When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to lower costs, companies should choose a __________ or __________ in order to compete in the global marketplace.

61.

In considering the decision to offshore, which of the following generally is not one of the hidden costs?    A.  Total wage costs and indirect costs B.  Increased inventory and coordination costs C.  Reduced market responsiveness and intellectual property rights D.  Wage deflation Common savings from offshoring, such as lower wages, benefits, energy costs, regulatory costs, and taxes, are all easily visible and immediate. In contrast, there are a host of hidden costs that arise over time and often overwhelm the cost savings of offshoring. These hidden costs include: total wage costs, indirect costs, increased inventory, reduced market responsiveness, coordination costs, intellectual property rights, and wage inflation.

AACSB: Analytic Blooms: Remember Learning Objective: 07-03 The motivations (or benefits) and the risks associated with international expansion; including the emerging trend for greater offshoring and outsourcing activity. Level of Difficulty: 1 Easy Topic: International Expansion Company Motivations and Risks

62.

Which one of the following is one of the Theodore Levitt assumptions supporting a pure global strategy?    A.  Consumers are willing to pay more for specific product features. B.  Customer needs and interests are becoming more dissimilar. C.  MNCs can successfully compete globally by aggressively pricing products at the sacrifice of product features. D.  If the world markets are treated as heterogeneous, substantial economies of scale are easily achieved. Levitt advocated strategies that favored global products and brands. This approach rested on three key assumptions: customer needs and interests are becoming increasingly homogeneous worldwide; people around the world are willing to sacrifice preferences in product features, functions, design, and the like for lower prices at high quality; substantial economies of scale in production and marketing can be achieved through supplying global markets.

AACSB: Analytic Blooms: Understand Learning Objective: 07-04 The two opposing forces-cost reduction and adaptation to local markets-that firms face when entering international markets. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets

63.

When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to lower costs, companies should choose a __________ or __________ in order to compete in the global marketplace.    A.  global strategy; transnational strategy B.  global strategy: multidomestic strategy C.  international strategy; multidomestic strategy D.  international strategy; transnational strategy The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace: international, global, multidomestic, and transnational. The strategy that a firm selects depends on the degree of pressure that it is facing for cost reductions and the importance of adapting to local markets. When firms are faced with high pressures to lower costs, the international strategy and the multidomestic strategy would be most appropriate.

AACSB: Analytic Blooms: Understand Learning Objective: 07-04 The two opposing forces-cost reduction and adaptation to local markets-that firms face when entering international markets. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets

64.

When firms expand into global markets, they are faced with the choice of reducing costs and/or adapting to the local market. When high pressures exist to adapt locally, companies should choose a __________ or __________ in order to compete in the global marketplace.    A.  global strategy; transnational strategy B.  global strategy: multidomestic strategy C.  international strategy; global strategy D.  transnational strategy; multidomestic strategy The two opposing pressures result in four different basic strategies that companies can use to compete in the global marketplace: international, global, multidomestic, and transnational. The strategy that a firm selects depends on the degree of pressure that it is facing for cost reductions and the importance of adapting to local markets. When firms are faced with high pressures to adapt locally, the transnational strategy and the multidomestic strategy would be most appropriate.

AACSB: Analytic Blooms: Understand Learning Objective: 07-04 The two opposing forces-cost reduction and adaptation to local markets-that firms face when entering international markets. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets

65.

Which would be the appropriate strategy for companies to use to compete in the global marketplace if the marketplace pressure is for lower costs with little pressure for local adaptation?    A.  international strategy B.  global strategy C.  multidomestic strategy D.  transnational strategy An international strategy would be the best pure choice for a company to make in its quest to compete in the global marketplace, if both the pressures to lower costs and adapt locally are low.

AACSB: Analytic Blooms: Understand Learning Objective: 07-05 The advantages and disadvantages associated with each of the four basic strategies: international; global; multidomestic; and transnational. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets

66.

High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy?    A.  global strategy B.  multidomestic strategy C.  transnational strategy D.  overall cost leadership strategy A multidomestic strategy is used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low.

AACSB: Analytic Blooms: Understand Learning Objective: 07-05 The advantages and disadvantages associated with each of the four basic strategies: international; global; multidomestic; and transnational. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets

67.

Software Tech, Inc., a company in the computer software industry, invests heavily in Research and Development, and product design. Thus, most of its value is added ________.    A.  upstream B.  in its infrastructure C.  downstream D.  midstream Research and development, and product design are primary activities in the value-chain that are far from the customer, and are therefore considered upstream activities. Such activities are often centralized in transnational organizations.

AACSB: Analytic Blooms: Apply Learning Objective: 07-05 The advantages and disadvantages associated with each of the four basic strategies: international; global; multidomestic; and transnational. Level of Difficulty: 3 Hard Topic: Achieving Competitive Advantage in Global Markets

68.

Industries in which proportionally more value is added in __________ activities are more likely to benefit from a global strategy.    A.  downstream B.  upstream C.  marketing D.  sales Primary activities that are downstream (e.g., marketing and sales, and service), or closer to the customer, tend to require more decentralization in order to adapt to local market conditions (a multidomestic strategy). Primary activities that are upstream (e.g., logistics and operations), or further away from the customer, tend to be centralized (a global strategy). This is because there is less need for adapting these activities to local markets and the firm can benefit from economies of scale.

AACSB: Analytic Blooms: Apply Learning Objective: 07-05 The advantages and disadvantages associated with each of the four basic strategies: international; global; multidomestic; and transnational. Level of Difficulty: 3 Hard Topic: Achieving Competitive Advantage in Global Markets

69.

Which of the following types of international firms are most likely to benefit from a global strategy as opposed to a multidomestic strategy?    A.  firms that compete in industries in which consumer preferences vary substantially in each country B.  firms in industries that are expanding very rapidly C.  firms in industries that have value added by sales and marketing departments D.  firms in industries that have much value added in research and design or manufacturing Primary activities that are downstream (e.g., marketing and sales, and service), or closer to the customer, tend to require more decentralization in order to adapt to local market conditions (a multidomestic strategy). Primary activities that are upstream (e.g., Research and Development, design, or manufacturing), or further away from the customer, tend to be centralized (a global strategy). This is because there is less need for adapting these activities to local markets and the firm can benefit from economies of scale.

AACSB: Analytic Blooms: Understand Learning Objective: 07-05 The advantages and disadvantages associated with each of the four basic strategies: international; global; multidomestic; and transnational. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets

70.

Recent trends that might lead managers of multinational corporations (MNCs) to adopt a more decentralized strategy for their operations would include all of the following EXCEPT ______.    A.  customer needs, interests, and tastes becoming increasingly homogenized B.  consumers around the world increasingly willing to tradeoff idiosyncratic preferences in product features for lower price C.  flexible manufacturing trends allowing a decline in the minimum volume required to reach acceptable levels of production efficiency D.  fluctuating exchange rates A decentralized strategy such as that seen within the multidomestic organization, allows for greater adaptation at the local level, which would not be necessary if customers were becoming more homogenous.

AACSB: Analytic Blooms: Understand Learning Objective: 07-05 The advantages and disadvantages associated with each of the four basic strategies: international; global; multidomestic; and transnational. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets