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OSU BUSMHR 2000 - TBChap012

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Chapter 12The Strategy of International Business True / False Questions 1. The actions that managers take to attain the goals of the firm are referred to as a firm's strategy. True False 2. Profit growth is measured by the percentage increase in net profits 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. The price a firm charges for a good or service is typically more than the value placed on that good or service by the customer. True False 5. Consumer surplus captures some of the value of a product thereby reducing the pricea firm can charges for it. True False 6. The greater the consumer surplus, the lower the value for the money the consumer gets. True False 7. The higher the firm’s profit per unit sold is, the greater its profitability will be, all else being equal. True False 12-1© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.8. A strategy that focuses primarily on increasing the attractiveness of a product is referred to as a low-cost strategy. True False 9. Superior value creation relative to rivals requires that the gap between the value and cost of production achieved by a company be lesser than the gap attained by its competitors. True False 10. Diminishing returns imply that when a firm already has significant value built into its product offering, increasing value by a relatively small amount requires only minimal additional costs. True False 11. According to Michael Porter, all positions on the efficiency frontier are viable. True False 12. The various value creation activities that a firm undertakes are referred to as operations. True False 13. For services such as banking or health care, production typically occurs when the service is being designed by in-house professionals. True False 14. In terms of attaining a competitive advantage, support activities can be as important as the primary activities of the firm. True False 15. The human resource function controls the transmission of physical materials through the value chain. True False 16. Maintaining the company infrastructure is a support activity. True False 12-2© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.17. The term organizational structure refers to the totality of a firm's organization, including organization architecture, control systems and incentives, organizational culture, processes, and people. True False 18. Processes are the manner in which decisions are made and work is performed within the organization. True False 19. Firms that operate internationally are able to realize location economies by dispersingindividual value creation activities to locations where they are performed most efficiently and effectively. True False 20. Successful global expansion requires the transfer of core competencies to foreign markets where indigenous competitors lack them. True False 21. 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 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 24. The ability to spread fixed costs over a large volume is one of the sources of economies of scale. True False 25. The firm that moves up the experience curve most rapidly will have a cost advantagevis-à-vis its competitors. True False 12-3© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.26. One key to progressing downward on the experience curve is to decrease the volume produced by a single plant. True False 27. 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 28. Responding to pressures for cost reduction requires a firm to try to lower the costs of value creation. True False 29. Universal needs exist when the tastes and preferences of consumers in different nations are different. 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 location economies. True False 32. A global standardization strategy makes most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal. True False 33. A localization strategy involves some duplication of functions and smaller production runs. True False 34. According to researchers, firms facing strong pressures for local responsiveness should pursue a global standardization strategy. True False 12-4© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.35. An international strategy involves taking products first produced for their domestic market and selling them internationally with only minimal local customization. True False 36. Strategic alliances allow firms to share the fixed costs of developing new products or processes. True False Multiple Choice Questions 37.


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