Chp 8

Question 1

International strategy

Answer 1

Strategy through which the firm sells its goods or service outside its domestic market

Question 2

Incentives to use international strategy

Answer 2

• Extends a product’s life cycle
• Gain easier access to raw materials
• Opportunities to integrate operations on a global scale
• Opportunities to better use rapidly developing technologies
• Gain access to consumers in emerging markets

Question 3

Benefits of being an international players

Answer 3

• Increased market size
• Greater returns on major capital investments or new products or processes
• Greater economies of scale, scope or learning
• A competitive advantage through location

Question 4

Increasing market size

Answer 4

• Potential to enhance the firm’s size and performance
• Limited growth opportunities in domestic market
• Larger market sizes pose less risk for the firm (just a random note)

Question 5

Economies of scale and learning

Answer 5

Continual improvements in processes by reducing costs and increasing value of goods/services.

Question 6

Location advantages

Answer 6

• Locating facilities outside domestic market can help reduce costs
• Lower labour, energy, and other natural resource costs
• Access to critical supplies and consumers

Question 7

Type of international strategies

Answer 7

1) International business-level strategy

2) International corporate-level strategy

Question 8

International business-level strategies

Answer 8

Each business must develop a competitive strategy focused on its own domestic market because capabilities & core competencies can be pursued in international markets since they’re foundations

Question 9

Determinants of national advantage

Answer 9

• Factors of production
• Demand conditions
• Firm strategy, structure, and rivalry
• Related and supporting industries

Question 10

International corporate-level strategy

Answer 10

Expanding the firm’s operations through geographic diversification.

Question 11

Multidomestic strategy

Answer 11

International strategy in which strategic and operating decisions are decentralized to the strategic business units in individual countries or regions for allowing each unit the opportunity to tailor products to the local market

Question 12

Global strategy

Answer 12

International strategy in which a firm’s home office determines the strategies that business units (SBUs) are to use in each country or region

Question 13

Transnational strategy

Answer 13

International strategy through which the firm seeks to achieve both global efficiency and local responsiveness

Question 14

Choice of international strategy mode

Answer 14

• Exporting
• Licensing
• Strategic alliance
• Acquisitions
• New wholly owned subsidiary

Question 15

Exporting

Answer 15

Firm sends products it produces in its domestic market to international markets
- High cost, low control

Question 16

Licensing

Answer 16

An agreement is formed that allows a foreign company to purchase the right to manufacture and sell a firm’s products within a host country’s market or a set of host countries’ markets
- Low cost, low risk, little control, low returns

Question 17

Strategic alliance

Answer 17

Firm collaborating with another company in a different setting in order to enter one or more international markets
- Shared costs, shared resources, shared risks, problems of integration

Question 18

Acquisitions

Answer 18

A cross-border acquisition in which a firm from one country acquires a stake in or purchases all of a firm located in another country
- Quick access to new markets, high costs, complex negotiations, problems of merging with domestic operations

Question 19

New wholly-owned subsidiary (greenfield venture)

Answer 19

Firm invests directly in another country or market by establishing a new wholly-owned subsidiary
- Complex, often costly, time consuming, high risk, max control, potential above-average returns

Question 20

Political risks

Answer 20

• Instability in national governments
• War, both civil and international
• Potential nationalization of a firm’s resources

Question 21

Economic risks

Answer 21

• Differences and fluctuations in the value of different currencies
• Differences in prevailing wage rates
• Difficulties in enforcing property rights
• Unemployment