Global Business Today Seventh Edition Chapter 11 The Strategy of International Business

Global Business Today Seventh Edition Chapter 11
The Strategy of International Business
1. In a world of zero transportation costs, no trade barriers, and nontrivial differences between nations about factor endowments, firms must expand internationally if they are to survive. Discuss.
2. Plot the position of the following firms Procter & Gamble, IBM, Apple, Coca-Cola, Dow Chemical, U.S. Steel, and McDonald’s. In each case, justify your answer.
3. Answer the following questions:
With more than 200 brands and strong coverage internationally of the different brands, strategically AB InBev is a unique and highly organized global company. Do they have too many brands? Why or why not?
The company follows a focused brands strategy in which the majority of the resources are devoted to those brands that have the greatest long-term growth potential. What positives and negatives do you see with this approach?
Strategically, AB InBev has 10 principles driving everything they do. At the core, AB InBev is focused on a shared dream that energizes everyone to work in the same direction to be the best beer company in the world, bring people together, and aspire for the betterment of the world. Additional principles cover people strengths, quality of teams, striving for increased satisfaction, consumer focus, ownership, common sense and simplicity, cost management, leadership, and hard work and responsibility. Should large multinational corporations really be built on strong principles or do they need a more flexible structure?
4. How might the rise of trade barriers, or a serious dislocating event such as war or the emergence of a multiyear global pandemic, change the strategy of companies like Apple or Intel, which have historically pursued a global standardization strategy?
IKEA’s Global Strategy
Summary
This feature describes the international strategy of Swedish furniture and home goods maker, IKEA. IKEA, now the largest furniture retailer in the world, has successfully built its business around its flat-pack merchandise using a largely standardized approach to both its product line and its store displays. While its standardized approach to international markets has been a competitive advantage for the company, IKEA has also recognized that in some markets, it is important to tailor its product line and sales approach to local preferences.
Discussion Questions
1. Why do you think IKEA uses a floorplan that “forces” the customers to move along a certain path in the store?
2. Is it appropriate for IKEA to customize their furniture to each geographic location, for example, differences between U.S. and European furniture? Some companies do not make these changes, but IKEA does; why?
3. IKEA entered the United States in 1985 and China in the 2000s. But the company started in 1958; why did it take so long to move into the United States and China? Why do you think IKEA is not in more countries today (there are almost 200 countries in the world)?
Red Bull: A Leader in International Strategy
The closing describes international strategy at Red Bull GmbH. The company, founded in Austria by Austrian Dietrich Mateschitz and Chaleo Yoovidhya of Thailand, owns the bestselling energy drink, Red Bull, on the market. Moreover, the company has created a product that is standardized globally, yet most people think it is a local product. Red Bull’s image and message focuses on having amazing energy, being a go-getter attitude, and enjoying fun risk. To that end, the company markets its products at various extreme sporting events around the world.
Case Discussion Questions
1. As an Austrian–Thai company, Red Bull has done a remarkable job of positioning itself internationally by coming across as a local company in every country where Red Bull is sold. Would you be more or less likely to buy Red Bull knowing the brand is Austrian but with a strong Thai influence? Does it generally matter to consumers where a product originates from?
2. Worldwide, Red Bull has the highest market share of all energy drinks, with more than 6 billion cans sold annually (that’s almost one can for every person worldwide). So, either you drink Red Bull, or your friend does! Does the sheer number of Red Bull cans sold—basically its popularity—make you more or less interested in supporting the product with your purchase?
3. Red Bull mass markets its products in a unique way. To support the company’s international business strategy, Red Bull hosts a number of extreme sporting events. Personally, how reachable are you as a customer via these extreme sporting events, or does it even matter? Some marketers believe that just knowing the “brand myth” and Red Bull “legend” is enough to make people buy the product. Do you agree or no, and why?
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.1) The actions that managers take to attain a firm’s goals represent a company’s strategy.
⊚ true⊚ false
2) Profit growth is measured by the percentage increase in a company’s total production over time.
⊚ true⊚ false
3) 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.
⊚ true⊚ false
4) Consumer surplus captures some of the value of a product, which reduces the price a firm can charge for it.
⊚ true⊚ false
5) A strategy that focuses primarily on increasing the manufacturing rate of a product is referred to as a low-cost strategy.
⊚ true⊚ false
6) According to Michael Porter, the only way for firms to create superior value is to export all manufacturing processes.
⊚ true⊚ false
7) In terms of attaining a competitive advantage, support activities can be as important as the primary activities of the firm.
⊚ true⊚ false
8) The inventory management system of a manufacturing company is an example of a support activity.
⊚ true⊚ false
9) The manner in which decisions are made within an organization are called controls.
⊚ true⊚ false
10) Firms that operate internationally are able to realize location economies by dispersing individual value creation activities to locations where they are performed most efficiently and effectively.
⊚ true⊚ false
11) A firm’s core competencies refer to those activities that are easily matched by competitors.
⊚ true⊚ false
12) Location economies are the economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be.
⊚ true⊚ false
13) The experience curve reflects a decrease in production costs that occur over the life of a product.
⊚ true⊚ false
14) Learning effects would be more pronounced in the sales team of a manufacturing company than in an employee on the assembly line.
⊚ true⊚ false
15) The ability to spread fixed costs over a large volume is a source of economies of scale.
⊚ true⊚ false
16) Moving down the experience curve means higher costs of increasing value and lower levels of profitability for a firm.
⊚ true⊚ false
17) Strategies that increase profitability can also expand a firm’s business and thus enable it to attain a higher rate of profit growth.
⊚ true⊚ false
18) Universal needs exist when the tastes and preferences of consumers in different nations are identical.
⊚ true⊚ false
19) Varying distribution channels among countries may make it necessary for a company to place marketing functions within national subsidiaries.
⊚ true⊚ false
20) Firms that pursue an international strategy focus on increasing profitability by reaping the cost reductions that come from economies of scale, learning effects, and location economies.
⊚ true⊚ false
21) Firms that implement a globalization standardization strategy typically do not customize their products to local conditions.
⊚ true⊚ false
22) A localization strategy focuses on mass production of products to meet general tastes and preferences.
⊚ true⊚ false
23) According to researchers, firms facing strong cost pressures and pressures for local responsiveness should pursue a global standardization strategy.
⊚ true⊚ false
24) An international strategy involves taking products first produced for their domestic market and selling them internationally with only minimal local customization.
⊚ true⊚ false
25) A dislocating event, such as the pandemic of 2020, increases the attractiveness of a localization strategy for business.
⊚ true⊚ false
Entering Developed and Emerging Markets
Licensing propriety technology to foreign competitors is the best way to give up a firm’s competitive advantage. Discuss.
Discuss how the need for control over foreign operations varies with firms’ strategies and core competencies. What are the implications for the choice of entry mode?
A small Canadian firm that has developed some valuable new medical products using its unique biotechnology know-how is trying to decide how best to serve the European Union market. Its choices are given below. The cost of investment in manufacturing facilities will be a major one for the Canadian firm, but it is not outside its reach. If these are the firm’s only options, which one would you advise it to choose? Why?
Manufacture the product at home, and let foreign sales agents handle marketing.
Manufacture the products at home, and set up a wholly owned subsidiary in Europe to handle marketing.
Enter into an alliance with a large European pharmaceutical firm. The product would be manufactured in Europe by a 50–50 joint venture and marketed by the European firm.
The Swedish retailer, renowned for its ability to maintain its entire concept in multiple foreign markets, decided that India required a different strategy. Despite its considerable experience operating in foreign markets, IKEA, aware that India is one of the largest markets in the world, wanted to avoid missteps and so carefully planned its expansion over five years, visiting some 200 homes in India and learning about the Indian lifestyle. Today, the company has about 400 employees in India, a number it expects to grow to 15,000 by 2025 as the company continues to expand its presence.
Case Discussion Questions
1. What do you think are the attractions of India to IKEA?
2. Why did the company chose Hyderabad as the location for its first store opening?
3. What are the biggest challenges IKEA faces in growing its Indian operation?
4. IKEA entered India by establishing a wholly owned subsidiary. Why do you think the company chose this entry mode over other entry modes, such as franchising the IKEA concept or a joint venture?
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.1) A firm contemplating expansion should ultimately choose a foreign market based on an assessment of the nation’s long-run profit potential.
⊚ true⊚ false
2) When assessing the attractiveness of a country as a potential market, an international business must understand how the benefits, costs, and risks of doing business in that country will balance out.
⊚ true⊚ false
3) The present purchasing power of consumers in a new market is not a factor used by a business to assess the long-run economic benefits of doing business with that nation.
⊚ true⊚ false
4) The probability of survival increases if an international business enters a national market after several other foreign firms have already done so.
⊚ true⊚ false
5) Pioneering costs are incurred by late entrants to the foreign market.
⊚ true⊚ false
6) A business that chooses to enter an international market on a large scale implies rapid entry.
⊚ true⊚ false
7) Exporting, as a mode of entry into foreign markets, limits a firm from achieving experience curve and location economies.
⊚ true⊚ false
8) If transportation costs are high for bulky products, exporting as a mode of entry into foreign markets is the most economical choice a firm can make.
⊚ true⊚ false
9) Licensing gives an international firm tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies.
⊚ true⊚ false
10) Cross-licensing agreements minimize the probability that firms might lose their know-how and technology to a partner firm.
⊚ true⊚ false
11) Fast food restaurants are good examples of the franchise model.
⊚ true⊚ false
12) The most typical joint venture is a 50/50 venture, in which there are two parties, each of which holds a 50 percent ownership stake and contributes a team of managers to share operating control.
⊚ true⊚ false
13) In a joint venture, a firm benefits from a local partner’s knowledge of the competitive conditions, culture, language, political systems, and business systems of the host country.
⊚ true⊚ false
14) Similar to a licensing agreement, a joint venture does not put the control of a company’s technology at risk.
⊚ true⊚ false
15) When a firm’s competitive advantage is based on technological competence, a wholly owned subsidiary is the preferred mode of entry into a foreign market because it reduces the risk of losing control over that competence.
⊚ true⊚ false
16) Establishing a wholly owned subsidiary provides a company with tight control over the operations in another country.
⊚ true⊚ false
17) With a wholly owned subsidiary, a firm shares the costs of setting up overseas operations with partner firms.
⊚ true⊚ false
18) If an international firm’s core competency is based on proprietary technology, entering a joint venture might risk losing control of that technology to the joint-venture partner.
⊚ true⊚ false
19) Licensing increases the risk of losing control over a firm’s proprietary technological know-how.
⊚ true⊚ false
20) An international firm that perceives its technological advantage to be transitory and susceptive to rapid imitation might want to license its technology to foreign firms.
⊚ true⊚ false
21) Service-based companies typically favor a combination of licensing and exporting to control the franchises within a region.
⊚ true⊚ false
22) Acquisitions commonly take a long time to execute and, for this reason, are not favored by most firms.
⊚ true⊚ false
23) While there are many arguments in favor of acquisitions, ultimately many acquisitions are unsuccessful.
⊚ true⊚ false
24) The “hubris hypothesis” of why acquisitions fail is based on firms overpaying for the assets of the acquired firm.
⊚ true⊚ false
25) An advantage of establishing a greenfield venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.
⊚ true⊚ false
Global Human Resource Management
1. What are the main advantages and disadvantages of the ethnocentric, polycentric, and geocentric approaches to staffing policy? When is each approach appropriate?
2. What is the link between an international business’s strategy and its human resource management policies, particularly with regard to the use of expatriate employees and their pay scale?
3. In what ways can organized labor constrain the strategic choices of an international business? How can an international business limit these constraints?
4.You work in the human resource department at the headquarters of a multinational corporation. Your company is about to send a number of managers overseas as expatriates to France and New Zealand. You need to create an executive summary evaluating, comparing, and contrasting the possible issues expats may encounter in these two countries. Your manager tells you that a tool called Expat Explorer created by HSBC can assist you in your task.
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.1) Employee compensation and labor relations are functions associated with human resource management.
⊚ true⊚ false
2) An expatriate manager is a citizen of one country who is working abroad in one of the firm’s subsidiaries.
⊚ true⊚ false
3) Organizational architecture refers to an organization’s norms and value systems.
⊚ true⊚ false
4) Ethnocentric staffing policies are in place when all key management positions are filled by parent-country nationals.
⊚ true⊚ false
5) A firm would pursue an ethnocentric staffing policy when it believes there are an abundance of qualified individuals from the host country to fill senior management positions.
⊚ true⊚ false
6) An international firm demonstrates cultural myopia when it adopts cross-cultural literacy policies and understands cultural differences in a host country.
⊚ true⊚ false
7) A polycentric approach to staffing might be less expensive to implement than an ethnocentric approach.
⊚ true⊚ false
8) For international firms, an ethnocentric staffing approach is compatible with a localization strategy.
⊚ true⊚ false
9) Citizens of a foreign country working in the home country of their multinational employer are known as inpatriates.
⊚ true⊚ false
10) According to a study by R. L. Tung, the most indicated reason for expatriate failure among U.S. multinationals was a lack of technical competence.
⊚ true⊚ false
11) A person’s willingness to communicate is an important dimension in others-orientation, which was identified by Mendenhall and Oddou as a factor that predicts success in a foreign posting.
⊚ true⊚ false
12) It is important for the spouse of an expatriate manager, and perhaps the whole family, to be included in cultural training programs.
⊚ true⊚ false
13) Repatriation is the first step in integrating new international managers into the host country.
⊚ true⊚ false
14) Bringing managers together in one location for extended periods and rotating them through different jobs in several countries help a firm build an informal management network.
⊚ true⊚ false
15) Unintentional bias makes it easy to evaluate the performance of expatriate managers objectively.
⊚ true⊚ false
16) The balance sheet approach to expatriate pay is used for expatriates in lower economic postings to show how their reduced income level is in line with the economy where they are living.
⊚ true⊚ false
17) An expatriate would receive a hardship allowance in order to ensure he or she will enjoy the same standard of living in the foreign posting as at home.
⊚ true⊚ false
18) Unless a host country has a reciprocal tax treaty with the expatriate’s home country, an expatriate must pay income tax to both the home- and host-country governments.
⊚ true⊚ false
19) A concern of organized labor is that an international business will farm out highly skilled tasks to foreign plants.
⊚ true⊚ false
20) International trade secretariats have been highly successful in linking national unions in the automobile and steel industries.
⊚ true⊚ false
McDonald’s Global Compensation Practices
This feature explores McDonald’s efforts to develop a global compensation and performance appraisal strategy. McDonald’s, which has over 400,000 managers and senior employees working in 118 different countries, wants its new program to provide some standardization of compensation and performance appraisal for the firm, but at the same time, allow subsidiaries to tailor the program to local market conditions.
Discussion Questions
1. What does McDonald’s hope to gain from having a global compensation and performance appraisal system in place?
2. How does the compensation and performance appraisal system introduced at McDonald’s allow managers to take local market differences into account? Why is this type of approach important to employees?
3. How does McDonald’s approach help the company to consider local differences when reviewing the performance of different country managers and awarding bonus pay?
Lecture Note: To extend the discussion of this feature, consider https://www.washingtonpost.com/posteverything/wp/2014/10/29/were-not-denmark-but-we-can-learn-something-from-that-nation-about-how-wages-are-set/, https://www.theatlantic.com/business/archive/2013/08/the-magical-world-where-mcdonalds-pays-15-an-hour-its-australia/278313 and https://www.huffpost.com/entry/global-mcdonalds-protests_n_5324938.
Global Mobility at Shell
The closing case examines how Royal Dutch Shell, a global petroleum company employing about 90,000 people, of which are some 6,000–7,000 expatriates. Managing this workforce is a complex task. Shell wants to meet its commercial goals and also transfer valuable knowledge across its operations. Given that the company operates in more than 70 countries, this is not easy. The company often finds it difficult to recruit skilled managers to work in different locations and is working to better understand employee concerns and develop ways to respond to them.
Case Discussion Questions
1. Royal Dutch Shell is one of the largest companies in the world and has been for years. With sales approaching $400 billion and 82,000 employees worldwide, including some 7,000 employees on expatriate assignments, the company is large, complex, and powerful. Compared with retail or consumer companies, Shell is much more narrowly focused and much more technical in orientation. How do you think this narrower focus and technical orientation affects global human resource management at Shell?
2. Shell’s long-term goal is to develop local talent wherever possible, thereby leveraging local employees’ networks, market knowledge, and language skills, while also minimizing costs. Moving Shell employees from other countries to work with partners and transfer expertise is often a key part of the company’s strategy. Can this be done effectively in all world regions (e.g., Middle East and North Africa), where potential local employees do not have the educational background in many cases? How would you solve the education, skill, and knowledge gaps if you were a Shell C-suite leader?
3. Spending significant time (e.g., three years) on an expatriate assignment has significant family and professional implications, as can be seen in the Shell survey that was mentioned in the case. How would you feel if you were given an expatriate assignment today? How would you feel about it if you were 25 years old? 35? 50?
Global Marketing and Business Analytics
1.Imagine you are the marketing manager for a U.S. manufacturer of disposable diapers. Your firm is considering entering the Brazilian market. Your CEO believes the advertising message that has been effective in the United States will suffice in Brazil. Outline some possible objections to this. Your CEO also believes that the pricing decisions in Brazil can be delegated to local managers. Why might she be wrong?
2. Within 20 years, we will have seen the emergence of enormous global markets for standardized consumer products. Do you agree with this statement? Justify your answer.
3. You are the marketing manager for a food products company that is considering entering the Indian market. The retail system in India tends to be very fragmented. Also, retailers and wholesalers tend to have long-term ties with Indian food companies, these ties make access to distribution channels difficult. What distribution strategy would you advise the company to pursue? Why?
4. You work for a company that designs and manufactures personal computers. Your company’s R&D center is in Michigan. The computers are manufactured under contract in Taiwan. Marketing strategy is delegated to the heads of three regional groups: a North American group (based in Chicago), a European group (based in Paris), and an Asian group (based in Singapore). Each regional group develops the marketing approach within its region. In order of importance, the largest markets for your products are North America, Germany, Great Britain, China, and Australia. Your company is experiencing problems in its product development and commercialization process. Products are late to market, the manufacturing quality is poor, costs are higher than projected, and market acceptance of new products is less than hoped for. What might be the source of these problems? How would you fix them?
Marketing Sneakers
The closing case explores the use of celebrity athletes as a marketing tool to reach sneaker buyers around the world. Having a contract with a sports superstar like Michael Jordan or LeBron James, athletes that appeal to people around the world, can take the company to a new level of notoriety. While contracts with athletes that play sports that are globally enjoyed are perhaps more sought after, even contracts with athletes that play in sports with less appeal can be quite lucrative.
Case Discussion Questions
1. Why do superstar athletes have so much brand selling power?
2. Why does the selling power of athletic superstars often transcend sports equipment and apparel?
3. What major sports have the greatest global appeal? Which major sports are more local in appeal? How does this influence a company’s choice of brand ambassador?
4. What explains Michael Jordan’s longevity as a brand ambassador for Nike?
5. Do you think that a superstar such as soccer player Lionel Messi would be a good brand ambassador in the United States?
Lecture Note: To extend this discussion, consider https://www.forbes.com/sites/michaelcannivet/2018/07/07/lebron-james-mega-deal-shows-why-globalization-is-here-to-stay/#5a0d8aa15c1e.
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.1) There is generally a critical link among channel length, the final selling price, and the firm’s profit margin because each intermediary in a channel adds its own markup to the products.
⊚ true⊚ false
2) One drawback of a longer distribution channel is that it increases selling costs when the retail sector is very fragmented.
⊚ true⊚ false
3) Cultural differences often make it easier for a firm to use the same marketing message and selling approach worldwide.
⊚ true⊚ false
4) A push strategy emphasizes the use of mass media rather than personal selling.
⊚ true⊚ false
5) A business might find it more cost effective to use a pull strategy when entering a market with a long distribution channel.
⊚ true⊚ false
6) A disadvantage of standardized advertising is that it increases the costs of value creation by spreading the fixed costs of developing the advertisements over many countries.
⊚ true⊚ false
7) Price discrimination occurs when one store sells a product at full price, but another chooses to put the product on sale.
⊚ true⊚ false
8) Predatory pricing occurs when companies use price as a competitive weapon to drive out weaker competition.
⊚ true⊚ false
9) Multipoint pricing refers to the various pricing strategies a company uses for the same product based on the geographic location of customers.
⊚ true⊚ false
10) In terms of pricing strategies, dumping occurs whenever an international firm sells a product for a price that is less than the price charged by domestic producers.
⊚ true⊚ false
11) Differences in product and technical standards between nations would be a reason a business might vary aspects of its marketing mix.
⊚ true⊚ false
12) Dispersing research and development activities to many locations around the world allows a firm to stay close to the center of leading-edge activity to gather scientific and competitive information and to draw on local scientific resources.
⊚ true⊚ false
13) A company might vary its marketing mix based on differences in national culture.
⊚ true⊚ false
14) Markets can be segmented by geography, demography, sociocultural factors, and psychological factors.
⊚ true⊚ false
15) An intermarket segment refers to the set of customers based in the home country of a corporation.
⊚ true⊚ false
16) Advanced statistical techniques are necessary to conduct predictive analytics.
⊚ true⊚ false
17) Consumers in the most developed countries are often willing to sacrifice their preferred product attributes for lower-priced products.
⊚ true⊚ false
18) Differences in government-mandated product standards can often rule out mass production and marketing of a standardized product.
⊚ true⊚ false
19) A fragmented retail system is one in which a few retailers supply most of the market.
⊚ true⊚ false
20) Keesha sells brightly colored hair accessories directly to customers on Etsy. Her business has a short channel length.
⊚ true⊚ false
Global Production and Supply Chain Management
1. An electronics firm is considering how best to supply the world market for microprocessors used in consumer and industrial electronic products. A manufacturing plant costs approximately $500 million to construct and requires a highly skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $10 and $15 billion. The tariffs prevailing in this industry are currently low. Should the firm adopt a concentrated or decentralized manufacturing strategy? What kind of location(s) should the firm favor for its plant(s)?
2. A chemical firm is considering how best to supply the world market for sulfuric acid. A manufacturing plant costs about $20 million to construct and requires a moderately skilled workforce. The total value of the world market for this product over the new 10 years is estimated to be between $20 and $30 billion. The tariffs prevailing in this industry are moderate. What kind of location(s) should the firm seek for its plant(s)?
3. A firm must decide whether to make a component part in-house or to contract it out to an independent supplier. Manufacturing the part requires a nonrecoverable investment in specialized assets. The most efficient suppliers are located in countries with currencies that many foreign exchange analysts expect to appreciate substantially over the next decade. What are the pros and cons of (a) manufacturing the component in-house and (b) outsourcing manufacturing to an independent supplier? Which option would you recommend? Why?
4. Reread the Management Focus “IKEA Production in China,” and then answer the following questions:
What are the benefits to IKEA of shifting so much of its global production to China?
What are the risks associated with a heavy concentration of manufacturing assets in China?
What strategies might IKEA adopt to maximize the benefits and mitigate the risks associated with moving so much product?
5. Explain how the global supply chain functions of (a) logistics and (b) purchasing can be used to strategically leverage the global supply chains for a manufacturing company producing mobile phones.
6. What type of interorganizational relationship should a global company consider in the (a) inbound portion of its supply chains if the goal is to buy commodity-oriented component parts for its own production and (b) outbound portion of its supply chains if the goal is to establish a strong partnership in reaching end-customers?
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.1) In recent years, the trend among U.S. firms is to outsource the “production” of some service activities to developing nations to take advantage of lower labor costs.
⊚ true⊚ false
2) The part of the supply chain that plans, implements, and controls the effective flows and inventory of raw materials is known as purchasing.
⊚ true⊚ false
3) A business that supplies parts to a manufacturer would be part of the downstream supply chain.
⊚ true⊚ false
4) W. Edwards Deming believed that achieving better quality requires the commitment of everyone in a company.
⊚ true⊚ false
5) When applying the Six Sigma approach, when there are a lower number of “sigmas,” there are a greater number of errors.
⊚ true⊚ false
6) The ISO 9000 system used in the European marketplace provides small companies with information regarding export opportunities.
⊚ true⊚ false
7) In recent years, time-based competition has become more important in international business.
⊚ true⊚ false
8) In international business, when consumer demand is prone to large and unpredictable shifts, the firm that can adapt most quickly to these shifts will gain an advantage.
⊚ true⊚ false
9) Location externalities, such as the presence of supporting industries, can affect a company’s foreign direct investment decision.
⊚ true⊚ false
10) In international business, a relatively high level of fixed costs makes it economical for a company to perform a particular activity in several locations at once.
⊚ true⊚ false
11) According to the concept of economies of scale, as plant output expands, unit costs increase.
⊚ true⊚ false
12) Minimum efficient scale refers to the level of output at which most plant-level scale economies are exhausted.
⊚ true⊚ false
13) In terms of minimum efficient scale of output, the “unit cost curve” rises with output until a certain output level is reached, at which point further increases in output realize little reduction in unit costs.
⊚ true⊚ false
14) An advantage of a low minimum efficient scale is it allows a company to accommodate demands for local responsiveness.
⊚ true⊚ false
15) Flexible manufacturing technologies allow a company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.
⊚ true⊚ false
16) Flexible machine cells enhance a company’s ability to provide mass customization.
⊚ true⊚ false
17) One downfall of flexible manufacturing technology is that it does not help a company customize products for different national markets.
⊚ true⊚ false
18) Flexible manufacturing technologies force a company to establish manufacturing facilities in each major national market in order to meet demand.
⊚ true⊚ false
19) Industrial products have few national differences in consumer taste and preference, hence the need for local responsiveness is reduced for such products.
⊚ true⊚ false
20) Since paint products have a low value-to-weight ratio, when they are shipped anywhere around the world, the transportation costs account for a large percentage of total costs.
⊚ true⊚ false
21) Source factories should be located where production costs are low.
⊚ true⊚ false
22) A contributor factory acts as a stand-alone unit and has its own infrastructure for development, engineering, and production.
⊚ true⊚ false
23) A “buy” decision is favored when there is a chance that supply cannot be guaranteed if the firm moves production overseas.
⊚ true⊚ false
24) The inform function of packaging refers to the package’s ability to contain the products properly.
⊚ true⊚ false
25) A JIT system provides a company with enough buffer stock to meet any product demands.
⊚ true⊚ false
.
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