Chapter 9 Flashcards
In which of the following circumstances can a firm best achieve economies of scale?
a) When the firm can spread the costs of investments in plant across many sales
b) When the firm creates highly customized products for a niche audience in the market
c) When the firm creates better quality products due to higher quality equipment
d) When the firm can reap the benefit of investing in research through higher customer satisfaction
a) When the firm can spread the costs of investments in plant across many sales
Dave is a research analyst at Geo Corp., a U.S.-based firm, specializing in organic farm produce. Since the management is considering entering a foreign market, Dave begins to study the risks associated with this move. After gathering sufficient data regarding the internal factors of the new market, he categorizes the risks based on the type. Which of the following is most likely to be considered a political risk?
a) Marketers of Geo standardizing products based on local market needs
b) Distribution costs being higher in the market than that in the United States
c) Consumers preferring local goods to foreign products in the new market
d) Laws prohibiting foreign ownership of local firms in the new market
d) Laws prohibiting foreign ownership of local firms in the new market
Score Ink Corp., a publishing firm, decides to enter a new market. It changes its strategy from standardization to local responsiveness in order to meet the needs of the new market. However, in order to execute this strategy, it had to increase production and distribution expenses. Which of the following is adopted by Score Ink?
a) A standardization strategy
b) A global strategy
c) A multidomestic strategy
d) An arbitrage strategy
c) A multidomestic strategy
The Purple Lace Inc., a home furnishing company, emphasizes standardization over local culture and needs of the specific market. It maintains consistency of operations across the different countries that the firm operates in. Which of the following is being exemplified in this scenario?
a) A global strategy
b) A customization strategy
c) A multidomestic strategy
d) An arbitrage strategy
a) A global strategy
An automobile manufacturing company has its production units and sales units in two different locations. The production units are situated in geographical areas that offer cheap labor and easy resource availability. On the other hand, the sales units are in places where there is a high demand for the products. Which of the following strategies is best exemplified in this scenario?
a) An arbitrage strategy
b) A global strategy
c) A multidomestic strategy
d) A standardization strategy
a) An arbitrage strategy
Neferent Inc., a finance company, incorporates itself in the Notre Islands because of low corporate tax rates there. In this case, the strategy adopted by Neferent is to gain a(n) __________.
a) economic arbitrage
b) administrative arbitrage
c) cultural arbitrage
d) capital arbitrage
b) administrative arbitrage
Vactin Motors, an automobile company, is a well-recognized brand. It does not have the capital and capabilities to set up manufacturing units abroad, although it is keen to have its products made in the foreign market. It decides to have the products produced and sold under its brand name. In this case, which of the following modes of international market entry should be adopted by Vactin?
a) Exporting
b) Joint venture
c) Wholly owned subsidiaries
d) Franchising
d) Franchising
Which of the following statements is true of alliances as a means of entering international markets?
a) It allows the alliance to be perceived by both government and consumers as local.
b) It is a favored way to enter markets that are close to the home market.
c) It offers the least amount of control of all the various modes of entry.
d) It avoids sharing resources, risks, and rewards.
a) It allows the alliance to be perceived by both government and consumers as local.
A U.S.-based insurance firm purchases a company in Germany. The purchase allows the U.S. firm to acquire local resources, knowledge, and expertise while still maintaining control through 100 percent ownership. This process of purchasing a local firm is called __________.
a) acquisition
b) licensing
c) authorization
d) franchising
a) acquisition
dentify an advantage of competing in international markets.
a) It can help firms find high-value resources for a premium cost.
b) It helps firms attain diseconomies of scale.
c) It can help firms identify unmet needs in multiple areas.
d) It helps firms lower a product’s life cycle.
c) It can help firms identify unmet needs in multiple areas.
Identify a true statement about administrative distance.
a) Low administrative distance can keep foreign firms from entering a new country to expand business.
b) High administrative distance can decrease the effect of geographical distance.
c) High administrative distance lowers both transportation and communication costs.
d) Low administrative distance can increase the rate of entry by foreign firms into a country.
d) Low administrative distance can increase the rate of entry by foreign firms into a country.
Which of the following statements is true of exporting?
a) It allows for lesser economies of scale across countries.
b) It involves very high investments.
c) It is the least risky of the modes of international market entry.
d) It works well when high differentiation of a product is required.
c) It is the least risky of the modes of international market entry.
Which of the following is a limitation of a global strategy?
a) Global firms may improve sales by not being responsive.
b) It is typically a low-cost strategy.
c) Standardized products may not meet the needs of customers in particular countries.
d) It uses differentiated processes in its value chain.
c) Standardized products may not meet the needs of customers in particular countries.
The stages a product or service goes through during its lifespan refers to a(n) _______
product life cycle
