domestic Chinese companies. These firms now allege that the Chinese
partners built on the Japanese and European partners' advanced technology to create their
own, next-generation high-speed trains. This example best highlights the _____ that firms can
experience when expanding overseas.

A. threat of new entrants


B. liability of foreignness
C. loss of reputation
D. intellectual property exposure

This example highlights the intellectual property exposure that firms can face when expanding
overseas. The issue of protecting intellectual property in foreign markets also looms large.
When required to partner with a foreign host firm, companies may find their intellectual
property being siphoned off and reverse-engineered.

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Topic: Going Global: Why?

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21. Which of the following is part of Geert Hofstede's cultural dimensions?

A. Locus of control
B. Self-efficacy
C. Span of control
D. Power distance

Four dimensions of culture have emerged: power distance, individualism, masculinity-


femininity, and uncertainty avoidance. More recently, Hofstede added a fifth cultural
dimension: long-term orientation.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

22. Under the CAGE distance framework, the administrative and political distance between two
countries primarily increases with:

A. differences in climates and time zones.


B. the absence of a trading bloc.
C. physical remoteness.
D. the lack of connective ethnic and social networks.

Administrative and political distance between two countries increases with absence of trading
bloc.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

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23. United Nerumbia and Fernsland are two neighboring countries with strong economic
disparities. However, both the countries share a common national language and the same
political ideologies. The relationship between these two countries will most likely affect the
trade of:

A. food processed in Fernsland.


B. movies and TV shows produced in United Nerumbia.
C. iron ore extracted in Fernsland.
D. luxury items manufactured in United Nerumbia.

Between the two countries, trade of luxury items manufactured in United Nerumbia will be
most affected. Economic distance most affects industries or products for which demand varies
by income (cars).

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

24. When two neighboring, democratic countries that are part of a trading bloc follow different
religions and social norms, they most likely have high _____.

A. political distance
B. geographic distance
C. administrative distance
D. cultural distance

When two neighboring, democratic countries that are part of a trading bloc follow different
religions and social norms, they most likely have high cultural distance. Cultural differences
find their expression in language, ethnicity, religion, and social norms.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

25. Welcome Inc. is a global Internet company that offers country-specific variations of its sites,
keeping in mind the linguistic and religious differences between the countries. Welcome Inc. is
most likely doing this to:

A. reduce its geographical distance from the other countries.


B. increase its administrative distance from the other countries.
C. increase its economic distance from the other countries.
D. reduce its cultural distance from the other countries.

Welcome Inc. is most likely doing this to reduce its cultural distance from the other countries.
Cultural differences find their expression in language, ethnicity, religion, and social norms.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

26. A greater cultural distance between two trading countries:

A. increases linguistic similarities between the two countries.


B. increases the liability of foreignness.
C. reduces the uncertainty of doing business.
D. reduces the transaction costs associated with business.

A greater cultural distance can increase the cost and uncertainty of conducting business
abroad. In short, greater cultural distance increases the liability of foreignness.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

27. Zeda is a country of English-speaking people and has a very profitable economy. Which of the
following countries is most likely to be the closest to Zeda in terms of cultural distance?

A. Olax, which has the same wealth and per capita income as Zeda
B. Jordax, which has a very profitable economy and where people speak Jordaxian
C. Segar, where people speak English and have a low standard of living
D. Terra, which is located close to Zeda and is easily accessible by road

The country that is most likely to be the closest to Zeda in terms of cultural distance is Segar,
where people speak English and have a low standard of living. Cultural differences find their
expression in language, ethnicity, religion, and social norms.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

28. How has the administrative and political distance between Canada, Mexico, and the United
States been reduced?

A. By adopting similar national cultures


B. By lowering the disparities between their per capita incomes
C. By establishing the North American Free Trade Agreement (NAFTA)
D. By reducing their linguistic differences

Canada and Mexico partner with the United States in the NAFTA, increasing trade in goods
and services between the three countries. An administrative and political distance factor that is
significant in predicting the amount of trade between two countries include whether they
belong to the same regional trading bloc.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

29. The administrative and political distance between two trading countries reduces when:

A. there are FDI restrictions in the host country.


B. there is no independent central bank in the host country.
C. there are tariffs and trade quotas in the host country.
D. there is a well-functioning capital market in the host country.

Strong legal and ethical pillars as well as well-functioning economic institutions like capital
markets and an independent central bank reduce administrative and political distance. Strong
institutions, both formal and informal, reduce uncertainty, and thus reduce transaction costs.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

30. For which of the following companies will geographic distance be the most relevant factor in
deciding whether or not to trade with a target country?

A. A firm that manufactures cell phone batteries


B. A firm that extracts and exports iron ore
C. A firm that produces movies
D. A firm that sells wrist watches

Geographic distance is particularly relevant when trading products with low value-to-weight
ratios such as steel, cement, or other bulk products and fragile and perishable products such
as glass or fresh meats and fruits.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

31. Which of the following factors is the most important determinant of economic distance?

A. The wealth and per capita income of consumers


B. The ethnicity and religion of consumers
C. The presence of legal institutions in a country
D. The topography of a country

The wealth and per capita income of consumers is the most important determinant of
economic distance.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

32. Which of the following statements is true with regard to international trade between countries?

A. Greater cultural distance between the home and host countries decreases the liability of
foreignness to multinational companies.
B. Colony-colonizer relationships have a strong negative effect on bilateral trade between
countries.
C. Wealthy countries engage in relatively more cross-border trade than poorer ones.
D. Political integrations decrease the expected trade intensity between two countries.

Wealthy countries engage in relatively more cross-border trade than poorer ones. Rich
countries tend to trade with other rich countries; in addition, poor countries also trade more
frequently with rich countries than with other poor countries.

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Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

33. Which of the following statements best explains why Walmart is finding it difficult to replicate
its existing business model in India?

A. Because of the political differences between India and U.S.


B. Because NAFTA prohibits Walmart from investing in countries outside North America
C. Because of the large economic distance between U.S. and India
D. Because Walmart's low-cost strategy has not been accepted by Indian consumers

Although Walmart in Canada is a virtual carbon copy of the Walmart in the United States,
Walmart in India is very different. This is because replication of an existing business model is
much easier in a country where the incomes are relatively similar and resources,
complements, and infrastructure are of roughly equal quality.

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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

10-61
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McGraw-Hill Education.
34. Zenovia Inc., a well-established and reputed multinational enterprise (MNE), is headquartered
in a highly developed economy. It wants to start its operations in United Marva, which has
been recognized as one of the less-developed nations in the world. How will this strategic
move most likely affect Zenovia Inc.?

A. It will be able to benefit from economic arbitrage.


B. It will be able to successfully leverage its competitive advantage from economies of
standardization.
C. It will be able to replicate its existing business model easily.
D. It will be able to easily sell products for which demand varies by income.

Zenova Inc. will most likely be able to benefit from economic arbitrage. Companies from
wealthy countries also trade with companies from poor countries to benefit from economic
arbitrage.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

35. Which of the following modes of entering a foreign market allows for the lowest level of
control?

A. Greenfield ventures
B. Exporting
C. Joint ventures
D. Acquisitions

Exporting, licensing, and franchising are vehicles of foreign expansion that require low
investments but also allow for a low level of control.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember

10-62
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 1 Easy
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

36. Which of the following is the most likely advantage of using foreign acquisitions or greenfield
plants as a foreign entry mode?

A. They are easy to initiate and terminate.


B. They require low amounts of investments in terms of capital.
C. They reduce a firm's exposure to loss of reputation.
D. They are based on contracts rather than ownership.

Foreign entry modes with a high level of control such as foreign acquisitions or greenfield
plants reduce the firm's exposure to two particular downsides of global business: loss of
reputation and loss of intellectual property.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

10-63
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McGraw-Hill Education.
37. Octa Autos Inc. wants to globally expand its market. It intends to ensure that its mode of
foreign entry allows it to have strong control over its operations and protect its intellectual
property, though it may mean investing a significant amount of capital and other resources. In
this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.?

A. Exporting
B. Franchise agreement
C. Acquisition
D. Licensing

Acquisition is the foreign entry mode that would best suit Octa Autos Inc. Greenfield
operations and acquisitions are foreign entry modes that require a high level of investment in
terms of capital and other resources, but also allow for a high level of control.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

38. Which of the following foreign entry modes primarily involves producing goods in one country
to sell in another?

A. Greenfield operations
B. Brownfield operations
C. Exporting
D. Crowdsourcing

Exporting involves producing goods in one country to sell in another. It is one of the oldest
forms of internationalization. It is often used to test whether a foreign market is ready for a
firm's products.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember

10-64
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 1 Easy
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

39. Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production
facilities and distribution channels from scratch. This will allow it to have strong control over all
of its business activities. What is the foreign entry mode most likely opted by Lucar Steels
Inc.?

A. Greenfield operation
B. Export
C. Joint venture
D. Acquisition

The foreign entry mode opted by Lucar Steels Inc. is greenfield operation. Greenfield
operations involve building new plants and facilities from scratch.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

40. Which of the following types of organizations comparatively requires the lowest levels of
investment and control?

A. Joint ventures
B. Franchising
C. Acquisition
D. Greenfield operations

The type of organization that comparatively requires the lowest levels of investment and
control is franchising.

AACSB: Analytic

10-65
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

41. Which of the following is not included within the types of strategic alliances?

A. Joint ventures
B. Franchising
C. Acquisitions
D. Licensing

Acquisitions and strategic alliances (including licensing, franchising, and joint ventures) are
popular vehicles for entry into foreign markets.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

42. Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries.
This information best supports the assumptions made under the:

A. globalization hypothesis.
B. upper echelons theory.
C. real options perspective.
D. global scaling theory.

In support of the globalization hypothesis, Toyota is selling its hybrid Prius vehicle successfully
in 80 countries. Most vehicles today are built on global platforms and modified (sometimes
only cosmetically) to meet local tastes and standards.

AACSB: Analytic
Accessibility: Keyboard Navigation

10-66
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

43. For a multinational enterprise (MNE), applying the globalization hypothesis would mean:

A. being highly responsive to the heterogeneous needs and preferences of consumers


globally, without focusing on cost reduction.
B. customizing each product sold by an enterprise to differentiate it from its competitors.
C. manufacturing products on international platforms and slightly modifying them to meet local
tastes and standards.
D. pursuing a focused differentiation strategy instead of a cost-leadership strategy to gain a
competitive advantage.

The globalization hypothesis states that consumer needs and preferences throughout the
world are converging and thus becoming increasingly homogenous. For a multinational
enterprise (MNE), applying the globalization hypothesis would mean manufacturing products
on international platforms and slightly modifying them to meet local tastes and standards. The
strategic foundations of the globalization hypothesis are based primarily on cost reduction.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-67
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
44. Which of the following statements best describes local responsiveness?

A. The process of producing goods in one country and selling them in another
B. The need to tailor product and service offerings to fit native consumer preferences and
host-country requirements
C. The belief that consumer needs and preferences throughout the world are converging and
thus becoming increasingly homogenous
D. The additional costs of doing business in an unfamiliar culture and economic environment,
and of coordinating across geographic distances

In some instances, firms experience pressure for local responsiveness—the need to tailor
product and service offerings to fit local consumer preferences and host country requirements.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

45. When a firm pursues a(n) _____, it sells the same products or services in both domestic and
foreign markets.

A. domestic strategy
B. international strategy
C. differentiation strategy
D. localization strategy

An international strategy is essentially a strategy in which a firm sells the same products or
services in both domestic and foreign markets. It enables firms to leverage their home-based
core competencies in foreign markets.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember

10-68
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

46. Which of the following is one of the features of an international strategy?

A. It is characterized by limited local responsiveness.


B. It is one of the newest types of global strategies.
C. It is characterized by cost-leadership as a preferred business strategy.
D. It is often used successfully by firms with relatively small domestic markets.

An international strategy is essentially a strategy in which a firm sells the same products or
services in both domestic and foreign markets. A strength of the international strategy—its
limited local responsiveness—is also a weakness in many industries.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-69
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
47. Onico Inc., a luxury car company, sells the same cars and offers the same superior services in
both its home country and foreign markets. The market it operates in faces low pressures for
both local responsiveness and cost reductions. Which of the following strategies within the
integration-responsiveness framework does Onico Inc. most likely pursue?

A. A multidomestic strategy
B. A transnational strategy
C. A global-standardization strategy
D. An international strategy

Onico Autos Inc. pursues an international strategy. An international strategy is essentially a


strategy in which a firm sells the same products or services in both domestic and foreign
markets. This strategy is advantageous when the MNE faces low pressures for both local
responsiveness and cost reductions.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

48. Which of the following statements is true of an international strategy?

A. It enables firms to leverage their home-based core competencies in foreign markets.


B. It is advantageous when firms face high pressures for both local responsiveness and cost
reductions.
C. It relies on joint ventures to reap economies of scale by accessing a larger market.
D. It effectively protects a firm from exchange rate fluctuations.

An international strategy is essentially a strategy in which a firm sells the same products or
services in both domestic and foreign markets. It enables firms to leverage their home-based
core competencies in foreign markets.

AACSB: Analytic

10-70
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

49. Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an
international strategy?

A. They cannot leverage their home-based core competencies in foreign markets.


B. They are highly affected by exchange rate fluctuations.
C. They have to be highly responsive to local needs and preferences.
D. They cannot reap the benefits of economies of scale due to their highly customized
products.

MNEs following an international strategy are highly affected by exchange rate fluctuations. An
international strategy is essentially a strategy in which a firm sells the same products or
services in both domestic and foreign markets.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-71
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
50. Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be
following an international strategy because:

A. they pursue a cost-leadership strategy in their respective industries.


B. they are highly responsive to the local needs and preferences of customers in the host
countries.
C. they offer the same products or services in all their stores throughout the world.
D. they attempt to combine benefits of localization and standardization strategies
simultaneously.

Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy


because they offer the same products or services in all their stores throughout the world. An
international strategy is essentially a strategy in which a company sells the same products or
services in both domestic and foreign markets. It enables MNEs to leverage their home-based
core competencies in foreign markets.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-72
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McGraw-Hill Education.
51. In which of the following situations is pursuing an international strategy advisable?

A. When a firm manufactures products related to national and religious identity


B. When a firm operates in an industry where the pressure to keep the costs low is extremely
high
C. When a firm wants to be perceived as a domestic company by the host country consumers
D. When a firm enjoys a large domestic market, strong reputation, and brand name

An international strategy is often used successfully by firms with relatively large domestic
markets, and strong reputations and brand names. These firms, capitalizing on the fact that
foreign customers want to buy the original product, tend to use differentiation as their preferred
business strategy.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

52. A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it:

A. is pursued in response to low pressure for local responsiveness and low pressure for cost
reduction.
B. attempts to reap significant economies of scale by pursuing a global division of labor based
on wherever best-of-class capabilities reside at the lowest cost.
C. attempts to maximize local responsiveness, hoping that the host country consumers will
perceive it to be a local company.
D. operates on the assumptions made in the globalization hypothesis in order to lower costs.

MNEs pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping


that local consumers will perceive them to be domestic companies.

AACSB: Analytic
Accessibility: Keyboard Navigation

10-73
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

53. A(n) _____ arises out of the combination of high pressure for local responsiveness and low
pressure for cost reductions.

A. international strategy
B. transnational strategy
C. global standardization strategy
D. multidomestic strategy

Multidomestic strategy arises out of the combination of high pressure for local responsiveness
and low pressure for cost reductions.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-74
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McGraw-Hill Education.
54. Which of the following statements is true of a multidomestic strategy?

A. Firms frequently use a multidomestic strategy when entering host countries with large
and/or idiosyncratic local markets.
B. The multidomestic strategy is one of the main strategies companies pursued in the
Globalization 1.0 stage.
C. Companies pursuing a multidomestic strategy generally follow a cost-leadership strategy at
the business level.
D. The multidomestic strategy effectively protects firms from the risk of intellectual property
appropriation.

Multinational companies frequently use a multidomestic strategy when entering host countries
with large and/or idiosyncratic domestic markets, such as Japan or Saudi Arabia.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-75
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
55. Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The
company clearly understands that the skin and hair type of customers varies from one country
to another. Consequently, its products are customized to suit local needs and preferences of
customers, even though the costs incurred while producing these products are exceptionally
high. This strategy helps the company behave as a local firm in a foreign market. In this
scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement?

A. A multidomestic strategy
B. An international strategy
C. A global-standardization strategy
D. A one-product strategy

In this scenario, Evara Cosmetics Inc. most likely implements a multidomestic strategy. Firms
pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local
consumers will perceive them to be domestic companies.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

56. For which of the following types of industries is a multidomestic strategy most common?

A. Machine-tool industries
B. Genetic industries
C. Food industries
D. Capital goods industries

A multidomestic strategy is common in the consumer products and food industries. This
strategy arises out of the combination of high pressure for local responsiveness and low
pressure for cost reductions.

AACSB: Analytic

10-76
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

57. Glova Inc., a company that manufactures and sells premium perfumes, is pursuing an
international strategy. RightMart Inc., a supermarket chain, follows a multidomestic strategy.
Which of the following statements is most likely true of this scenario?

A. Glova Inc. will sell the same products and services in both domestic and foreign markets,
whereas RightMart Inc. will customize its product offerings to suit local requirements.
B. Glova Inc. will pursue a differentiation strategy at the business level, whereas RightMart
Inc. will pursue a cost-leadership strategy at the business level.
C. Glova Inc. will be better protected from exchange rate fluctuations when compared to
RightMart Inc.
D. Glova Inc. will not be able to leverage its home-based core competencies in foreign
markets as much as RightMart Inc.

Glova Inc. will sell the same products and services in both domestic and foreign markets,
whereas RightMart Inc. will customize its product offerings to suit local requirements. An
international strategy is essentially a strategy in which a company sells the same products or
services in both domestic and foreign markets. Firms pursuing a multidomestic strategy
attempt to maximize local responsiveness, hoping that local consumers will perceive them to
be domestic companies.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-77
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
58. A firm following a multidomestic strategy:

A. is highly efficient.
B. lacks local responsiveness.
C. faces a greater risk of intellectual property (IP) appropriation.
D. requires exposing explicit knowledge because products are manufactured locally.

The risk of IP appropriation increases when companies follow a multidomestic strategy.


Besides exposing codified knowledge embedded in products, as is the case with an
international strategy, a multidomestic strategy also requires exposing tacit knowledge
because products are manufactured locally.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

59. Which of the following is a drawback of pursuing a multidomestic strategy?

A. The strategy allows for the lowest possible local responsiveness.


B. The strategy lowers the differentiation of a firm's product and service offerings.
C. The strategy exposes a firm to greater exchange rate fluctuation when compared to an
international strategy.
D. The strategy is costly and inefficient because it requires the duplication of key business
functions across several countries.

A multidomestic strategy is costly and inefficient because it requires the duplication of key
business functions across multiple countries. Each country unit tends to be highly
autonomous, and the MNE is unable to reap economies of scale or learning across regions.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand

10-78
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

60. After testing its products in foreign markets by pursuing an international strategy, GR Foods
Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the
company?

A. The company's operations will become more cost efficient.


B. The company's exposure to exchange rate fluctuations will reduce.
C. The company will be able to reap greater benefits from economies of scale.
D. The company will be exposed to a lower risk of intellectual property appropriation.

The company's exposure to exchange rate fluctuations will reduce. Multinational enterprises
(MNEs) following a multidomestic strategy, in contrast with an international strategy, face
reduced exchange-rate exposure because the majority of the value creation takes place in the
host country business units, which tend to span all functions.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-79
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McGraw-Hill Education.
61. McDonald's uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of
the following strategies is the fast food chain pursuing?

A. Multidomestic strategy
B. Focused differentiation strategy
C. Global-standardization strategy
D. International strategy

McDonald's is pursuing a multidomestic strategy. Multinational companies pursuing a


multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers
will perceive them to be domestic companies. This strategy arises out of the combination of
high pressure for local responsiveness and low pressure for cost reductions.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-80
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
62. Food Works Inc. is a multinational fast food chain that follows a multidomestic strategy. Which
of the following statements most likely holds true for the company?

A. The company's competitive advantage lies in leveraging its home-based core


competencies in foreign markets.
B. Each country unit owned by the company will tend to be highly autonomous.
C. Majority of the value creation for the company will take place in its home country.
D. The company will not face any operational inefficiency as the key business functions do not
have to be duplicated.

The statement that most likely holds true for Food Works Inc. is that each country unit owned
by the company will tend to be highly autonomous. For firms following a multidomestic
strategy, each country unit will tend to be highly autonomous, and the MNE will be unable to
reap economies of scale or learning across regions.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-81
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McGraw-Hill Education.
63. Some multinational enterprises (MNEs) attempt to reap significant economies of scale and
location economies by pursuing an international division of labor based on wherever best-of-
class capabilities reside at the lowest cost. This is known as a(n) _____.

A. international strategy
B. multidomestic strategy
C. global-standardization strategy
D. localization strategy

MNEs following a global-standardization strategy attempt to reap significant economies of


scale and location economies by pursuing a global division of labor based on wherever best-
of-class capabilities reside at the lowest cost.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-82
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McGraw-Hill Education.
64. Garnet Mobiles Inc., a cell phone manufacturing company, has its product development
centers located in the U.S. and South Korea. The manufacturing units are located in China
and Philippines to benefit from low-labor costs and access to original equipment
manufacturers. This allows the company to competitively price its cell phones. Also, the
various phone models sold by the company are uniform in all the foreign markets it operates
in. In this scenario, which of the following strategies does Garnet Mobiles Inc. most likely
pursue?

A. International strategy
B. Multidomestic strategy
C. Global-standardization strategy
D. Localization strategy

In this scenario, Garnet Mobiles Inc. most likely pursues a global-standardization strategy.
Multinational companies following a global-standardization strategy attempt to reap significant
economies of scale and location economies by pursuing a global division of labor based on
wherever best-of-class capabilities reside at the lowest cost.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-83
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McGraw-Hill Education.
65. The global-standardization strategy arises out of the combination of:

A. high pressure for cost reductions and low pressure for local responsiveness.
B. high pressure for local responsiveness and low pressure for cost reductions.
C. low pressure for both local responsiveness and cost reductions.
D. high pressure for both local responsiveness and cost reductions.

The global-standardization strategy arises out of the combination of high pressure for cost
reductions and low pressure for local responsiveness.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

66. For a firm pursuing a global-standardization strategy, which of the following bases of
competition becomes its primary weapon?

A. Product differentiation
B. Superior customer service
C. Local responsiveness
D. Price

Because there is little or no differentiation or local responsiveness (because products are


standardized), price becomes the main competitive weapon for a firm pursuing the global-
standardization strategy.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-84
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McGraw-Hill Education.
67. To keep track of the latest developments in computing, Lenovo's research centers are located
in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs,
the company's manufacturing facilities are in Mexico, India, and China. Which of the following
strategies would require Lenovo to organize its operations worldwide in order to develop
uniform products for its domestic and foreign markets?

A. A transnational strategy
B. A multidomestic strategy
C. A localization strategy
D. A global-standardization strategy

The global-standardization strategy would require Lenovo to organize its operations worldwide
to develop uniform products for its domestic and foreign markets. Firms following a global-
standardization strategy attempt to reap significant economies of scale and location
economies by pursuing a global division of labor based on wherever best-of-class capabilities
reside at the lowest cost.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-85
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McGraw-Hill Education.
68. Which of the following products are generally manufactured by multinational enterprises
(MNEs) pursuing a global-standardization strategy?

A. Products with a high value-to-weight ratios like luxury goods


B. Commodity products like computer hardware
C. Consumer products related to national and/or religious identity like food
D. Products that carry country-specific quality associations like wine

MNEs that manufacture commodity products (such as computer hardware) or offer services
(such as business process outsourcing) generally pursue a global-standardization strategy.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

69. Which of the following is a feature of a multinational company pursuing a global-


standardization strategy?

A. Its key business functions are located at the home country headquarters.
B. Its business-level strategy tends to be cost leadership.
C. Its competitive advantage lies in its high local responsiveness.
D. Its core competency lies in its strong product differentiation.

The global-standardization strategy arises out of the combination of high pressure for cost
reductions and low pressure for local responsiveness. Multinational companies who use this
strategy are often organized as networks. This lets them strive for the lowest cost position
possible.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium

10-86
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McGraw-Hill Education.
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

70. Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-
standardization strategy?

A. The firm customizes products and services to better suit local requirements.
B. The firm reaps significant economies of scale and location economies.
C. The firm follows a differentiation strategy at the business level.
D. The firm has all its key business functions located in the home country.

MNEs following a global-standardization strategy attempt to reap significant economies of


scale and location economies by pursuing a global division of labor based on wherever best-
of-class capabilities reside at the lowest cost.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-87
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McGraw-Hill Education.
71. One Stop Inc., a supermarket chain, is implementing a multidomestic strategy. Solar Com Inc.,
a company that manufactures solar panels for commercial and domestic purposes, is pursuing
a global-standardization strategy. How will the two companies most likely differ from each
other?

A. One Stop Inc. will focus more on cost-reduction than Solar Com Inc.
B. One Stop Inc. will have its business functions spread across the world; Solar Com Inc.'s
business functions will be highly centralized.
C. Unlike Solar Com Inc., One Stop Inc. will be able to pursue a differentiation strategy at the
business level.
D. Unlike Solar Com Inc., One Stop Inc. will be able to reap significant economies of scale
and location economies.

Unlike Solar Com Inc., One Stop Inc. will be able to pursue a differentiation strategy at the
business level. For firms following a global-standardization strategy, their business-level
strategy tends to be cost leadership. Firms following a multidomestic strategy generally pursue
a differentiation strategy at the business level.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-88
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McGraw-Hill Education.
72. Marc Works Inc., a reputed brand for fine writing instruments, is implementing an international
strategy in its firms. Torque Inc., a laptop brand, is pursuing a global-standardization strategy
in its firms. Which of the following statements most likely holds true in this scenario?

A. While Marc Works Inc.'s competitive advantage lies in its high local responsiveness,
Torque Inc. will lack such capabilities.
B. Torque Inc. focuses more on cost reductions when compared to Marc Works Inc.
C. Torque Inc.'s business functions are highly centralized, whereas Marc Works Inc.
organizes its activities worldwide.
D. Torque Inc. is exposed to greater risks of exchange rate fluctuations.

Torque Inc. most likely focuses more on cost reductions when compared to Marc Works Inc.
The global-standardization strategy arises out of the combination of high pressure for cost
reductions and low pressure for local responsiveness. An international strategy is
advantageous when the multinational enterprise MNE faces low pressures for both local
responsiveness and cost reductions.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-89
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McGraw-Hill Education.
73. In which of the following stages of globalization did firms organize as networks to pursue a
global-standardization strategy?

A. Globalization 1.0
B. Globalization 2.0
C. Globalization 3.0
D. Globalization 4.0

Multinational enterprises (MNEs) who use a global-standardization strategy are often


organized as global-collaboration networks. In the Globalization 3.0 stage, the MNE's strategic
objective changes. The MNE reorganizes from a multinational company with self-contained
operations in a few selected countries to a more seamless global enterprise with centers of
expertise.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

74. Why did the American MTV network cable channel fail when pursuing a global-standardization
strategy?

A. Because MTV failed to understand that music videos were a commodity product
B. Because the globalization hypothesis holds true for the music industry
C. Because cultural distance most affects products with high linguistic content
D. Because an international strategy was more suitable for the music industry

MTV reasoned that music videos were a commodity product that would attract worldwide
audiences. However, cultural distance most affects products with high linguistic content such
as TV. Even in a music video channel, audiences have a distinct preference for at least some
local content.

AACSB: Analytic

10-90
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

75. A(n) _____ arises out of the combination of high pressure for local responsiveness and high
pressure for cost reductions.

A. transnational strategy
B. multidomestic strategy
C. international strategy
D. global-standardization strategy

Multinational companies pursuing a transnational strategy attempt to combine the benefits of a


localization strategy (high local-responsiveness) with those of a global-standardization
strategy (lowest cost position attainable). This strategy arises out of the combination of high
pressure for local responsiveness and high pressure for cost reductions.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-91
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McGraw-Hill Education.
76. Which of the following strategies must a multinational enterprise (MNE) use when it wants to
pursue an integration strategy at the business level by attempting to reconcile product and/or
service differentiations at low cost?

A. A multidomestic strategy
B. An international strategy
C. A global-standardization strategy
D. A transnational strategy

A transnational strategy is generally used by multinational companies that pursue an


integration strategy at the business level by attempting to reconcile product and/or service
differentiations at low cost.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

77. Which of the following globalization strategies requires managers working in multinational
enterprises (MNEs) to remember to think globally, but act locally?

A. International strategy
B. Global-standardization strategy
C. Transnational strategy
D. Focused-differentiation strategy

While implementing the transnational strategy, the idea is that best practices, ideas, and
innovations will be diffused throughout the world, regardless of their origination. The
managers' mantra is to think globally, but act locally.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember

10-92
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

78. Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50
countries and employs over 80,000 people across the world. It operates through multiple
regional product divisions, which tend to function as autonomous profit-and-loss centers. This
allows the company to reap significant economies of scale. Though each division acts as an
autonomous firm with its individual regional leaders, frequent sharing of knowledge between
the divisions allows for global learning. These factors help the company reconcile product and
service differentiations at low cost. Which of the following strategies does Shine Enterprises
Inc. most likely use?

A. An international strategy
B. A focused-differentiation strategy
C. A multidomestic strategy
D. A transnational strategy

Shine Enterprises Inc. most likely uses a transnational strategy. Multinational enterprises
(MNEs) pursuing a transnational strategy attempt to combine the benefits of a localization
strategy (high local-responsiveness) with those of a global-standardization strategy (lowest
cost position attainable).

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-93
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McGraw-Hill Education.
79. Which of the following is a benefit of the transnational strategy?

A. It facilitates global learning and harnesses economies of location.


B. It completely eliminates a firm's risk of intellectual property expropriation.
C. It helps to create a matrix global structure, which is cost effective and easy to implement.
D. It helps a firm pursue a cost-leadership strategy by minimizing the need for local
responsiveness.

Besides harnessing economies of scale and location, a transnational strategy also aims to
benefit from global learning. Firms typically implement a transnational strategy through a
global matrix structure. That structure combines economies of scale along specific product
divisions with economies of learning attainable in specific geographic regions.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

80. A firm pursuing a transnational strategy would believe that:

A. key business functions should be located in its home country headquarters.


B. local responsiveness is more important than cost reductions for competitive advantage.
C. best practices, ideas, and innovations should be diffused throughout the world.
D. the majority of the value creation should take place in the home country.

Multinational enterprises typically implement a transnational strategy through a global matrix


structure. That structure combines economies of scale along specific product divisions with
economies of learning attainable in specific geographic regions. The idea is that best
practices, ideas, and innovations will be diffused throughout the world, regardless of their
origination.

AACSB: Analytic
Accessibility: Keyboard Navigation

10-94
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

81. Which of the following is a drawback of pursuing a transnational strategy?

A. It creates bottlenecks for global learning.


B. It exposes a firm to diseconomies of scale and location.
C. It requires a global matrix structure, which is difficult to implement.
D. It involves locating all key business activities in the home country headquarters.

Although a transnational strategy is quite appealing, the required matrix structure is rather
difficult to implement because of the organizational complexities involved. High local-
responsiveness typically requires that key business functions are frequently duplicated in each
host country, leading to higher costs.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-95
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McGraw-Hill Education.
82. Gamma Foods Inc., a company popular for its dairy products, successfully follows a
multidomestic strategy. RiverGem Inc., a large conglomerate, pursues a transnational
strategy. Which of the following statements is most likely true of this scenario?

A. While RiverGem Inc.'s competitive advantage will lie in its high local responsiveness,
Gamma Foods Inc. will lack such competencies.
B. Gamma Foods Inc. will face greater pressure for cost reductions than RiverGem Inc. due
to its strategy choice.
C. Both Gamma Foods Inc. and RiverGem Inc. will have to duplicate key business functions
in multiple host countries.
D. While Gamma Foods Inc. will require a global matrix structure, RiverGem Inc. will require a
traditional headquarters model.

A multidomestic strategy is costly and inefficient because it requires the duplication of key
business functions across multiple countries. Each country unit tends to be highly
autonomous. Similarly for a transnational strategy, high local-responsiveness typically requires
that key business functions are frequently duplicated in each host country.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-96
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McGraw-Hill Education.
83. For which of the following products is an international strategy most suitable?

A. For luxury goods that can be shipped across the globe


B. For products with low value-to-weight ratios such as steel
C. For food products that are specific to certain cultures
D. For products with high linguistic content

An international strategy is well-suited for high-end products with high value-to-weight ratios
such as machine tools and luxury goods that can be shipped across the globe.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

84. The _____ states that geographic location alone should not lead to firm-level competitive
advantage because firms are now, more than ever, able to source inputs globally.

A. death-of-distance hypothesis
B. local responsiveness hypothesis
C. real option framework
D. dynamic capabilities framework

Because firms can now, more than ever, source inputs globally, many believe that location
must be diminishing in importance as an explanation of firm-level competitive advantage. This
idea is called the death-of-distance hypothesis.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: National Competitive Advantage: World Leadership in Specific Industries

10-97
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McGraw-Hill Education.
85. Some of the best engineering and car companies are in Germany. Thus, it can be concluded
that Germany has a _____ in the automobile industry.

A. capital gain
B. trade surplus
C. national competitive advantage
D. liability of foreignness

National competitive advantage refers to world leadership in specific industries. Companies


from home countries that are world leaders in specific industries tend to be the strongest
competitors globally.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: National Competitive Advantage: World Leadership in Specific Industries

86. United Borova Laboratories Inc. has a national competitive advantage in the pharmaceutical
industry. This means that the country:

A. is a world leader in the pharmaceutical industry.


B. has nationalized the pharmaceutical industry.
C. has low levels of competition, providing other multinational companies with an opportunity
to take over the pharmaceutical industry.
D. is a potential foreign market for multinational pharmaceutical companies to sell their
products.

National competitive advantage refers to world leadership in specific industries. Companies


from home countries that are world leaders in specific industries tend to be the strongest
competitors globally.

AACSB: Analytic

10-98
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: National Competitive Advantage: World Leadership in Specific Industries

87. Which of the following factors pertaining to national competitive advantage enabled Nokia, a
multinational company from Finland, to become an early leader in cell phones?

A. The competitive intensity in the cell phone industry of Finland


B. The huge demand for high-quality wireless services in Finland
C. The abundance of natural resources in Finland
D. The related and supporting industries present in Finland

A lack of land lines for telephone service has resulted in the Finnish demand for high-quality
wireless services, combined with reliable handsets and long battery life that can be operated
in remote areas with often hostile environments. Cell phones have long been a necessity for
survival in rural areas of Finland. This situation enabled Nokia to become an early leader in
cell phones.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: National Competitive Advantage: World Leadership in Specific Industries

10-99
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McGraw-Hill Education.
88. Due to dense urban living conditions, hot and humid summers, and high energy costs, it is not
surprising that Japanese customers want small, quiet, and energy-efficient air conditioners.
Which feature of Porter's diamond framework does this scenario best exemplify?

A. Factor conditions
B. Complementor availability
C. Competitive intensity
D. Demand conditions

This scenario best exemplifies the demand conditions feature of Porter's diamond framework.
Demand conditions are the specific characteristics of demand in a firm's domestic market.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: National Competitive Advantage: World Leadership in Specific Industries

89. Which of the following statements best explains how the presence of top-notch
complementors within a firm's industry affects the focal firm's business?

A. It weakens the national competitive advantage enjoyed by the focal firm.


B. It improves the factor conditions in the focal firm's domestic market.
C. It increases the value of the focal firm's offering from a customer's perspective.
D. It reduces the economic contribution created by the focal firm.

The availability of top-notch complementors—firms that provide a good or service that leads
customers to value the focal firm's offering more when the two are combined—further
strengthens national competitive advantage.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium

10-100
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: National Competitive Advantage: World Leadership in Specific Industries

90. Charlie is a strategist who wants to decide on the appropriate strategy to help his firm "go
global." Which of the following should Charlie consider while choosing his strategy?

A. He must be aware of the fact that despite globalization and the emergence of the Internet,
firm geographic location has actually maintained its importance.
B. He should rely on his firm's business-level strategy as a clue to possible strategies pursued
globally.
C. He should remember that he has only one framework at his disposal to make global
strategy decisions.
D. He must remember that higher levels of control and a lower likelihood of any loss in
reputation go along with less investment-intensive foreign entry modes.

The strategist must be aware of the fact that despite globalization and the emergence of the
Internet, firm geographic location has actually maintained its importance.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: Implications for the Strategist

Short Answer Questions

10-101
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McGraw-Hill Education.
91. What is meant by globalization? How has it affected the economies around the world?

Globalization is a process of closer integration and exchange between different countries and
peoples worldwide, made possible by falling trade and investment barriers, advances in
telecommunications, and reductions in transportation costs. Combined, these factors reduce
the costs of doing business around the world, opening the doors to a much larger market than
any one home country. Globalization also allows companies to source supplies at lower costs
and to further differentiate products. Consequently, the world's market economies are
becoming more integrated and interdependent. Globalization has led to significant increases in
living standards in many economies around the world.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

92. What is the engine behind globalization? Provide a real-world example.

Student answers will vary. The engine behind globalization is the multinational enterprise
(MNE)—a company that deploys resources and capabilities in the procurement, production,
and distribution of goods and services in at least two countries. By making investments in
value chain activities abroad, MNEs engage in foreign direct investment (FDI). For example,
the European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build
jetliners.
MNEs need an effective global strategy that enables them to gain and sustain a competitive
advantage when competing against other foreign and domestic companies around the world.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

10-102
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McGraw-Hill Education.
93. What is a global strategy?

A global strategy is part of a multinational company's corporate strategy to gain and sustain a
competitive advantage when competing against other foreign and domestic companies around
the world.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

94. Briefly explain the stages of globalization.

There are three stages of globalization, dated from 1900 to the early 21st century. During
Globalization 1.0, all important business functions were located in the home country, and only
sales and distribution operations took place overseas.
In the Globalization 2.0 stage, multinational enterprises began to create smaller, self-
contained copies of themselves, with all business functions intact, in a few key countries.
MNEs during Globalization 3.0 have become global-collaboration networks by freely locating
business functions in the world based on the optimal mix of costs, capabilities, and PESTEL
factors.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

10-103
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McGraw-Hill Education.
95. What are the implications of continued economic development across the globe for
multinational enterprises (MNEs)? Explain using China as an example.

Continued economic development across the globe has two consequences for MNEs. First,
rising wages and other costs are likely to negate any benefits of access to low-cost input
factors. Second, as the standard of living rises in emerging economies, MNEs are hoping that
increased purchasing power will enable workers to purchase the products they used to make
for export only.
China's labor costs, for example, are steadily rising in tandem with an improved standard of
living, especially in the coastal regions. Rising wages, fewer workers due to the effects of
China's one-child-per-family policy, and appreciation of the Chinese currency now combine to
lessen the country's advantage in low-cost manufacturing. This shift is in alignment with the
Chinese government's economic policy, which wants to see a move from "Made in China" to
"Designed in China," to capture more of the value added.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Define globalization; multinational enterprise (MNE); foreign direct investment (FDI); and global
strategy.
Topic: What is Globalization?

96. How do firms make decisions to pursue a global strategy?

The decision to pursue a global strategy clearly comes from the firm's assessment that doing
so will enhance its competitive advantage and that the benefits of globalization will exceed the
costs. Simply put, firms expand beyond their domestic borders if they can increase their
economic value creation (V - C) and enhance competitive advantage. Firms enlarge their
competitive advantage by increasing a consumer's willingness to pay through higher perceived
value based on differentiation and/or lower production and service delivery costs.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium

10-104
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
global strategy.
Topic: Going Global: Why?

97. How can expanding globally become a threat to a multinational enterprises (MNEs)
reputation? Explain with the help of a real-world example.

Student answers will vary. One of the most valuable resources that a firm may possess is its
reputation. A firm's reputation can have several dimensions, including a reputation for
innovation, customer service, or brand reputation.
Globalizing a supply chain can have unintended side effects. These in turn can lead to a loss
of reputation and diminish the MNE's competitiveness. A possible loss in reputation can be a
considerable risk and cost for doing business abroad.
The textile industry is notorious for sweat-shop conditions, and many Western companies
such as the Gap (U.S.), H&M (UK), and Carrefour (France) have taken a big hit to their
reputation in recent factory accidents in Bangladesh and elsewhere in Southeast Asia.
Hundreds of factory workers were killed when a textile factory collapsed on the outskirts of
Dhaka, Bangladesh. Although much of the blame lies with the often corrupt host governments
not enforcing laws, regulations, and building codes, the MNEs that source their textiles in
these factories also receive much of the blame with negative consequences for their
reputation. The MNEs are accused of exploiting workers and being indifferent to their working
conditions and safety, all in an unending quest to drive down costs.

AACSB: Reflective Thinking


Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-02 Explain why companies compete abroad; and evaluate the advantages and disadvantages of a
global strategy.
Topic: Going Global: Why?

10-105
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McGraw-Hill Education.
98. Briefly discuss the application of the CAGE distance framework.

To aid multinational companies in deciding where in the world to compete, Pankaj Ghemawat
introduced the CAGE distance framework. CAGE is an acronym for Cultural, Administrative
and political, Geographic, and Economic distance. Most of the costs and risks involved in
expanding beyond the domestic market are created by distance. Distance not only denotes
geographic distance (in miles or kilometers), but also includes, as the CAGE acronym points
out, cultural distance, administrative and political distance, and economic distance. The CAGE
distance framework breaks distance into different relative components between any two
country pairs that affect the success of foreign direct investment.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

99. Explain how the distance between two countries increases with geographic distance and
economic distance.

Geographic distance between two countries increases with lack of common border, waterway
access, adequate transportation, or communication links. It also increases with physical
remoteness and different climates and time zones.
Economic distance between two countries increases with different consumer incomes,
different costs and quality of natural, financial, and human resources, and different information
or knowledge.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

10-106
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McGraw-Hill Education.
100. What is meant by cultural distance? How does it affect a firm?

Cultural distance is the cultural disparity between the internationally expanding firm's home
country and its targeted host country. A firm's decision to enter certain international markets is
influenced by cultural differences. A greater cultural distance can increase the cost and
uncertainty of conducting business abroad. In short, greater cultural distance increases the
liability of foreignness.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

101. What are the factors that capture administrative and political distance in the CAGE
framework?

Administrative and political distances are captured in factors such as the absence or presence
of shared monetary or political associations, political hostilities, and weak legal and financial
institutions.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

10-107
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McGraw-Hill Education.
102. Within the CAGE distance framework, what does geographic distance imply?

Geographic distance does not simply capture how far two countries are from each other but
also includes additional attributes such as the country's physical size (Canada versus
Singapore), whether the countries are contiguous to one another, have access to waterways
to the ocean, the within-country distances to its borders, the country's topography, and its time
zones. The country's infrastructure such as road, power, and telecommunications networks
also plays a role in determining geographic distance.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

103. What products and industries does geographic distance affect the most?

Geographic distance most affects industries or products:

• With low value-to-weight ratio (cement)


• That are fragile or perishable (glass, meats)
• In which communications are vital (financial services)

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

10-108
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McGraw-Hill Education.
104. When do companies from wealthy countries benefit from trade with other wealthy countries?

Companies from wealthy countries benefit in cross-border trade with other wealthy countries
when their competitive advantage is based on economies of experience, scale, scope, and
standardization. This is because replication of an existing business model is much easier in a
country where the incomes are relatively similar and resources, complements, and
infrastructure are of roughly equal quality.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Apply the CAGE distance framework to explain which countries MNEs enter.
Topic: Going Global: Where and How?

105. When should a firm choose exporting as a foreign entry mode?

Exporting as a foreign entry mode requires low investments but also allow for a low level of
control. Exporting involves producing goods in one country to sell in another. It is one of the
oldest forms of internationalization (part of Globalization 1.0). It is often used to test whether a
foreign market is ready for a firm's products.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

10-109
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McGraw-Hill Education.
106. When should a firm choose acquisition or greenfield operation as a foreign entry mode?

Acquisitions and greenfield operations are foreign entry modes that require a high level of
investments in terms of capital and other resources, but also allow for a high level of control. In
some instances, companies are required by the host country to form joint ventures in order to
conduct business there, while some firms prefer greenfield operations (building new plants
and facilities from scratch).

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Compare and contrast the different options MNEs have to enter foreign markets.
Topic: Going Global: Where and How?

107. What is the integration-responsiveness framework?

The integration-responsiveness framework is a strategy framework that juxtaposes the


pressures a multinational company faces for cost reductions and local responsiveness to
derive four different strategies to gain and sustain competitive advantage when competing
globally. The four strategies are international strategy, multidomestic strategy, global-
standardization strategy, and transnational strategy.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-110
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McGraw-Hill Education.
108. What are the two opposing forces that multinational companies have to face when competing
around the globe?

Multinational companies face two opposing forces when competing around the globe: cost
reductions versus local responsiveness.
One of the core drivers for globalization is to expand the total market of firms in order to
achieve economies of scale and drive down costs. Cost reductions achieved through a global-
standardization strategy often reinforce a cost-leadership strategy at the business level.
Similarly, local responsiveness increases the differentiation of products and services,
reinforcing a differentiation strategy at the business level. Although there seems to be some
convergence of consumer preferences across the globe, national differences remain, due to
distinct institutions and cultures.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

109. What is meant by local responsiveness?

Local responsiveness is the need to tailor product and service offerings to fit local consumer
preferences and host-country requirements. It generally entails higher cost, and sometimes
even outweighs cost advantages from economies of scale and lower-cost input factors.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-111
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McGraw-Hill Education.
110. When should a multinational company pursue an international strategy?

An international strategy is essentially a strategy in which a company sells the same products
or services in both domestic and foreign markets. It enables multinational enterprises (MNEs)
to leverage their home-based core competencies in foreign markets. An international strategy
is one of the oldest types of global strategies (Globalization 1.0) and is frequently the first step
companies take when beginning to conduct business abroad. It is advantageous when the
MNEs face low pressures for both local responsiveness and cost reductions.
An international strategy is often used successfully by MNEs with relatively large domestic
markets, and strong reputations and brand names. These MNEs, capitalizing on the fact that
foreign customers want to buy the original product, tend to use differentiation as their preferred
business strategy.
Given increasing globalization, however, fewer and fewer markets correspond to this
situation—low pressures for local responsiveness and cost reductions—that gives rise to the
international strategy.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-112
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McGraw-Hill Education.
111. Discuss how the limited local responsiveness characteristic of an international strategy affects
a firm. Substantiate with an example.

Student answers will vary. A strength of the international strategy—its limited local
responsiveness—is also a weakness in many industries. For example, when a multinational
company sells its products in foreign markets with little or no change, it leaves itself open to
the expropriation of intellectual property (IP). Looking at the multinational company's products
and services, pirates can reverse-engineer the products to discover the intellectual property
embedded in them.
Besides the risk of exposing IP, multinational companies following an international strategy are
highly affected by exchange rate fluctuations.

AACSB: Reflective Thinking


Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

112. Provide an example of a company following a multidomestic strategy.

Student answers will vary. A multidomestic strategy is common in the consumer products and
food industries. For example, Swiss-based Nestlé, the largest food company in the world is
well known for customizing its product offerings to suit local preferences, tastes, and
requirements. Given the strong brand names and core competencies in R&D, and the quality
in their consumer products and food industries, it is not surprising that these multinational
companies generally pursue a differentiation strategy at the business level. Other companies
following a multidomestic strategy include Bridgestone and Philips.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-113
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McGraw-Hill Education.
113. The risk of intellectual property appropriation increases when companies follow a
multidomestic strategy. Elaborate on this statement.

The risk of intellectual property appropriation increases when companies follow a


multidomestic strategy. Besides exposing codified knowledge embedded in products, as is the
case with an international strategy, a multidomestic strategy also requires exposing tacit
knowledge because products are manufactured locally. Tacit knowledge that is at risk of
appropriation may include, for example, the process of how to create consumer products of
higher perceived quality.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

114. What does a multinational company strive for when pursuing a global-standardization
strategy?

The global-standardization strategy arises out of the combination of high pressure for cost
reductions and low pressure for local responsiveness. Multinational companies who use this
strategy are often organized as networks (Globalization 3.0). This lets them strive for the
lowest cost position possible. Their business-level strategy tends to be cost leadership.
Because there is little or no differentiation or local responsiveness (because products are
standardized), price becomes the main competitive weapon.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-114
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McGraw-Hill Education.
115. How does Lenovo pursue a global-standardization strategy? How has the company benefited
from it?

Lenovo, the Chinese computer manufacturer, is now the maker of the ThinkPad line of
laptops, which it acquired from IBM in 2005. To keep track of the latest developments in
computing, Lenovo's research centers are located in Beijing and Shanghai in China, in
Raleigh, North Carolina (in the Research Triangle Park), and in Japan. To benefit from low-
cost labor and to be close to its main markets in order to reduce shipping costs, Lenovo's
manufacturing facilities are in Mexico, India, and China.
The company organizes its worldwide operations with the view that a truly global company
must be able to quickly capitalize on new ideas and opportunities from anywhere. By forgoing
a traditional headquarters model and focusing on centers of excellence around the world,
Lenovo makes the maximum use of its resources to create the best products in the most
efficient and effective way possible.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

116. When should multinational enterprises (MNEs) use a transnational strategy?

The transnational strategy arises out of the combination of high pressure for local
responsiveness and high pressure for cost reductions. A transnational strategy is generally
used by MNEs that pursue an integration strategy at the business level by attempting to
reconcile product and/or service differentiations at low cost.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

10-115
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McGraw-Hill Education.
117. Define a transnational strategy using the German multimedia conglomerate Bertelsmann as
an example.

Multinational companies pursuing a transnational strategy attempt to combine the benefits of a


localization strategy (high local-responsiveness) with those of a global-standardization
strategy (lowest cost position attainable).
The German multimedia conglomerate Bertelsmann attempts to follow a transnational
strategy. Bertelsmann's employs over 100,000 people, with two-thirds of that work force
outside its home country. In particular, Bertelsmann operates in more than 60 countries
throughout the world, and owns many regional leaders in their specific product categories,
including Random House Publishing in the U.S. and RTL Group, Europe's second-largest TV,
radio, and production company (after the BBC). Bertelsmann operates its over 500 regional
media divisions as more or less autonomous profit-and-loss centers; global learning and
human resource strategies for executives are coordinated at the network level.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

118. Discuss the drawbacks associated with using a transnational strategy.

Although a transnational strategy is quite appealing, the required matrix structure is rather
difficult to implement because of the organizational complexities involved. High local-
responsiveness typically requires that key business functions are frequently duplicated in each
host country, leading to higher costs. Further compounding the organizational complexities is
the challenge of finding managers who can dexterously work across cultures in the ways
required by a transnational strategy.

AACSB: Analytic
Blooms: Understand

10-116
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McGraw-Hill Education.
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

119. Discuss national competitive advantage with the help of examples.

Student answers will vary. National competitive advantage can be gained when a country has
world leadership in specific industries. Companies from home countries that are world leaders
in specific industries tend to be the strongest competitors globally.
High-performing firms in certain industries are concentrated in specific countries. For example,
the leading biotechnology, software, and Internet companies are headquartered in the United
States. Some of the world's best computer manufacturers are in China and Taiwan. Many of
the leading consumer electronics companies are in South Korea and Japan. The top mining
companies are in Australia. The leading business process outsourcing (BPO) companies are
in India. Some of the best engineering and car companies are in Germany. The world's top
fashion designers are in Italy. The best wineries are in France.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: National Competitive Advantage: World Leadership in Specific Industries

10-117
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McGraw-Hill Education.
120. Briefly discuss the application of Michael Porter's diamond framework.

Michael Porter advanced a framework to explain national competitive advantage—why are


some nations outperforming others in specific industries. This framework is called Porter's
diamond of national competitive advantage. It consists of four interrelated factors:

• Factor conditions
• Demand conditions
• Competitive intensity in focal industry
• Related and supporting industries/complementors

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: National Competitive Advantage: World Leadership in Specific Industries

121. Discuss how demand conditions within Porter's diamond framework affect national competitive
advantage.

Demand conditions are the specific characteristics of demand in a firm's domestic market. A
home market made up of sophisticated customers who hold companies to a high standard of
value creation, where cost containment contributes to national competitive advantage.
Moreover, demanding customers may also clue firms in to the latest developments in specific
fields and may push firms to move research from basic findings to commercial applications for
the marketplace.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: National Competitive Advantage: World Leadership in Specific Industries

10-118
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McGraw-Hill Education.
122. What factors enabled Japanese companies to build energy-efficient air conditioners?

Due to dense urban living conditions, hot and humid summers, and high energy costs,
Japanese customers demand small, quiet, and energy-efficient air conditioners. A home
market made up of sophisticated customers who hold companies to a high standard of value
creation, where cost containment contributes to national competitive advantage. Moreover,
demanding customers may also clue firms in to the latest developments in specific fields and
may push firms to move research from basic findings to commercial applications for the
marketplace.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: National Competitive Advantage: World Leadership in Specific Industries

123. Using the automotive industry in Germany as an example, explain how competitive intensity in
a focal industry affects national competitive advantage.

Companies that face a highly competitive environment at home tend to outperform global
competitors that lack such intense domestic competition. Fierce domestic competition in
Germany, for example, combined with demanding customers and the no-speed-limit Autobahn
make a tough environment for any car company. Success requires top-notch engineering of
chassis and engines, as well as keeping costs and fuel consumption in check. This extremely
tough home environment amply prepared German car companies such as Volkswagen (which
also owns Audi and Porsche), BMW, and Daimler for global competition.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: National Competitive Advantage: World Leadership in Specific Industries

10-119
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McGraw-Hill Education.
124. What effect do related and supporting industries have on national competitive advantage?

Leadership in related and supporting industries can foster world-class competitors in


downstream industries. The availability of top-notch complementors—firms that provide a
good or service that leads customers to value the focal firm's offering more when the two are
combined—further strengthens national competitive advantage.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-06 Apply Porter's diamond framework to explain why certain industries are more competitive in specific
nations than in others.
Topic: National Competitive Advantage: World Leadership in Specific Industries

125. China is infamous for its rampant business in illegal materials. Explain.

As discussed in Chapter Case 10, in 2010, a Chinese government report found that the
market for pirated DVDs was $6 billion. As a comparison, the total box-office revenues in
China in 2010 were $1.5 billion. One reason is that ticket prices for movies in China are steep
and are considered luxury entertainment that few can afford. Another reason that "black-
market" sales in China are so high is that legitimate sales often are not allowed. China allows
only about 20 new non-Chinese movies into its theaters each year. Additionally, it has strict
licensing rules on the sale of home-entertainment goods. As a result there is often no
legitimate product competing with the bootlegged offerings available via DVD and the Internet
in China.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Apply the integration-responsiveness framework to evaluate the four different strategies MNEs can
pursue when competing globally.
Topic: National Competitive Advantage: World Leadership in Specific Industries

10-120
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McGraw-Hill Education.