Chapter 6 – Strategy in the Global Environment
True/False Questions
_____ 1. The average tariff rate on manufactured goods traded between advanced nations has fallen from around 40 percent to under 4 percent.
_____ 2. The success of many multinational companies is based solely on the goods or services that are sold in foreign nations.
_____ 3. Location economies are the economic benefits that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be.
_____ 4. Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical.
_____ 5. Companies that pursue a global standardization strategy focus on increasing profitability by reaping the cost reductions that come from economies of scale and location economies.
_____ 6. Companies that pursue a transnational strategy tend to centralize product development functions such as R&D at home.
_____ 7. The greater the pressures for cost reductions are, the more likely it is that a company will want to pursue some combination of exporting and wholly owned subsidiaries.
Page 1 of 4 Multiple-Choice Questions
8. Low pressure for local responsiveness, combined with low pressure for cost reductions, would suggest what type of strategy? a. Universal b. Global standardization c. Localization d. Transnational e. International
9. Which strategy for entering into international operations offers the lowest level of control? a. Exporting b. Licensing c. Joint venture d. Franchising e. Wholly owned subsidiary
10. Pressures for local responsiveness include all of the following except: a. differences in customer tastes b. differences in customer preferences c. differences in infrastructure d. differences in distributions channels e. differences in localization strategy
Page 2 of 4 11. All of the following are main strategic postures that a company can choose when competing internationally except: a. global standardization strategy b. localization strategy c. international licensing strategy d. transnational strategy e. international strategy
12. ______avoids the costs of establishing manufacturing operations in the host country, which are often substantial, and it may be consistent with scale economies and location economies. a. Licensing b. Exporting c. Franchising d. Joint venture e. Wholly owned subsidiary
13. The disadvantages of licensing as an entry mode include all of the following except: a. inability to realize location and scale based economies b. lack of control over quality c. in ability to engage in global strategic coordination d. lack of control over technology e. none of the above
Page 3 of 4 14. A _____ is a business in which a parent company owns 100 percent of the stock. a. joint venture b. wholly owned subsidiary c. strategic alliance d. franchising operation e. licensing operation
15. All of the following are advantages of joint venture except a. having complete control of the operation of the entity. b. benefiting from local partners’ knowledge about the foreign market. c. sharing development costs with a local partner. d. sharing the risks of opening up a foreign market with a local partner. e. gaining access to markets that are often closed to foreign investors
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