Chapter 7

Question 0

A framework for explaining why countries foster successful multinational corporation, consisting of four factors – factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry

Answer 0

Diamond of national advantage

Question 1

Has two meanings. One is the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information. Two is the growing similarity of the laws, rules, norms, values, and ideas across countries

Answer 1

Globalization

Question 2

A nation’s position in factors of production

Answer 2

Factor endowments (national advantage)

Question 3

The nature of home – market demand for the industry’s product or service

Answer 3

Demand conditions (national advantage)

Question 4

The presence, absence, and quality in the nation of supplier industries and other related industries that supply services, support, or technology to firms in the industry value chain

Answer 4

Related and supporting industries (national advantage)

Question 5

The conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry

Answer 5

Firm strategy, structure, and rivalry (national advantage)

Question 6

Firms that manage operations in more than one country

Answer 6

Multinational firms

Question 7

An opportunity to profit by buying and selling the same good in different markets

Answer 7

Arbitrage opportunities

Question 8

New products developed by developed country multi nation firms for emerging markets that have adequate functionality at a low cost

Answer 8

Reverse innovation

Question 9

Potential threat to a firm’s operations in a country due to ineffectiveness of the domestic political system

Answer 9

Political risk

Question 10

A characteristic of legal systems where behavior is governed by rules that are uniformly enforced

Answer 10

Rule of law

Question 11

Potential threat to a firm’s operations in a country due to economic policies and conditions, including property rights laws and enforcement of those laws

Answer 11

Economic risk

Question 12

Selling of trademarked goods without the consent of the trademark holder

Answer 12

Counterfeiting

Question 13

Potential threat to a firm’s operations in a country due to fluctuations in the local currency’s exchange rate

Answer 13

Currency risk

Question 14

Potential threat to a firm’s operations in a country due to the problems that managers have making decisions in the context of foreign markets

Answer 14

Management risk

Question 15

Using other firms to perform value-creating activities that were previously performed in–house

Answer 15

Outsourcing

Question 16

Shifting a value-creating activity from a domestic location to a foreign location

Answer 16

Offshoring

Question 17

A strategy based on firm’s’ diffusion and adaptation of the parent companies’ knowledge and expertise to foreign markets, used in industries where the pressures for both local adaptation and lowering costs are low

Answer 17

International strategy

Question 18

A strategy based on firm’s’ centralization and control by the corporate office, with the primary emphasis on controlling cost, and used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high

Answer 18

Global strategy

Question 19

A strategy based on firm’s’ differentiating their products and services to adapt to local markets, used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low

Answer 19

Multi domestic strategy

Question 20

A strategy based on firm’s’ optimizing the trade-offs associated with efficiency, local adaptation, and learning, used in industries where the pressures for both local adaptation and lowering costs are high

Answer 20

Transnational strategy

Question 21

Increasing international exchange of goods, services, money, people, ideas, and information; and the increasing similarity of culture, laws, rules, and norms within a region such as Europe, North America, or Asia

Answer 21

Regionalization

Question 22

Groups of countries agreeing to increase trade between them by lowering trade barriers

Answer 22

Trading blocs

Question 23

Producing goods in one country to sell to residents of another country

Answer 23

Exporting

Question 24

A contractual agreement in which a company receives a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable intellectual property

Answer 24

Licensing

Question 25

A contractual agreement in which a company receives a royalty or fee in exchange for the right to use its intellectual property; it usually involves a longer time period than licensing and includes other factors, such as monitoring of operations, training, and advertising

Answer 25

Franchising

Question 26

A business in which a multinational company owns 100% of the stock

Answer 26

Wholly-owned subsidiary