9.

Superior value creation relative to

Chapter 12 rivals requires that the gap between the value
and cost of production achieved by a company
1. The actions that managers take to
be lesser than the gap attained by its
attain the goals of the firm are referred to as a
competitors.
firm's strategy. True False
True False
10. Diminishing returns imply that when a
2. Profit growth is measured by the firm already has significant value built into its
percentage increase in net profits over time.
product offering, increasing value by a
True False
relatively small amount requires only minimal
additional costs.
3. The amount of value a firm creates is
True False
measured by the difference between its costs
of production and the value that consumers
11. According to Michael Porter, all
perceive in its products.
positions on the efficiency frontier are viable.
True False
True False

4. The price a firm charges for a good or

12. The various value creation activities
service is typically more than the value placed
that a firm undertakes are referred to as
on that good or service by the customer.
operations.
True False True False

5. Consumer surplus captures some of

13. For services such as banking or health
the value of a product thereby reducing the care, production typically occurs when the
price a firm can charges for it.
service is being designed by in-house
True False
professionals.
True False
6. The greater the consumer surplus, the
lower the value for the money the consumer
14. In terms of attaining a competitive
gets.
advantage, support activities can be as
True False
important as the primary activities of the firm.
True False
7. The higher the firm’s profit per unit
sold is, the greater its profitability will be, all
15. The human resource function controls
else being equal.
the transmission of physical materials through
True False
the value chain.
True False
8. A strategy that focuses primarily on
increasing the attractiveness of a product is
16. Maintaining the company
referred to as a low-cost strategy.
infrastructure is a support activity.
True False
True False
17. The term organizational structure 24. The ability to spread fixed costs over a
refers to the totality of a firm's organization, large volume is one of the sources of
including organization architecture, control economies of scale.
systems and incentives, organizational culture, True False
processes, and people.
True False 25. The firm that moves up the experience
curve most rapidly will have a cost advantage
18. Processes are the manner in which vis-à-vis its competitors.
decisions are made and work is performed True False
within the organization.
True False 26. One key to progressing downward on
the experience curve is to decrease the volume
19. Firms that operate internationally are produced by a single plant.
able to realize location economies by True False
dispersing individual value creation activities
to locations where they are performed most 27. Strategies that increase profitability
efficiently and effectively. can also expand a firm's business and thus
True False enable it to attain a higher rate of profit
growth.
20. Successful global expansion requires True False
the transfer of core competencies to foreign
markets where indigenous competitors lack 28. Responding to pressures for cost
them. reduction requires a firm to try to lower the
True False costs of value creation.
True False
21. Location economies are the economies
that arise from performing a value creation 29. Universal needs exist when the tastes
activity in the optimal location for that activity, and preferences of consumers in different
wherever in the world that might be. nations are different.
True False True False

22. The experience curve refers to
systematic increase in production costs that
have been observed to occur over the life of a
product.
True False
23. Learning effects will be more
significant in an assembly process which
involves 100 simple steps than in an assembly
process which involves 1,000 complex steps.
True False
30. Pressures for local responsiveness
imply that it may not be possible to leverage
skills and products associated with a firm’s
core competencies wholesale from one nation
to another.
True False
31. Firms that pursue an international
strategy focus on increasing profitability by
reaping the cost reductions that come from
economies of scale, learning effects, and 38. The rate of return that a firm makes on
location economies. its invested capital is referred to as _____.
True False A. stakeholder return
32. A global standardization strategy B. profitability
makes most sense when there are strong C. profit growth
pressures for cost reductions and demands for D. process value
local responsiveness are minimal. E. strategic fit
True False
39. Profit growth is measured by:
33. A localization strategy involves some A. dividing the net profits of the firm by
duplication of functions and smaller total invested capital.
production runs. B. subtracting the previous years gross
True False profit from the current year's gross profit.
C. calculating the difference between the
34. According to researchers, firms facing previous year's profitability and the current
strong pressures for local responsiveness year's profitability.
should pursue a global standardization D. the percentage increase in net profits
strategy. over time.
True False E. adding the profitability of the last two
fiscal years.
35. An international strategy involves
taking products first produced for their 40. Managers are most likely to increase
domestic market and selling them the profitability of their firm by pursuing
internationally with only minimal local strategies that:
customization. A. add value to the firm's products.
True False B. increase costs.
C. enable the firm to reduce the depth of
36. Strategic alliances allow firms to share its product line.
the fixed costs of developing new products or D. allow the firm to sell less products in
processes. existing markets.
True False E. allow the firm to exit from relatively
new markets.

Multiple Choice Questions 41. The amount of value a firm creates is

measured by:
37. _____ is a support activity. A. the difference between the previous
A. Research and development year's profitability and the current year's
B. Production profitability.
C. Marketing and sales B. dividing the market price of its products
D. Logistics by the price that customers are actually willing
E. Customer service to pay.
C. the difference between its costs of E. profit growth
production and the value that consumers
perceive in its products. 45. As a result of consumer surplus, a firm
D. dividing the net profits of the firm by typically charges less price for a good or
total invested capital. service than the value placed on it by
E. the sum of the profitability of the last customers because:
two fiscal years. A. the value creation results in a
corresponding reduction in costs of production.
42. In general, the more value customers B. it is highly unlikely that the same good
place on a firm's products: or service will be available to the customers
A. the lesser the profitability of the firm. from other firms.
B. the higher the competitive pressure C. the firm is competing with other firms
from other firms. for the customer's business.
C. the lesser the quality of the product. D. the firm charges a price that reveals a
D. the lesser the consumer surplus for consumer's assessment of the product's value.
those products. E. the firm creates value for the customer
E. the higher the price the firm can by producing a wide range of products
charge for those products.
46. One of the reasons why a firm typically
43. Typically, the price a firm charges for a charges for a good or service less than the
good or service is: value placed on that good or service by the
A. less than the value placed on that good customer is because:
or service by the customer.
B. more than what customers assume it A. the firm attempts to create value for
would be. the consumers by providing them a wide range
C. more than the market price for similar of products
goods or services. B. it is normally impossible to segment a
D. the same as the value placed on that market based on each customer's reservation
good or service by the customer. price.
E. less than the lowest priced similar good C. the value creation results in a
or service in the market. corresponding reduction in costs of production.
D. the firm frequently modifies its
44. The price a firm charges for a good or products to compete with the products
service is typically less than the value placed introduced by other firms.
on that good or service by the customer. This is E. it is highly unlikely that the same good
because the consumer captures some of that or service will be available to the customers
value in the form of what economists call a from other firms.
_____.
A. firm value 47. The price that reflects an individual's
B. consumer surplus assessment of the value of a product is
C. customer loyalty referred to as:
D. firm deficit
A. the market price. C. generating more profits.
B. the customer's negotiated price. D. making the product more attractive.
C. the base value of the product. E. increasing the profitability of the
D. the customer's reservation price. product.
E. the profit growth price.
51. A strategy that focuses primarily on
48. The value of a product to an average increasing the attractiveness of a product is
consumer is V, the average price that the firm referred to as a _____ strategy.
can charge a consumer for that product is P,
and the average unit cost of producing that A. standardization
product is C. For this scenario, which of the B. differentiation
following is true? C. target-identification
D. low-cost
A. The firm makes a profit so long as C is E. profitability
greater than P.
B. The higher C is relative to P, greater will 52. According to Michael Porter, _____
be the profit. and _____ are the two basic strategies for
C. The consumer surplus per unit is equal improving creating value and attaining a
to V - P. competitive advantage in an industry.
D. The higher the intensity of competitive
pressure, the higher the price charged relative A. differentiation; low-cost
to V. B. value creation; generalization
E. The lower the consumer surplus the C. one-size-fits-all; zero-sum
greater the value for the money the consumer D. comparison; standardization
gets. E. profitability; strategic fit

49. The _____ of a firm is measured by the 53. According to Michael Porter, superior
difference between the value of a product to portability goes to a firm that:
an average consumer and the average unit cost
of producing that product. A. creates similar products as their
competitors.
A. customer surplus B. keeps the gap between value and cost
B. value creation of production smaller than the gap attained by
C. cost curve competitors.
D. value efficiency C. drives down the cost structure of its
E. customer reservation business.
D. has the highest cost structure in the
50. A company can create more value for a industry.
product by: E. has the least valuable product in the
industry.
A. charging a higher price for the product.
B. raising production costs.
54. Superior value creation relative to A. To maximize its profitability, a firm
rivals requires that the firm: should avoid a position that lies on the
efficiency frontier.
A. creates similar products as its B. Not all positions on the efficiency
competitors so that consumers do not have to frontier are viable.
pay a premium price. C. The efficiency frontier is a function of
B. has the highest cost structure in the the cost and revenue of a product.
industry. D. Positions inside the frontier are more
C. creates the least valuable product in the efficient than the positions that are located on
eyes of consumers. the frontier.
D. ensures that the gap between value E. It is always concave in shape because of
and cost of production is greater than the gap diminishing returns.
attained by competitors.
E. drives up the cost structure of its 58. For a firm to maximize its profitability,
business. it is necessary that it:

55. The _____ shows all of the different A. creates products similar to the products
positions that a firm can adopt with regard to of its competitors.
value creation and low cost assuming that its B. does not configure its internal
internal operations are configured adequately operations to reduce costs.
to support a particular position. C. minimizes the value of the consumer
surplus
A. demand-value model D. picks a position on the efficiency
B. experience curve frontier that is viable.
C. efficiency frontier E. strips all the value out of its product
D. optimal output model offering.
E. surplus curve
59. A firm maximizes its profitability when
56. The efficiency frontier has a convex it:
shape because of:
A. creates products similar to the products
A. a high-cost structure. of its competitors.
B. diminishing returns. B. minimizes the value provided by its
C. a significantly low product value. products.
D. low production costs. C. picks a position on the efficiency
E. high profit growth. frontier that is not viable.
D. strips all the value out of its product
57. Which of the following statements is offering.
true of the efficiency frontier? E. configures its internal operations to
support the position selected by it on the
efficiency frontier.
60. A firm's profitability maximizes when D. Human resource function
it: E. Company infrastructure

A. creates products similar to the products 64. Which of the following operations of a
of its competitors. firm is concerned with the design of products
B. strips all the value out of its product and production processes?
offering.
C. ensures that it has the right A. Human resources
organization structure in place to execute its B. Research and development
strategy. C. Marketing and sales
D. picks a position on the efficiency D. Materials management
frontier that is not viable. E. Company infrastructure
E. does not configure its internal
operations to reduce costs. 65. For services such as banking or health
care, "production" typically occurs when:
61. The value creation activities of a firm
are categorized as _____ and _____. A. the customer specifies the service
requirements.
A. primary activities; support activities B. the service is paid for by the customer.
B. strategic activities; functional activities C. the service is designed in-house.
C. ancillary functions; tertiary functions D. the service is delivered to the
D. primary activities; core activities customer.
E. goal-oriented activities; organizational E. the customer gives a feedback.
activities
66. Which of the following is a support
62. The _____ activities of a firm have to activity in the operations of a firm?
do with the design, creation, and delivery of
the product; its marketing; and its support and A. Research and development
after-sale service. B. Customer service
C. Marketing and sales
A. support D. Creation and maintenance of
B. tertiary information systems
C. ancillary E. Production
D. primary
E. secondary 67. Of all the value creation activities in a
firm, _____ create(s) value by discovering
63. Which of the following is a primary consumer needs and communicating them
activity in the operations of a firm? back to the R&D function of the company,
which can then design products that better
A. Logistics function match those needs.
B. Research and development
C. Information systems A. production
B. marketing and sales A. human resource
C. human resources B. finance
D. logistics C. marketing
E. information systems D. logistics
E. research and development
68. Which of the following functions
creates a perception of superior value in the 72. The _____ function of a value chain
minds of consumers by solving consumer ensures that the company has the right mix of
problems and by supporting them after they skilled people to perform its value creation
have purchased the product? activities effectively.

A. Production A. finance
B. Marketing and sales B. marketing
C. Human resources C. human resource
D. Customer service D. logistics
E. Logistics E. marketing and sales

69. The _____ of a value chain provide 73. Which of the following support
inputs that allow the primary activities to functions is most likely to involve dealing with
occur. the organizational structure, control systems,
and culture of the firm?
A. lateral functions
B. support activities A. Human resource function
C. core activities B. Logistics
D. central activities C. Information systems
E. secondary activities D. Company infrastructure
E. Inventory management
70. _____ is a value creation activity which
falls into the category of primary activities. 74. Who among the following should be
viewed as part of a firm’s infrastructure?
A. Creation and maintenance of
information systems A. Procurement manager
B. Customer service B. Top management
C. Human resources C. Production manager
D. Logistics D. Research and development scientist
E. Company infrastructure maintenance E. Marketing personnel

71. The _____ function of a value chain 75. The term _____ refers to the totality of
controls the transmission of physical materials a firm's organization, including its
through the value chain, from procurement organizational structure, control systems,
through production and into distribution. incentives, processes, and people.
A. primary structure E. the norms and value systems that are
B. organization architecture shared among the employees of an
C. organizational hierarchy organization.
D. organizational model
E. management structure 79. Which of the following terms best
represents the norms and value systems that
76. Which of the following is a part of the are shared among the employees of an
organization architecture that consists of the organization?
metrics used to measure the performance of
subunits and make judgments about how well A. Process scenario
managers are running those subunits? B. Organizational structure
C. Business structure
A. Reports D. Organizational culture
B. Controls E. Management structure
C. Rewards
D. Knowledge flows 80. A firm's ability to increase its
E. Dominions profitability and profit growth by expanding
globally is constrained:
77. _____ are considered a part of an
organization architecture and are used to A. by the imperative of localization.
reward appropriate managerial behavior. B. by the economies of scale.
C. due to customer surplus.
A. Knowledge flows D. due to the leveraging of skills developed
B. Reports in foreign operations.
C. Processes E. due to the dispersion of individual value
D. Incentives creation activities.
E. Controls
81. A company can increase its growth rate
78. Processes are: by taking goods or services developed at home
and selling them internationally. The returns
A. the manner in which decisions are from such a strategy are likely to be greater if:
made and work is performed within the
organization. A. the product is already being offered by
B. the metrics used to measure the local companies in the nations that the
performance of subunits. company enters.
C. the devices used to reward appropriate B. the product is a generic product that
managerial behavior. requires little differentiation.
D. the metrics used to make judgments C. indigenous competitors in the nations
about how well managers are running the that the company enters lack comparable
subunits. products.
D. there is a high inflation in the nations
that the company enters.
E. the product is perceived to be very the optimal place for that activity, wherever in
costly in the home country of the company. the world that might be.

82. Skills within a firm that competitors A. Diversification economies

cannot easily match or imitate are referred to B. Value-building economies
as _____. C. Location economies
D. Support economies
A. core competencies E. Core economies
B. barriers to entry
C. internalities 86. Which of the following is most likely to
D. externalities be the advantage of locating a value creation
E. premium skills activity in the optimal location for that
activity?
83. How does possessing a core
competence help a firm? A. It increases the costs of value creation.
B. It decreases consumer surplus.
A. It helps a firm to create value in such a C. It helps the firm to achieve a high-cost
way that premium pricing is impossible. position.
B. It reduces a firm's dependence on its D. It nullifies all trade barriers.
logistics function. E. It enable a firm to differentiate its
C. It enables a firm to reduce the costs of product offering from those of competitors.
value creation.
D. It reduces the scope of transfer of skills 87. A firm creates a(n) _____ by dispersing
to foreign markets. different stages of its value chain to those
E. It reduces the need to replicate a locations around the world where the value
business model in a foreign market. added is maximized or where the costs of
value creation are minimized.
84. If a value creation activity of a firm can
take place in Mexico most effectively, then A. integral circle
that activity of the firm must be based in B. dispersal chain
Mexico. Firms that pursue such a strategy are C. global web
most likely to realize: D. international mesh
E. worldwide circle
A. a position inside the efficiency frontier.
B. the experience curve. 88. In theory, which of the following
C. economies of scale. advantages can be realized by a firm by
D. location economies. implementing a global web of operations?
E. demographic advantages.
A. It will be able to raise the perceived
85. _____ are the economies that arise value of its goods and services.
from performing a value creation activity in B. It will be able to decrease consumers'
reservation price for its products.
C. It will be able to decrease consumer A. learning effects and economies of
surplus. scale.
D. It will be able to increase the cost of B. technology inputs and wealth transfer.
value creation. C. leveraging subsidiary and local
E. It will be able to sell its products at a responsiveness.
price which is below its cost price in its home D. standardized manufacturing and global
country. web.
E. efficiency frontier and location
89. Which of the following caveats is most economies
likely to discourage global expansion of
businesses? 93. _____ refer to cost savings that come
from acquiring knowledge from doing a task.
A. Economies of scale
B. High consumers' reservation prices A. Learning effects
C. Trade barriers B. Exponential effects
D. Mass customization C. Ancillary effects
E. Low transportation costs D. Economies of scale
E. Location economies
90. The _____ refer(s) to systematic
reductions in production costs that have been 94. Labor productivity increases over time
observed to occur over the life of a product. as individuals understand the most efficient
ways to perform particular tasks. This is as a
A. experience curve result of _____.
B. learning effects
C. location economies A. diminishing returns
D. efficiency slope B. location economies
E. economies of scale C. economies of time
D. learning effects
91. A number of studies have observed E. an efficiency frontier.
that a product's production costs decline by
some quantity about each time _____ doubles. 95. In which of the following tasks will the
learning effects be most significant?
A. annual output
B. cumulative output A. Pizza delivery for a fast-food major
C. workforce B. Data entry for a loan recovery center
D. fixed investment C. Assembly process involving 1,000
E. foreign domestic investment complex steps
D. Sewing buttons onto shirts in a garment
92. The two phenomena that help explain factory
the experience curve are: E. Delivering letters to different recipients
96. Which of the following is true about C. captured savings.
learning effects? D. size effects.
E. location economies.
A. They tend to be more significant in non-
repetitive tasks. 100. Which of the following statements is
B. They tend to be less significant when a true about economies of scale?
task is technologically complex.
C. They typically last a lifetime. A. Economies of scale lead to an increase
D. They are important only during the in the average unit cost of a product.
start-up period of a new process. B. Attaining economies of scale increases
E. They do not have any effect on the cost a firm's profitability.
of production. C. The ability to spread variable costs over
a large volume is a source of economies of
97. Learning effects tend to be more scale.
significant when: D. Economies of scale result due to the
increase in the perceived value of a product.
A. a task involves a few simple steps. E. Economies of scale refer to cost savings
B. a task is repeated for a period of over that come from learning by doing.
five years.
C. the workforce consists of unskilled 101. Which of the following terms best
labor. represents the systematic reductions in
D. the cumulative output becomes half of production costs that have been observed to
what it was originally. occur over the life of a product?
E. a technologically complex task is
repeated. A. Global web
B. Dispersion linkage
98. _____ refer to the reductions in unit C. Economies of scale
cost achieved by producing a large volume of a D. Experience curve
product. E. Efficiency frontier

A. Location economies 102. Serving a global market from a single

B. Learning effects location is consistent with:
C. Standardization economies
D. Core economies A. establishing a high-cost position.
E. Economies of scale B. taking advantage of location
economies.
99. Spreading fixed costs over a large C. moving down the experience curve.
volume results in a cost-savings phenomenon D. operating from a position which falls
which is referred to as: inside the efficiency frontier.
E. going up the global web.
A. volume synergies.
B. economies of scale.
103. Firms that compete in the global E. serve different customers with different
marketplace typically face two types of needs.
competitive pressure: pressures for _____ and
pressures to _____. 106. Which of the following terms best
represents the requirements that are the same
A. increasing investment; minimize all over the world, such as steel, bulk
consumer surplus chemicals, and industrial electronics?
B. labor skill enhancement; minimize
economies of scale A. Universal needs
C. cost reductions; be locally responsive B. Efficiency frontier
D. global promotions; move down the C. Global web
efficiency frontier D. Lateral requirements
E. product standardization; move up the E. Supreme needs
experience curve
107. Pressures for cost reduction are
104. Why do companies find dealing with intense in:
high pressures for both, cost reductions and
local responsiveness, a difficult strategic A. firms which produce products that are
challenge? well differentiated.
B. firms whose major competitors are
A. Cost reductions are inversely based in high-cost locations.
proportional to standardization. C. firms with persistent low capacity.
B. Being locally responsive tends to raise D. firms in which consumers face low
costs. switching costs.
C. Cost reductions negatively impact E. firms with no international competition.
maximization of single-plant utilization.
D. As the quantity produced goes on 108. The liberalization of the world trade
increasing, it becomes more difficult for a and investment environment in recent
company to achieve economies of scale. decades, by facilitating greater international
E. Customer tastes are usually identical competition, has generally:
across global markets. A. increased cost pressures.
B. decreased the demand for local
105. Cost reduction pressures tend to be responsiveness.
particularly intense in industries that: C. decreased pressures for cost reduction.
D. increased consumer surplus.
A. create products that serve universal E. reduced the production of conventional
needs. commodity products.
B. create customized products.
C. are not involved in international 109. Which of the following conditions is
business. most favorable to reap gains from global scale
D. produce products that have inelastic economies?
demand. A. Low demand for local responsiveness
B. High pressures for cost reduction D. Declining demand for local
C. Lack of universal needs customization
D. National differences in accepted E. Host-government demands
business practices
E. High pressure to delegate production to 113. For an international business, which of
domestic subsidiaries the following is most likely to be an outcome
of protectionism and nationalism in a host-
110. Which of the following supports the country?
argument that customer demands for local A. Increase in the attractiveness of
customization are on the decline worldwide? location economies
A. Local and indigenous industries are B. Pressure for localization of production
increasingly filling up available demand. C. Requirement of standardization of
B. High costs of local customization are products or services
deterring companies from doing so. D. Pressure for cost reduction
C. Governments across the world are E. Decrease in the significance of local
standardizing their legal procedures. responsiveness
D. Customer tastes have converged
worldwide. 114. The appropriateness of the strategy
E. Managers worldwide ignore the that a firm chooses to use in an international
differences in consumer tastes and preferences. market varies with the extent of pressures for
_____ and _____.
111. Which of the following is most likely to
necessitate the delegation of marketing A. quality improvement; product
functions to national subsidiaries? standardization
A. Differences in distribution channels B. customer surplus; quality
B. Pressures for decreasing consumer improvements
surplus C. customer surplus; product
C. Lack of product customization standardization
D. Pressures for increasing economies of D. cost reductions; local responsiveness
scale E. product standardization; cost
E. Pressures for increasing consumers' reductions
reservation price 115. Firms that pursue a(n) _____ strategy
focus on increasing profitability and profit
112. Which of the following is most likely to growth by reaping the cost reductions that
require a firm to be locally responsive in a come from economies of scale, learning
host-country? effects, and location economies.
A. Similarity in distribution channels A. international
B. Identical traditional practices among B. transnational
countries C. localization
C. Standard consumer tastes and D. global standardization
preferences worldwide E. nationalization
116. Which of the following is true of a firm C. Localization strategy
that pursues a global standardization strategy? D. Transnational strategy
A. It ensures that it pursues a high-cost E. Nationalization strategy
strategy on a global scale. 120. Which of the following is true of a
B. It has its production, marketing, and R localization strategy?
& D activities in only one optimum location. A. It allows a firm to capture the cost
C. It tries to customize its products to local reductions of mass-producing a standardized
conditions. product
D. It has shorter production runs. B. It reduces duplication of functions.
E. It reaps maximum benefits from C. It involves longer production runs.
economies of scale and learning effects. D. It makes sense if the value added by
117. A firm is most likely to pursue a global customization supports higher pricing.
standardization strategy when: E. It substantially reduces local demand.
A. it wants to implement a high-cost
strategy on a global scale. 121. A global car manufacturer wants to
B. it wants to reduce consumer surplus. start production in China. While catering to
C. there are no universal needs to be local responsiveness, what can the firm do to
served. get scale economies?
D. there are strong demands for local
responsiveness. A. Increase costs whenever possible
E. there are strong pressures for cost B. Use common vehicle platforms and
reduction. components across many different models
C. Shorten the production runs for each
118. Which of the following strategies is component
most likely to pursued by a firm when there D. Increase the duplication of functions
are strong pressures for cost reductions and required for each operation
demands for local responsiveness are E. Manufacture only one type of car and
minimal? sell it in all the international markets
A. Domestic strategy
B. Global standardization strategy 122. Which of the following strategies is a
C. International strategy firm most likely to pursue when it
D. Transnational strategy simultaneously faces both strong cost
E. Nationalization strategy pressures and strong pressures for local
responsiveness?
119. Which of the following strategies A. Global standardization strategy
focuses on increasing profitability by B. Localization strategy
customizing the firm's goods or services so that C. International strategy
they provide a good match to tastes and D. Transnational strategy
preferences in different national markets? E. Nationalization strategy

A. International strategy 123. Which of the following is an

B. Global standardization strategy observation made by researchers Bartlett and
Ghoshal regarding modern multinational market and sell them across various markets
enterprises? with only minimal local customization.
A. Global logistics industry makes the A. nationalization
concept of "location economies" redundant for B. transnational
international firms. C. global standardization
B. Core competencies and skills can D. international
develop in any of the firm's worldwide E. localization
operations.
C. Flow of skills between a firm and its 127. Pursuing a(n) _____ strategy makes
global subsidiaries should be unidirectional. sense if a firm has a valuable core competence
D. Differentiating across geographic that indigenous competitors in foreign markets
markets helps a firm in reducing costs. lack.
E. Customer demands for local A. global standardization
customization are on the decline worldwide. B. international
C. nationalization
124. Firms that pursue a(n) _____ strategy D. transnational
differentiate their product offering across E. nationalization
geographic markets to account for local
differences. 128. Xerox had a monopoly on
A. international photocopiers for several years as the
B. global standardization technology underlying the photocopier was
C. transnational protected by strong patents. As it served a
D. multi-domestic universal need, this favorable position led
E. nationalization Xerox to pursue a(n) _____ strategy.
A. global standardization
125. Which of the following is true of a B. localization
transnational strategy? C. international
A. It is easy to implement because it does D. transnational
not place any conflicting demands on a E. nationalization
company.
B. It is used when the pressures for cost 129. Mayer Life Systems, a manufacturer of
reductions are low. surgical and medical appliances, invented and
C. It is usually used when the pressure for patented a new dialysis machine that radically
local responsiveness is relatively low. reduced maintenance and operational issues.
D. It enables the one-way flow of core Responding to a global demand, it decided to
competencies. sell the machines manufactured at its plant in
E. It is used by firms that try to achieve the U.S. to various markets across the globe.
low costs through location economies, Since the product features provided by Mayer
economies of scale, and learning effects. were not provided by any other competitor,
Mayer did not feel any pressure for cost
126. Firms that pursue a(n) _____ strategy reductions. Which of the following strategies is
take products first produced for their domestic most likely being pursued by Mayer?
A. International strategy D. strategic alliance
B. Localization strategy E. dispersion linkage
C. Global standardization strategy
D. Transnational strategy 133. Which of the following is a
E. Nationalization strategy disadvantage of a strategic alliance?

130. Which of the following statements is A. Entering into a strategic alliance, makes
true about an international strategy? it difficult for a firm to enter into a foreign
A. International strategy typically involves market.
taking products first produced for foreign B. As a result of strategic alliance, fixed
markets and then customizing them for costs of developing new products tend to
domestic markets. increase.
B. International strategy should be C. Strategic alliance gives competitors a
pursued by a firm if it manufactures a product low-cost route to new technology and
that satisfies local, rather than universal, needs. markets.
C. When a firm pursues an international D. Firms that enter into a strategic alliance
strategy, the head office of the firm retains with a foreign firm tend to face higher trade
fairly tight control over marketing and product barriers.
strategy. E. Strategic alliance always leads to a loss
D. Firms pursuing the international to either of the firms involved.
strategy tend to outsource their development
functions such as R&D. 134. One of the principal risks associated
E. International strategy should be with a strategic alliance is that:
pursued by a firm only if it faces strong A. it brings together the complementary
competition in foreign markets. skills of alliance partners.
B. it makes it difficult for the partner firms
131. The term _____ refers to cooperative to enter into a foreign market.
agreements between potential or actual C. a firm can give away more than it
competitors. receives.
D. it does not allow firms to share fixed
A. tactical union costs.
B. strategic alliance E. it almost always fails.
C. political affiliation
D. economic association 135. Managing an alliance successfully
E. nationalization requires building interpersonal relationships
between the firms' managers, or what is
132. A _____ allows two or more firms to sometimes referred to as:
share the fixed costs (and associated risks) of A. relational capital.
developing new products or processes. B. interorganizational synergy.
A. franchising agreement C. power equilibrium.
B. global web D. symbiotics.
C. free trade agreement E. intraorganizational coordination.