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Exam 8: International Strategy

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Question 81

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The location advantages associated with locating facilities in other countries can include all of the following EXCEPT

A) low-cost labor.
B) access to critical supplies.
C) access to customers.
D) evasion of host country governmental regulations.

E) A) and C)
F) B) and C)

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Question 82

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Coca Cola and PepsiCo approach international growth differently. Coca Cola is the world's largest snack-food producer and relies on overseas sales to make up for slower sales volumes in North America. In contrast, PepsiCo which is less diversified, derives only 32% of it sales from North America, an indication of the importance of international markets to its performance.

A) True
B) False

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Question 83

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Embracing the global marketplace is important to Starbucks because it commands less that one percent of the global coffee market suggesting that there is room for growth. (Chapter 8 Opening Case)

Bunyan Heavy Equipment, a U.S. firm, is investigating expanding into Russia using a greenfield venture. The committee researching this project has delivered a negative report. The MAIN concern of the committee is probably

In place of relatively stable and predictable domestic markets, firms across the globe find that they are competing in relatively unstable and unpredictable global markets.

Research has shown that, as international diversification increases, firms' returns decrease initially but then increase quickly as firms learn to manage international expansion.

International diversification can help to reduce a firm's overall risk through the stabilization of returns.

Case Scenario 3: Compliance, Inc. Compliance, Inc., (CI) conducts clinical human and animal trials for the pharmaceutical and biotechnology industries. Revenues are split evenly between early and late drug development services. In the area of early drug development, CI offerings include analytical, bioanalytical, antibody, clinical pharmacology (Phases I-IIa) , toxicology, and drug metabolism services. Late development services include central diagnostics, central lab, clinical development (Phases IIb- IIIa) , periapproval (Phases IIIb-IV) , and pharmacogenomics. The bulk of its business is conducted in Europe and the U.S. (10 and 17 subsidiaries, respectively) ; CI also has subsidiaries in Africa, Latin America, Asia, and Australia. While now an independent public company, CI was once itself a subsidiary of Corning International. Corning built up CI through over 40 acquisitions, hoping to extend its strength in medical testing glassware into the medical services business. At the time Corning made its acquisitions, the clinical testing industry was geographically fragmented, owing largely to the fact that various parts of the world had their own strong local pharmaceutical companies and distinct regulatory environments. Perhaps for that reason Corning, and now CI, has retained the autonomous character of each country's businesses. However, globalization of the regulatory environment (both global and local standards) , globalization of the biotechnology firms (increasing the geographic scope of their operations) , and tremendous consolidation in the pharmaceutical industry (reducing the number of pharmaceutical industry participants to only a handful of major global companies) is causing CI to question its decentralized strategy. -(Based on Case Scenario 3) What type of international strategy should CI pursue?

Export, licensing, and the strategic alliance entry modes are all appropriate for early market development.

Acquisitions, greenfield ventures, and sometimes joint ventures are appropriate when firms want to establish a strong presence in an international market.

A U.S. manufacturer of pigments for household paint that exports about 40 percent of its production to European markets will find its sales will be harmed by a weak dollar.

Identify and describe the major risks of international diversification.

All of the following complicate the implementation of an international diversification strategy EXCEPT

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT

Arkadelphia Polymers, Inc., earns 60% of its revenue from exports to Europe and Asia. The CEO of the company would be

Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national advantage?

A multidomestic corporate-level strategy is one in which

The three basic benefits of international strategies are 1) increased market size; 2) increased economies of scale and learning; and 3) development of competitive advantages through location.

Both the size and the nature of a country's domestic demand for a particular industry's good or service are important in Porter's determinants of national advantage.

Which of the following is NOT a disadvantage of international acquisitions?