Chapter 7

Question 1

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 laws, rules, norms, values, and ideas across countries.

Answer 1

Globalization

Question 2

a framework for explaining why countries foster successful multinational corporations, consisting of four factors—factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry.

Answer 2

diamond of national advantage

Question 3

a nation’s position in factors of production.

Answer 3

factor endowments (national advantage)

Question 4

the nature of home-market demand for the industry’s product or service.

Answer 4

demand conditions (national advantage)

Question 5

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 5

related and supporting industries (national advantage)

Question 6

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

Answer 6

firm strategy, structure, and rivalry (national advantage)

Question 7

firms that manage operations in more than one country.

Answer 7

multinational firms

Question 8

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

Answer 8

arbitrage opportunities

Question 9

new products developed by developed country multination firms for emerging markets that have adequate functionality at a low cost.

Answer 9

reverse innovation

Question 10

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

Answer 10

political risk

Question 11

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

Answer 11

rule of law

Question 12

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 12

economic risk

Question 13

selling of trademarked goods without the consent of the trademark holder.

Answer 13

counterfeiting

Question 14

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

Answer 14

currency risk

Question 15

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 15

management risk

Question 16

using other firms to perform value-creating activities that were previously performed in-house.

Answer 16

outsourcing

Question 17

shifting a value-creating activity from a domestic location to a foreign location.

Answer 17

offshoring

Question 18

a strategy based on firms’ 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 18

international strategy

Question 19

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

Answer 19

global strategy

Question 20

a strategy based on firms’ 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 20

multidomestic strategy

Question 21

a strategy based on firms’ 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 21

transnational strategy

Question 22

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 22

regionalization

Question 23

groups of countries agreeing to increase trade between them by lowering trade barries.

Answer 23

trading blocs

Question 24

producing goods in one country to sell to residents of another country.

Answer 24

exporting

Question 25

a contractual arrangement 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 25

licensing

Question 26

a contractual arrangement 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 26

franchising

Question 27

a business in which a multinational company owns 100 percent of the stock.

Answer 27

wholly owned subsidiary