Chapter 02 Theoretical Foundationstestbankcollege.eu/sample/Test-Bank-Global-Marketing-5th... · Web viewAn externalization strategy, as expressed in the use of agents, brokers, or

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Chapter 02Theoretical Foundations

Multiple Choice Questions

1. (p. 31) Nike and Reebok were the main competitors for sneakers in the international market in the 1980's, but lost some of their share by which other sneaker brand in the 1990s? A. PumaB. AdidasC. PonyD. U.S. Keds

Difficulty: Easy

2. (p. 33) The fundamental aim of business strategy is to create and maintain: A. lower prices.B. efficient channels.C. a competitive advantage.D. production efficiency.

Difficulty: Easy

3. (p. 33) The America-First Corporation is preparing to "go global" by simultaneously entering several foreign markets. To be successful, the firm must understand: A. its competitive advantages in these markets.B. global compensation.C. import/export laws.D. electronic communication.

Difficulty: Easy

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4. (p. 34) If a company's strength is not firm-specific, then its competitive advantage is usually: A. less imitable.B. less vulnerable to competition.C. less sustainable.D. not subject to change.

Difficulty: Easy

5. (p. 34) The fundamental rationale for the existence of international trade is based upon the principle of: A. comparative advantage.B. absolute advantage.C. political advantage.D. economic necessity.

Difficulty: Easy

6. (p. 34) A country which is more efficient/productive than all other nations with regard to a specific product or resource is said to have a(n): A. comparative advantage.B. monopoly.C. absolute advantage.D. trade deficit.

Difficulty: Easy

7. (p. 34) According to the 1981 Dunning study of comparative advantage, what advantage did the U.S. have? A. Technology of all kindsB. Transportation equipmentC. Food productsD. Mechanical engineering

Difficulty: Medium

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8. (p. 34) After the 1981 Dunning study of comparative advantage, the advantage in _____ has moved from Japan to other Asian countries. A. technologyB. transportation equipmentC. food productsD. textiles

Difficulty: Medium

9. (p. 34-35) For which of the following advantages is location fixed? A. Low cost laborB. ServicesC. Knowledge workersD. Raw materials

Difficulty: Medium

10. (p. 35) A country's absolute advantage may eventually be erased by foreign competitors through the operation of: A. political pressure.B. the international product cycle.C. cartels.D. free trade zones.

Difficulty: Medium

11. (p. 35) According to the _____, an innovating country will eventually import the products it created. A. international product cycleB. principle of absolute advantageC. principle of comparative advantageD. circular flow of innovation model

Difficulty: Easy

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12. (p. 35) The theory of comparative advantage is extended by Porter's concept of: A. the international product cycle.B. the circular flow of innovation.C. the diamond of national advantage.D. economic Darwinism.

Difficulty: Medium

13. (p. 35) The United State's traditional concern with infrastructure gives it a favorable position in which of the following portions of Porter's diamond of national advantage? A. Factor conditionsB. Demand conditionsC. Related and supporting industriesD. Firm strategy, structure, and rivalry.

Difficulty: Medium

14. (p. 35) One of the best examples of exceptions to the traditional international product cycle concept can be found in America's continuing dominance in the area of: A. automobile production.B. home entertainment.C. computer design.D. textiles.

Difficulty: Medium

15. (p. 35) The shift of focus of American industry from home entertainment products such as television and VCRs to computer design is explained by: A. the diamond of national advantage model.B. the circular flow of innovation model.C. the cycle of absolute advantage model.D. the international product cycle model.

Difficulty: Medium

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16. (p. 35-36) Which of the following provides a hope for a nation seeking to develop new skills and gain/renew competitive advantages? A. The cycle of competitive advantageB. The diamond of national advantageC. The cycle of absolute advantageD. The circular flow of innovation

Difficulty: Medium

17. (p. 37) According to Porter, as the manufacturing costs increase in a country's industry: A. the country becomes less competitive.B. the country can still remain competitive in that industry.C. the country will begin focusing on other industries.D. the country will shift its focus to trading in standardized commodities.

Difficulty: Medium

18. (p. 37) The development of high-technology areas such as Silicon Valley south of San Francisco can be best explained by: A. international product cycle.B. new trade theory.C. cycle of innovation.D. circular flow of innovation.

Difficulty: Medium

19. (p. 38) According to the _____, a country can become efficient in the production of goods in which it starts with little or no comparative advantage. A. international product cycleB. new trade theoryC. cycle of innovationD. circular flow of innovation

Difficulty: Medium

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20. (p. 38) Which of the following is most consistent with the concept of the learning organization? A. International product cycleB. Diamond of national advantageC. New trade theoryD. Circular flow of innovation

Difficulty: Medium

21. (p. 38) The "country-of-origin" phenomenon seems to have a particularly strong impact upon perceptions of: A. quality.B. style.C. price.D. content.

Difficulty: Medium

22. (p. 39) Given the intense global competition in many markets, there is an evidence of: A. worsening perceptions of American quality.B. greatly improved perceptions of Japanese quality.C. worsening perceptions of German quality.D. a convergence of quality perceptions.

Difficulty: Easy

23. (p. 40) The America-First Corporation has an unusually large number of patents for critical technological innovations. This fact gives the company an important: A. location specific advantage.B. comparative advantage.C. firm-specific advantage.D. advertising advantage.

Difficulty: Hard

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24. (p. 40) A firm-specific advantage is synonymous with: A. country-specific advantage.B. comparative advantage.C. location-specific advantage.D. differential advantage.

Difficulty: Medium

25. (p. 41) One of the major goals of a knowledge-based organization would be to develop: A. product advantages.B. firm-specific advantages.C. trade barriers.D. transferred advantages.

Difficulty: Medium

26. (p. 41) A resource-based strategy defines the firm in terms of: A. the products it markets.B. the services it markets.C. the needs it seeks to satisfy.D. what it is capable of doing.

Difficulty: Easy

27. (p. 42) Marketing skills are especially difficult to transfer abroad because of their: A. intangibility.B. reliability upon technology.C. product-dependence.D. regulation under import legislation.

Difficulty: Easy

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28. (p. 42) The America-First Corporation is considering how it can best transfer its marketing skills to foreign markets. The firm should probably focus on: A. extensive use of expatriates.B. transferring its best domestic talent to foreign markets.C. hiring/training local people.D. implement ethnocentric staffing policy.

Difficulty: Medium

29. (p. 42) Technology transfer is usually easiest for: A. firms with marketing FSAs.B. manufacturers.C. service franchisers.D. the firms where the advantages are not embodied in the product.

Difficulty: Medium

30. (p. 43) Manufacturing companies need not investment in technology transfer since: A. these factors often represent intangibles.B. the incentive to go abroad is not as strong.C. the final product embodies the advantages already.D. the results of these efforts can be uncertain.

Difficulty: Medium

31. (p. 44) The America-First Corporation often employs licensing as a means of entering foreign markets. This approach would be described as the: A. internalization option.B. legalistic option.C. transference option.D. externalization option.

Difficulty: Medium

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32. (p. 44) The possibility that licensing fees will not be collected and/or that foreign firms will utilize licensed technology for export is called: A. dissipation.B. deception.C. demarcation.D. de-licensure.

Difficulty: Easy

33. (p. 44) The America-First Corporation has decided to safeguard control of its firm-specific advantages as much as it can. The firm will probably seek to enter foreign markets under a(n): A. externalization option.B. decentralized option.C. internalization option.D. negotiated option.

Difficulty: Medium

34. (p. 45) A firm is most likely to opt for an FDI strategy when: A. it has strong domestic country-specific advantages.B. transportation costs to foreign markets are low.C. strong foreign country-specific advantages exist.D. good foreign middlemen are cheap and easily available.

Difficulty: Medium

35. (p. 45) Collectively, transportation charges, sales taxes, and brokerage fees are called: A. market makers.B. tariffs.C. transaction costs.D. trade barriers.

Difficulty: Easy

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36. (p. 45) Banks and brokerage houses link buyers and sellers across borders and provide information as part of their role as: A. internalizers.B. market makers.C. transaction cost agents.D. market movers.

Difficulty: Medium

37. (p. 45) As it seeks foreign opportunities, the America-First Corporation actively pursues forward and backward vertical integration. The firm's approach is most consistent with the principle of: A. decentralization.B. market-making.C. externalization.D. internalization.

Difficulty: Medium

38. (p. 46) The switch to a resource-based strategy is most consistent with: A. the externalization concept.B. the value chain concept.C. the benchmarking concept.D. the just-in-time concept.

Difficulty: Medium

39. (p. 47) Changing the value chain by simplifying the entire flow from raw materials to the ultimate consumer is called: A. industrialization.B. benchmarking.C. externalization.D. industrial rationalization.

Difficulty: Easy

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40. (p. 48) Porter's "five forces" model emphasizes all of the following considerations EXCEPT: A. rivalry.B. international law.C. substitutes.D. buyer power.

Difficulty: Easy

41. (p. 48) The most obvious competitive force a firm considering entry into a new market must consider is the: A. intensity of competitive rivalry between firms competing directly in that market.B. cost of distribution to that market.C. political system in that market.D. natural resources available in that market.

Difficulty: Easy

42. (p. 48) Competitors with roughly similar resources and similar target markets comprise a: A. cartel.B. competitive barrier.C. strategic group.D. strategic alliance.

Difficulty: Medium

43. (p. 48) The America-First Corporation is attempting to identify the members of the strategic group it would confront in the Russian market. This group would consist of firms whose resources and choice of target markets would: A. mark them as potential allies.B. make them follow similar strategies.C. remove them from competitive concern.D. assist the firm's entry.

Difficulty: Medium

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44. (p. 49) Tariffs, regulations, and national security concerns have traditionally been designed to favor: A. foreign entries.B. strategic groups.C. competitive rivals.D. domestic competitors.

Difficulty: Medium

45. (p. 49) As a firm globalizes, its most direct competitors tend to be: A. foreign entrants.B. domestic competitors.C. domestic cartels.D. domestic government-owned firms.

Difficulty: Easy

46. (p. 49) The global financial turmoil at the end of the 90s led to: A. deregulation, privatization, and global integration.B. a backlash in some countries against free markets.C. trading blocs which encouraged economic integration.D. removal of entry barriers for foreign firms.

Difficulty: Easy

47. (p. 49) All of the following tends to be true for foreign entrants in a global market EXCEPT: A. foreign entrants tend to be the most direct competitors of a globalizing firm.B. foreign companies can often be analyzed as a separate strategic group.C. the similarity of their strategic situation that tends to suggest similar strategies.D. foreign companies from inside a trading area have a disadvantage over other foreign competitors.

Difficulty: Medium

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48. (p. 50) Due to differences in preferences, tastes, and habits, a foreign firm may be forced to develop strategies designed to compete with domestic producers of market-specific: A. initiations.B. substitutes.C. reproductions.D. counterfeits.

Difficulty: Medium

49. (p. 50) Porter's concern with buyer and supplier power relate to John Kenneth Galbraith's concept of: A. monopoly.B. countervailing power.C. local control.D. cartel dislocation.

Difficulty: Medium

50. (p. 51) The capability of a global firm to attack a competitor in several markets, and to defend a market by countering elsewhere is referred to as: A. strategic intent.B. competitive repertoire.C. integrated competitive moves.D. leveraged local presence.

Difficulty: Medium

51. (p. 52) The America-First Corporation has experienced problems in finding distributors and other intermediaries in Japan. The Japanese have "institutionalized" Galbraith's concept of countervailing power in the form of: A. buying cartels.B. supplier blocs.C. keiretsus.D. kabuki blocs.

Difficulty: Medium

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52. (p. 52) As a true, global company, the America-First Corporation often starts price wars in selected markets to "occupy" rivals and conceal its entry into new markets. This strategy is an example of: A. integrated competitive moves.B. global advertising.C. strategic intent.D. leveraged local presence.

Difficulty: Hard

53. (p. 52) Coca-Cola's experience of capturing market share from Pepsi in Russia is an example of: A. using financial resources as a competitive tool.B. using global advertising as a competitive tool.C. technology innovations overpowering global presence.D. global price-wars.

Difficulty: Hard

54. (p. 53) During which phase of global marketing is assessment of the market, customer segments, and competitive offerings often done through informal methods and by independent middlemen? A. Foreign entry phaseB. Local marketing phaseC. Foreign entry and local marketing phasesD. Global management phase

Difficulty: Medium

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55. (p. 53) Unforeseen shifts in customer preferences, potential channel conflict, uncertainty about advertising effectiveness, and competitors' price cuts are managerial headaches during: A. the foreign entry phase.B. the local marketing phase.C. both foreign entry and local marketing phases.D. the global management phase.

Difficulty: Medium

56. (p. 53) The typical market-based approach to strategy is most appropriate to which of the following phases of globalization? A. The foreign entry phaseB. The global management phaseC. The local marketing phaseD. Both the local marketing and global management phase

Difficulty: Medium

57. (p. 53) Which of the following activities are LEAST likely to feature during the foreign entry phase? A. Decision on what to offerB. How a firm should enter aboardC. Timing new product entriesD. Assessment of the market

Difficulty: Hard

58. (p. 53-54) A resource-based strategic perspective is most appropriate in the: A. foreign entry phase. B. local marketing phase. C. global management phase. D. both foreign entry and global management phases.

Difficulty: Medium

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59. (p. 53-54) A resource-based strategic perspective is most_appropriate in the: A. foreign entry phase.B. local marketing phase.C. global management phase.D. both foreign entry and global management phases.

Difficulty: Medium

60. (p. 54) With _____, the focus shifts back to headquarters and the resource perspective. A. the foreign entry phaseB. global managementC. the local marketing phaseD. the location economy phase

Difficulty: Medium

61. (p. 54) The global marketing manager will do all of the following EXCEPT which one in order to achieve synergistic efficiency. A. Borrow as much money as possible from foreign bankers so as to spread riskB. Synchronize strategic moves in various countriesC. Standardize products and servicesD. Coordinate activities and timing of new product entries

Difficulty: Hard

Fill in the Blank Questions

62. (p. 33-34) The traditional justification for a country's exports is the principle of _____ advantage-which may be derived from either _____ or _____ advantages. competitive; country-specific; firm-specific

Difficulty: Medium

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63. (p. 35) The _____ was initially proposed by _____ in 1966, who used it to demonstrate how the manufacturing of new products in the United States shifted over time to new locations overseas and in the process affected trade patterns. International Product Cycle; Raymond Vernon

Difficulty: Medium

64. (p. 35-36) According to Porter's _____, a nation's competitive advantage may be based on factor conditions, demand conditions, related and supporting industries, and/or firm strategy, structure, and rivalry. diamond of national advantage

Difficulty: Medium

65. (p. 37-38) According to _____ theorists such as Krugman, _____ leads to _____ and the creation of firm-specific advantages that come from learning by doing. new trade; differentiation; specialization

Difficulty: Medium

66. (p. 41) _____ defines the firm not in terms of the products or services it markets, or in terms of the needs it seeks to satisfy, but in terms of what it is capable of. Resource-based strategy

Difficulty: Easy

67. (p. 42) A major difficulty in transferring marketing skills abroad is that these factors often represent _____, skills that reside in people and are not _____ in the product itself. intangibles; "embodied"

Difficulty: Medium

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68. (p. 44) In terms of relative ease and degree of commitment, the three alternative modes of foreign entry available to the firm would range from _____ at the low-end, through _____ to the most demanding mode, _____. pure export; licensing; foreign direct investment

Difficulty: Medium

69. (p. 44) Firms which opt for either the pure export mode or foreign direct investment are practicing the strategy of _____. internalization

Difficulty: Medium

70. (p. 46) The value chain is the _____ sequence of operations undertaken by the firm. "Deconstructing" the value chain is equivalent to _____. "internalized"; externalization

Difficulty: Medium

71. (p. 48) _____ identifies five sources of competitive pressures on the firm in a given industry: rivalry, new entrants, _____, buyer power, and supplier power. Porter's "five forces" model; substitutes

Difficulty: Medium

Essay Questions

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72. (p. 33-34) Briefly describe the concept of country-specific advantage and differentiate between absolute and relative advantages. Why should the marketer be concerned with firm specific advantages and barriers to entry?

Country-specific advantages traditionally referred to natural resource and labor factors that allowed a particular nation to produce specific goods more efficiently than could rival nations. The concept has been broadened to include advantages in market knowledge/proximity, legal/commercial expertise, and transportation specialization. A country would enjoy an absolute advantage only if it can produce all products more efficiently than other nations. It is more likely that a nation will be able to produced one, or a few product(s)--that is, exhibit a relative advantage with respect to other nations. Firm-specific advantages help the marketer in identifying those products in which his/her firm can be most competitive/profitable. The existence of tariffs or other trade barriers may cause the marketer to eliminate the option of exporting in favor of licensing know-how (externalization) or investing in local production (internalization).

Difficulty: Hard

73. (p. 35) Describe the relationship between free trade and the ability of nations to benefit from comparative advantage. What role does technology transfer playing this process?

Free trade is a necessary condition for the exercise of any nation's comparative advantage. In the absence of free trade, each nation is forced to be more self-sufficient and less capable of developing the specialization that creates comparative advantages. Over time, large markets may attract local manufacturing investments by foreign-owned MNCs. The technology transfers which often accompany such investments provide a "second-best" solution by creating a dynamic facet for a nation's CSAs. Eventually, shifting CSAs will tend to favor the expansion of free trade.

Difficulty: Hard

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74. (p. 36-37) The America-First Corporation, a major innovator in the computer industry from its inception, is still the dominant firm in computer design and development worldwide. How can the firm's continued dominance of this highly competitive industry be explained given the concept of the international product cycle?

The "best" explanation is probably offered by Porter's National "Diamond" Theory which explains competitive advantage through the dynamic interaction of factor conditions, demand conditions, related or supporting industries, and firm strategy, structure, and rivalry. Typically, an innovator achieves dominance through superiority in such factors as labor or infrastructure. Over time, vigorous competition from rivals can strengthen the innovator and encourage growth and improvement among supplier firms. Sophisticated and demanding domestic customers will further sharpen competitive skills. Porter's theory holds that an innovating firm can maintain dominance by emphasizing that factor in which it has the greatest current advantage while continually seeking to improve in all areas. By developing new skills and reviewing competitive advantages, a firm may remain competitive even as its manufacturing costs rise. This runs counter to the IPC in that a country can remain competitive if it renews itself and develops new skills.

Difficulty: Hard

75. (p. 37) Explain the differences between Porter's diamond theory, and the International Product Cycle theory. Which of these are more applicable to the present day economies of the world?

Porter's diamond is a dynamic theory, showing how over time a nation can build up and sustain its competitive advantage in an industry. Vernon's IPC on the other hand was used to demonstrate how the manufacturing of new products in the United States shifted over time to new locations overseas and in the process affected trade patterns.Porter's diamond implies that a country can remain competitive in an industry even as its manufacturing costs rise. Thus, the diamond goes counter to the original IPC theory. While the IPC explains the "hollowing out" of a nation's industrial base, with manufacturing moving to low-wage countries, Porter's diamond suggests that competitive rivalry and capable business management can help nations develop new skills and renew their competitive advantages. While Vernon's IPC concludes that advanced nations will trade for standardized commodities and focus on innovation and new industries ("get out of televisions, and focus on computers"), Porter's diamond shows how the creation of favorable conditions can make a nation stay competitive in a given industry for a long time ("automobiles is what we do best"). Actually, in most economies of the world, both tendencies are at work simultaneously.

Difficulty: Medium

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76. (p. 37-38) Briefly explain the basic tenets of new trade theory.

New trade theory postulates that advanced technology centers are likely to arise around strong research universities and innovative new firms, local labor tends to develop skills required by those industries, and similar companies will be attracted by these advantages. Krugman pointed out that such conditions favored the appearance of a variety of firms capable of producing a variety of products. Over time, experience gained from diversification would tend to lead to specialization as each producer creates firm-specific advantages from learning by doing. The deliberate attempt to elevate this process to the stages of a strategy for the continual "rebirth" of the firm is at the height of the learning organizations ability to stay competitive.

Difficulty: Medium

77. (p. 41) Briefly describe the concepts of knowledge-based and resource-based capability. How do these concepts relate to the traditional emphasis upon customer orientation?

According to the knowledge-based concept, a firm's true strength is founded upon the know-how, skills, and experiences of the company and its employees. The ability of the firm to survive and prosper depends upon its ability to learn--and change. This dynamic knowledge base is the primary asset of the firm. Accordingly, a resource-based strategy defines the firm in terms of what it can offer--what it is capable of--instead of current products, services, markets, or the needs it might like to address. Simply knowing the customer is not enough--traditional market orientation is only a start. The firm must first know what its strengths are--then seek out those markets in which those strengths can be profitably employed for the benefit of both the firm and the customer.

Difficulty: Medium

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78. (p. 42-43) The America-First Corporation enjoys internationally known brands and a reputation for impeccable service. The firm has decided to expand its firm-specific advantages into the international arena. What problems are likely to be encountered? How can the firm meet these challenges?

Marketing based firm-specific advantages are often intangible in nature--and may not be easily transferred. America-First's brands may attract foreign customers who are seeking the quality of service it stands for. The firm must be certain that these foreign customers will not be disappointed. Local nationals, however, may not be as dedicated to the provision of such services as the firm's domestic employees. America-First should provide careful cultural preparation for domestic managers sent to foreign countries. Local nationals must be carefully selected and trained to ensure consistency of quality. The firm may opt for a franchising strategy to achieve this goal.

Difficulty: Medium

79. (p. 44-45) The America-First Corporation is preparing to enter international trade. How can the firm "match" its skills to potential foreign markets? Briefly describe the primary modes of entry available to the firm. Why would America-First be concerned with choosing between an externalization or internalization strategy?

America-first should carefully assess its firm-specific advantages to determine which markets it can best serve and evaluate country-specific advantages to determine from which countries this should be done. The firm may choose from pure exporting, licensing, or direct foreign investment as the primary vehicles through which their expertise may be "internalized" in foreign markets. In pure exporting, the product is simply transferred to a distributor appointed in the target country. Licensing involves the use of contractual arrangements to transfer some ownership advantages to an enterprise in a foreign country. Foreign direct investment would require the firm to spend funds to create subsidiary firms in other nations. The use of licensing in an "externalization" strategy could dissipate the firm's advantages. America-First may retain more control under the "internalization" options of exportation or direct foreign investment.

Difficulty: Medium

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80. (p. 44-46) Why is transaction framework relevant to the international marketer? How does this theory relate to FSAs, integration, and the choice between an internalization or externalization strategy?

Transaction costs, the costs incurred in completing a transaction between a buyer and seller, are at the heart of marketing activities. If these "market-making" costs are too high, trade is prohibited. In an effort to lower transaction costs to an acceptable level, firms employ specialists in those areas in which they lack experience or expertise. Over time, some firms develop firm-specific advantages in market-making activities which allow the company to practice forward or backward integration. Vertical integration is a form of internalization strategy which allows the firm to maximize both savings and control. An externalization strategy, as expressed in the use of agents, brokers, or other external specialists, allows cost savings--at the expense of control. An internalized strategy surfaces as pure exporting or direct foreign investment in international trade. Licensing is a form of externalization that may be taken into foreign markets.

Difficulty: Hard

81. (p. 46-47) Briefly discuss the concept of "industrial rationalization". How does this concept relate to other concepts discussed in the text?

Following a strategy of industrial rationalization, a firm would seek to simplify the entire flow, from raw materials to ultimate consumer. Such an effort would require the firm to recognize the reality of hypercompetition and to engage in benchmarking across the competitive spectrum. The resulting learning organization would seek to develop FSAs that can strengthen resource-based strategies that can expand, protect, and leverage its competitive strengths in all of its markets. It will expand its competitive repertoire, initiative integrated competitive moves, and enhance its ability to rely upon internalized strength to avoid the problems associated with the international product cycle.

Difficulty: Medium

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Chapter 02 Theoretical Foundationstestbankcollege.eu/sample/Test-Bank-Global-Marketing-5th... · Web viewAn externalization strategy, as expressed in the use of agents, brokers, or