Hill12e Chapter 13 TB Answer Key PDF

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1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the priorInternational Business, 12e (Hill)Chapter 13 The Strategy of International Business A firm's strategy can be defined as the actions that managers take to attain the goals of the firm. Answ...

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International Business, 12e (Hill) Chapter 13

The Strategy of International Business

1) A firm's strategy can be defined as the actions that managers take to attain the goals of the firm. Answer: TRUE Explanation: A firm's strategy can be defined as the actions that managers take to attain the goals of the firm. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 2) The preeminent strategic goal for most firms is to maximize the value of the firm for its owners and shareholders. Answer: TRUE Explanation: A firm's strategy can be defined as the actions that managers take to attain the goals of the firm. For most firms, the preeminent goal is to maximize the value of the firm for its owners, its shareholders. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 3) The customer is able to garner the benefit of the consumer surplus because one firm is competing with other firms for the customer's business, so the firm must charge a lower price than it could if it were a monopoly supplier. Answer: TRUE Explanation: The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because the customer captures some of that value in the form of what economists call a consumer surplus. The customer is able to do this because the firm is competing with other firms for the customer's business, so the firm must charge a lower price than it could, were it a monopoly supplier. Difficulty: 2 Medium Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 1 Copyright 20 19 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

4) According to Porter, the way to create superior value is to drive down the cost structure of the business and/or differentiate the product in some way so that consumers value it more. Answer: TRUE Explanation: Michael Porter has argued that low cost and differentiation are two basic strategies for creating value and attaining a competitive advantage in an industry. According to Porter, superior profitability goes to those firms that can create superior value, and the way to create superior value is to drive down the cost structure of the business and/or differentiate the product in some way so that consumers value it more and are prepared to pay a premium price. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 5) For a firm, all positions on the efficiency frontier are viable. Answer: FALSE Explanation: Not all positions on the efficiency frontier are viable. In the international hotel industry, for example, there might not be enough demand to support a chain that emphasizes very low cost and strips all the value out of its product offering. International travelers are relatively affluent and expect a degree of comfort (value) when they travel away from home. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 6) Support activities are always less important than the primary activities in achieving a competitive advantage. Answer: FALSE Explanation: The support activities of the value chain provide inputs that allow the primary activities to occur. In terms of attaining a competitive advantage, support activities can be as important as, if not more important than, the "primary" activities of the firm. Difficulty: 1 Easy Topic: Features and Functions of the Value Chain Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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7) The success of many multinational corporations is based not just upon the goods or services that they sell in foreign nations, but also upon the core competencies that underlie the development, production, and marketing of those goods or services. Answer: TRUE Explanation: The success of many multinational companies that expand in this manner is based not just upon the goods or services that they sell in foreign nations, but also upon the core competencies that underlie the development, production, and marketing of those goods or services. Difficulty: 1 Easy Topic: Opportunity and Risk Variables for Expansion Learning Objective: 13-02 Recognize how firms can profit by expanding globally. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 8) The skills within the firm that a competitor cannot easily match or imitate are known as the core knowledge base. Answer: FALSE Explanation: The term core competence refers to skills within the firm that competitors cannot easily match or imitate. Difficulty: 1 Easy Topic: Opportunity and Risk Variables for Expansion Learning Objective: 13-02 Recognize how firms can profit by expanding globally. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 9) Systematic increases in sales that have been observed to occur over the life of the product are referred to as the experience curve. Answer: FALSE Explanation: The experience curve refers to systematic reductions in production costs that have been observed to occur over the life of a product. Difficulty: 1 Easy Topic: Opportunity and Risk Variables for Expansion Learning Objective: 13-02 Recognize how firms can profit by expanding globally. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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10) One of the sources of economies of scale is the ability to spread fixed costs over a small volume. Answer: FALSE Explanation: Economies of scale refer to the reductions in unit cost achieved by producing a large volume of a product. Attaining economies of scale lowers a firm's unit costs and increases its profitability. Difficulty: 1 Easy Topic: Opportunity and Risk Variables for Expansion Learning Objective: 13-02 Recognize how firms can profit by expanding globally. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 11) Once a firm has established a low-cost position, it can act as a barrier to new competition. Answer: TRUE Explanation: Once a firm has established a low-cost position, it can act as a barrier to new competition. Specifically, an established firm that is well down the experience curve can price so that it is still making a profit while new entrants, farther up the curve, are suffering losses. Difficulty: 2 Medium Topic: Opportunity and Risk Variables for Expansion Learning Objective: 13-02 Recognize how firms can profit by expanding globally. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 12) In a multinational enterprise, skills are typically generated at the home location and are then dispersed to the rest of the organization. Answer: FALSE Explanation: Skills can be created anywhere within a multinational's global network of operations, wherever people have the opportunity and incentive to try new ways of doing things. The creation of skills that help to lower the costs of production, or to enhance perceived value and support higher product pricing, is not the monopoly of the corporate center. Difficulty: 1 Easy Topic: Opportunity and Risk Variables for Expansion Learning Objective: 13-02 Recognize how firms can profit by expanding globally. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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13) To leverage subsidiary skills, companies should establish incentive systems that encourage local employees to acquire new skills. Answer: TRUE Explanation: Managers of the multinational enterprise must establish an incentive system that encourages local employees to acquire new skills. This is not as easy as it sounds. Creating new skills involves a degree of risk. Not all new skills add value. Difficulty: 2 Medium Topic: Opportunity and Risk Variables for Expansion Learning Objective: 13-02 Recognize how firms can profit by expanding globally. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 14) Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical. Answer: TRUE Explanation: Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical. This is the case for conventional commodity products such as bulk chemicals, petroleum, steel, sugar, and the like. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-03 Understand how pressures for cost reductions local responsiveness influence strategic choice. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 15) When consumer tastes and preferences differ significantly between countries, there is low pressure for local responsiveness. Answer: FALSE Explanation: Strong pressures for local responsiveness emerge when customer tastes and preferences differ significantly between countries, as they often do for deeply embedded historic or cultural reasons. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-03 Understand how pressures for cost reductions local responsiveness influence strategic choice. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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16) Threats of protectionism, economic nationalism, and local content rules dictate that international businesses manufacture locally. Answer: TRUE Explanation: Economic and political demands imposed by host-country governments may require local responsiveness. Threats of protectionism, economic nationalism, and local content rules (which require that a certain percentage of a product should be manufactured locally) dictate that international businesses manufacture locally. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-03 Understand how pressures for cost reductions local responsiveness influence strategic choice. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 17) Pursuing a global standardization strategy is appropriate when a firm is facing low pressures for cost reduction but high pressure for local responsiveness. Answer: FALSE Explanation: Firms that pursue a global standardization strategy focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies; that is, their strategic goal is to pursue a low-cost strategy on a global scale. This strategy makes most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal. Difficulty: 2 Medium Topic: Choosing An International Business Strategy Learning Objective: 13-04 Identify and choose the different global strategies for competing in the global marketplace. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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18) As competition intensifies, global standardization strategies and transnational strategies tend to become less viable, and managers need to direct their companies toward either an international strategy or a localization strategy. Answer: FALSE Explanation: International strategy may not be viable in the long term, and to survive, firms need to shift toward a global standardization strategy or a transnational strategy in advance of competitors. The same can be said about a localization strategy. Difficulty: 2 Medium Topic: Choosing An International Business Strategy Learning Objective: 13-04 Identify and choose the different global strategies for competing in the global marketplace. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 19) Research has shown that in the modern multinational enterprise, core competencies and skills typically reside in the home country. Answer: FALSE Explanation: Researchers note that in the modern multinational enterprise, core competencies and skills do not reside just in the home country but can develop in any of the firm's worldwide operations. Difficulty: 1 Easy Topic: Choosing An International Business Strategy Learning Objective: 13-04 Identify and choose the different global strategies for competing in the global marketplace. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 20) Enterprises that pursue an international strategy tend to decentralize control over marketing and product strategies. Answer: FALSE Explanation: Ultimately, in most firms that pursue an international strategy, the head office retains fairly tight control over marketing and product strategy. Difficulty: 1 Easy Topic: Choosing An International Business Strategy Learning Objective: 13-04 Identify and choose the different global strategies for competing in the global marketplace. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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21) ________ is measured by the percentage increase in net profits over time. A) Profit growth B) Value C) Profitability D) Operational economy Answer: A Explanation: Profit growth is measured by the percentage increase in net profits over time. In general, higher profitability and a higher rate of profit growth will increase the value of an enterprise and thus the returns garnered by its owners, the shareholders. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 22) The amount of value a firm creates is measured by the A) economies of scale they are able to achieve. B) difference between its costs of production and the value that consumers perceive in its products. C) profitability the firm achieves. D) difference between its costs of production and the price that it charges for its products. Answer: B Explanation: The amount of value a firm creates is measured by the difference between its costs of production and the value that consumers perceive in its products. Difficulty: 2 Medium Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

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23) The ________ all of the different positions that a firm can adopt with regard to adding value to the product and low cost assuming that its internal operations are configured efficiently to support a particular position. A) economies of scale are B) diminishing returns imply C) efficiency frontier shows D) value creation scale shows Answer: C Explanation: The efficiency frontier is a convex curve that shows all of the different positions that a firm can adopt with regard to adding value to the product (V) and low cost (C) assuming that its internal operations are configured efficiently to support a particular position. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 24) The strategy, operations, and organization of a firm must all be consistent with each other if the firm is to ________ and achieve superior profitability. A) exploit core competencies B) attain a comparative advantage C) experience a learning curve D) attain a competitive advantage Answer: D Explanation: The strategy, operations, and organization of the firm must all be consistent with each other if it is to attain a competitive advantage and garner superior profitability. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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25) ________ include the design, creation, and delivery of a product. A) Primary activities B) Core competencies C) Support activities D) Universal needs Answer: A Explanation: Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its support and after-sale service. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 26) Research and development, production, marketing and sales, and customer service are all examples of A) core competencies. B) primary activities. C) value creation. D) secondary activities. Answer: B Explanation: Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its support and after-sale service. The primary activities include research and development, production, marketing and sales, and customer service. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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27) Top management should be viewed as part of the firm's A) primary activities. B) experience curve. C) infrastructure. D) universal strategy. Answer: C Explanation: A support activity is the company infrastructure, or the context within which all the other value creation activities occur. Because top management can exert considerable influence in shaping these aspects of a firm, top management should also be viewed as part of the firm's infrastructure. Difficulty: 1 Easy Topic: Factors Influencing Strategic Choice Learning Objective: 13-01 Explain the concept of global strategy. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 28) ________ can be defined as the rate of return that the firm makes on its invested capital, which is calculated by dividing the net profits of the firm by total invested capital. A) Profitability B) Performance C) Cash flow D) Efficiency Answer: A Explanation: Profitability can be defined as the rate of return that the firm makes on its invested capital (ROIC), which is calculated by dividing the net profits of the firm by total invested capit...