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 Chapter 07

Strategies for Competing in International Markets

Multiple Choice Questions

1. The reasons behind the accelerating pace of globalization include

A. countries with previously planned economies are embracing market or mixed economies.
B. information technology shrinks the importance of geographic distances.
C. ambitious growth-minded countries race to build global share.
D. lower barriers to international trade.
E. All of these.

2. The reasons a company opts to expand outside its home market include

A. gaining access to new customers for the company's products/services.

B. spreading its business risk across a wider market base.
C. achieving lower costs and enhancing the company's competitiveness.
D. a desire to capitalize on its core competencies and capabilities.
E. All of these.

7-1
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
3. Which of the following is not a typical reason for a company to expand into the markets of
foreign countries?

A. To gain access to new customers

B. To strengthen its capability to employ offensive strategies, especially those that involve
preemptive strikes
C. To achieve lower costs and enhance the firm's competitiveness
D. To capitalize on company competencies and capabilities
E. To spread business risk across a wider geographic market base

4. Which one of the following is not a reason a company decides to enter foreign markets?

A. To spread business risk across a wider geographic market base

B. To capitalize on company competencies and capabilities
C. To achieve lower costs and enhance the firm's competitiveness
D. To build the profit sanctuaries necessary to wage guerrilla offensives against global
challengers endeavoring to invade its home market
E. To gain access to more buyers for the company's products/services

5. One of the biggest strategic challenges to competing in the international arena include

A. how to avoid the risks of shifting exchange rates.

B. whether to charge the same price in all country markets.
C. how many foreign firms to license to produce and distribute the company's products.
D. whether to offer a mostly standardized product worldwide or whether to customize the
company's offerings in each different country market to match the tastes and preferences
of local buyers.
E. whether to pursue a global strategy or an international strategy.

7-2
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
6. The market size and market growth rates in the foreign market can be influenced negatively
by

A. population sizes, income levels and cultural influences, the current state of the
infrastructure and distribution and retail networks available.
B. the ability of management to tailor a strategy to take into consideration all the country
difference.
C. the large size of emerging markets such as China and India.
D. competitive rivalry that is only moderate in some countries.
E. All of these.

7. Which of the following is not an accurate statement as concerns competing in the markets of
foreign countries?

A. A multicountry strategy is generally superior to a global strategy.

B. There are country-to-country differences in consumer buying habits and buyer tastes and
preferences.
C. A company must contend with fluctuating exchange rates and country-to-country
variations in host-government restrictions and requirements.
D. Product designs suitable for one country are often inappropriate in another.
E. Market growth rates vary from country to country.

8. Competing in the markets of foreign countries entails dealing with such factors as

A. fluctuating exchange rates, country-to-country variations in host-government restrictions

and requirements, and variations in cultural, demographic, and market conditions.
B. important country-to-country differences in consumer buying habits and buyer tastes and
preferences.
C. whether to customize the company's offerings in each different country market or whether
to offer a mostly standardized product worldwide.
D. the fact that product designs suitable for one country are sometimes inappropriate in
another.
E. All of these.

7-3
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
9. Competing in the markets of foreign countries generally does not involve which of the
following?

A. Country-to-country differences in consumer buying habits and buyer tastes and

preferences
B. Country-to-country variations in host-government restrictions and requirements and
fluctuating exchange rates
C. Whether to customize the company's offerings in each different country market or whether
to offer a mostly standardized product worldwide
D. In which countries to locate company operations for maximum locational advantage (given
country-to-country variations in wages rates, worker productivity, energy costs, tax rates,
and the like)
E. Crafting a multicountry strategy that works just as well in one country as in another and
that also has the appeal of turning the world market into one big profit sanctuary

10. The advantages of manufacturing goods in a particular country

A. are significantly impacted by where its production, distribution, and customer service
activities are located.
B. can be affected by differences in operating costs and profitability due to wage rate and
worker productivity.
C. can be affected by differences in energy costs, environmental regulations, tax rates, and
inflation rates.
D. can be influenced by cheaper access to essential natural resources.
E. All of these.

7-4
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
11. The advantages of manufacturing goods in a particular country and exporting them to foreign
markets

A. are largely unaffected by fluctuating exchange rates.

B. are greatest when local distributors and dealers in that country can be convinced not to
carry products that are made outside the country's borders.
C. can be wiped out when that country's currency grows weaker relative to the currencies of
the countries where the output is being sold.
D. are weakened when that country's currency grows stronger relative to the currencies of
the countries where the output is being sold.
E. are seriously compromised by the potential for local government officials to raise tariffs on
the imports of foreign-made goods into their country.

12. Which of the following statements concerning the effects of fluctuating exchange rates on
companies competing in foreign markets is true?

A. Fluctuating exchange rates do not pose significant risks to a company's competitiveness in

foreign markets.
B. The advantages of manufacturing goods in a particular country are largely unaffected by
fluctuating exchange rates.
C. Companies that are manufacturing goods in a particular country and are exporting much of
what they produce are disadvantaged when that country's currency grows weaker relative
to the currencies of the countries that the goods are being exported to.
D. Companies that are manufacturing goods in a particular country and are exporting much of
what they produce are benefited when that country's currency grows weaker relative to
the currencies of the countries that the goods are being exported to.
E. Domestic companies under pressure from lower-cost imports are hurt even more when
their government's currency grows weaker in relation to the currencies of the countries
where the imported goods are being made.

7-5
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
13. A country's business climate is not a function of the political and economic risk factors, such
as:

A. instability or weaknesses inherent with the national government.

B. host-government hostility toward allowing foreign businesses market entry, often requiring
local produced parts and components to be included in manufacturing, allowing for ease of
funds transfers from the host country, and often requiring local ownership.
C. stability of country's monetary system.
D. lack of property rights protections and compliance with local environmental regulation.
E. All of these.

14. The strategic options for expansion into foreign markets include

A. employing a franchising strategy.

B. maintaining a national (one-country) production base and exporting goods to foreign
markets.
C. licensing foreign firms to produce and distribute one's products.
D. establishing a subsidiary in a foreign market.
E. All of these.

15. Which of the following is not one of the strategy options for expanding into markets of foreign
countries?

A. A profit sanctuary strategy

B. An export strategy
C. A licensing strategy
D. Establish a subsidiary in a foreign market strategy
E. A franchising strategy

7-6
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
16. Which of the following are strategy options for entering foreign markets?

A. Maintaining a national (one-country) production base and exporting goods to foreign

markets.
B. Establishing a subsidiary in a foreign market.
C. Franchising and licensing strategies.
D. Forming strategic alliances or joint ventures with foreign partners.
E. All of these.

17. Using domestic plants as a production base for exporting goods to selected foreign country
markets

A. can be an excellent initial strategy to pursue international sales.

B. can be a competitively successful strategy when a company is focusing on vacant market
niches in each foreign country.
C. works well when a firm does not have the financial resources to employ cross-market
subsidization.
D. is usually a weak strategy when competitors are pursuing multicountry strategies.
E. can be a powerful strategy because the company is not vulnerable to fluctuating exchange
rates.

18. The advantages of using an export strategy to build a customer base in foreign markets
include

A. being able to minimize shipping costs, avoid tariffs, and curb the effects of fluctuating
exchange rates.
B. minimizing capital requirements and involvement in foreign markets.
C. being cheaper and more cost effective than licensing and franchising.
D. being cheaper and more cost effective than a multicountry strategy.
E. facilitating the establishment of profit sanctuaries in foreign countries and being more
suited to accommodating local buyer tastes than a global strategy.

7-7
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
19. The advantages of using a licensing strategy to participate in foreign markets include

A. being especially well suited to the use of cross-market subsidization.

B. being able to charge lower prices than rivals.
C. enabling a company to achieve competitive advantage quickly and easily.
D. being able to leverage the company's technical know-how or patents without committing
significant additional resources to markets that are unfamiliar, politically volatile,
economically uncertain, or otherwise risky.
E. being able to achieve higher product quality and better product performance than with an
export strategy.

20. The advantages of using a franchising strategy to pursue opportunities in foreign markets
include

A. having franchisees bear most of the costs and risks of establishing foreign locations and
requiring the franchisor to expend only the resources to recruit, train, and support foreign
franchisees.
B. being particularly well suited to the global expansion efforts of companies with
multicountry strategies.
C. helping build multiple profit sanctuaries.
D. being well suited to companies that employ cross-market subsidization.
E. being well suited to the global expansion efforts of manufacturers.

21. Establishing a subsidiary in a foreign market to take advantage of all essential value chain
activities requires a strategy that

A. establishes a wholly owned subsidiary.

B. acquires a foreign company.
C. supports direct control over all aspects of operating in a foreign market.
D. establishes a start-up operation.
E. All of these.

7-8
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
22. Acquisition of an existing firm rather than going de novo may be the least risky and cost-
efficient means of overcoming entry barriers such as

A. gaining access to local distribution networks, building supplier networks, and establishing
working relationships with key government officials.
B. moving directly to the task of transferring resources and personnel, integrating and
redirecting activities into its own operation.
C. putting its own strategy into place.
D. accelerating efforts to build a strong market presence.
E. All of these.

23. Strategic alliances, joint ventures, and cooperative agreements between domestic and
foreign firms are a potentially fruitful means for the partners to

A. enter additional country markets.

B. gain better access to scale economies in production and/or marketing.
C. fill competitively important gaps in their technical expertise and/or knowledge of local
markets.
D. share distribution facilities and dealer networks, thus mutually strengthening their access
to buyers.
E. All of these.

24. Which is not one of the four conditions that make an internal start-up strategy appealing?

A. When creating an internal start-up is cheaper than making an acquisition

B. When adding new production capacity will adversely impact the supply-demand balance in
the local market
C. Having the ability to gain good distribution access
D. Having scale economies to compete against local rivals
E. All of these

7-9
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
25. Which of the following is not a potential benefit of strategic alliances or other cooperative
arrangements between foreign and domestic companies?

A. Gaining wider access to attractive country markets

B. Gaining better access to scale economies in production and/or marketing
C. Filling competitively important gaps in technical expertise and/or knowledge of local
markets
D. Safeguarding the company's dependence, allowing for positive engagement once the
purpose has been served and ensuring products of important technical standardization
requirements are not developed
E. Sharing distribution facilities and dealer networks, thus mutually strengthening access to
buyers

26. Which of the following is not one of the problems and risks of strategic alliances between
domestic and foreign firms?

A. Overcoming language and cultural barriers and the sometimes extensive managerial time
required for trust-building, communication, and coordination
B. The trouble allies can have reaching mutually agreeable ways to deal with key issues
C. Becoming overly dependent on another company for essential expertise and competitive
capabilities
D. Making it harder to pursue a multidomestic strategy as compared to a global strategy
E. Suspicions about whether allies are being forthright in exchanging information and
expertise

7-10
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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