D311 Global Management

strategy

strategy is an integrated set of choices and commitments that supports and sustains an MNE's competitiveness. It defines and communicates an MNE's plan on how it will use its resources, capabilities, and competencies to compete in different countries

vision

a future-oriented declara- tion of its purpose and aspirations, outlines its broad ambitions. It communicates to stake- holders, namely employees, stockholders, governments, partners, suppliers, customers, and society, what the MNE is, where it is going, and the values that will guide its efforts.

mission

Whereas the vision statement inspires people to dream, the mission statement inspires them to action. It communicates what the MNE is going to do, why it's going to do that, and the general approach to doing so.

difference between vision and mission

the vision outlines the goals to pursue, while the mission specifies the objectives to attain.

perfect competition

means that no firm or industry consistently outperforms others, no matter the innovativeness of a particular company or the imperfections within a particular industry

The IO Model

Model focuses sensemaking in terms of an MNE's external environment.

Great by Choice

centers on the MNE's internal setup.

Resources

drive the production of goods and services that are sold to customers.

capabilities

capabilities reflect how well an MNE productively bundles its resources.

core competencies

the special outlook, skill, or technology that, by synthesizing links between resources and capabilities, sets and sustains the firm's capacity to create superior value.

value

the difference between the cost of making a product and the price that customers are willing to pay for it.

a cost leadership strategy

aims to make a product at the lowest cost, relative to those offered by rivals, which appeals to the largest number of potential customers.

differentiation strategy

it aims to do something no other firm can do, and, besides doing it, doing it effectively.

competitive advantage

when the value it creates, whether through cost leadership, differentiation, or a combination, is greater than the costs it incurs in doing so.

Primary activities

represent the core business functions that make and move products.

support activities

These represent the infrastructure of the firm, identifying the activities that support the work done in carrying out primary activities.

configuration

essentially, the task of deciding which activity to do where.

concentrated configuration

(the MNE performs all value- chain activities in one location)

dispersed configuration

(the MNE performs different value-chain activities in different locations).

the liability of foreignness

the additional costs that an MNE operating outside its home country incurs above those experienced by a local firm— requires achieving some offsetting efficiencies, no matter which strategy an MNE chooses.

economies of scale

the property whereby long-run average total cost falls as the quantity of output increases

Global Strategy

selling the same standardized product and using the same basic marketing approach in each national market

Integration Responsiveness Grid

schema that helps managers measure the global and local pressures that influence the configuration and coordination of value chains

Mercantilism

holds that a country's wealth is measured by its holdings of "treasure," which usually means its gold. This theory, which formed the foundation of economic thought from about 1500 to 1800, 2 holds that countries should export more than they import

a favorable balance of trade

(also called a trade surplus) still indicates that a coun- try is exporting more than it imports.

An unfavorable balance of trade

(also known as a trade deficit) indicates the opposite of a favorable balance of trade.

Neomercantilism

is the running of a favorable balance of trade to achieve some social or political objective.

absolute advantage

holds that different countries produce different things more efficiently than others and that consumers should not have to buy domestically produced goods when they can buy them more cheaply from abroad.

natural advantage

production comes from climatic conditions, access to certain natural resources, or availability of certain labor forces.

Product Technology

enables a country to produce a unique product or one that is easily distinguished from those of competitors.

Process technology

enables a country to efficiently produce a homogeneous product (one not easily distinguished from that of competitors).

comparative advantage

that global efficiency gains may still result from trade if a country specializes in what it can produce most efficiently—regardless of other countries' absolute advantage.

Non-tradable goods

products and services (haircuts, retail grocery distribution, etc.) that are seldom practical to export because of high transportation costs—are produced in every country.

The theory of country size

holds that countries with larger land masses usually depend less on trade than smaller ones.

factor proportions theory

maintaining that differences in countries' proportional endowments of labor, land, and capital explain differences in these endowments' costs.

country-similarity theory

country-similarity theory

product life cycle (PLC) theory

states that the production loca- tion of certain manufactured products shifts as they go through their life cycle. The cycle consists of four stages: introduction, growth, maturity, and decline.

maturity stage

worldwide demand begins to level off, although growing perhaps in some countries and declining in others.

decline stage

those factors occurring during the maturity stage continue to evolve.

diamond of national competitive advantage

is a theory showing four features as important for competitive superiority: demand conditions; factor conditions; related and supporting industries; and firm strategy, structure, and rivalry

Factor conditions

Are sufficient quantities and combinations of the quality of labor, capital, and raw materials available at acceptable prices?

Demand conditions:

Are consumers likely to buy what we can produce with the factor conditions above and at the price we can deliver to them?

Related and supporting industries

industries: Can we outsource production of sufficient components and services to allow us to concentrate our efforts on what we can do best?

Firm strategy, structure, and rivalry

Will competitive conditions and our reactions to them enable us to evolve our operations to sustain and improve our market position?

factor mobility theory

which focuses on why production factors move, the effects of that movement on transforming factor endowments, and the impact of international factor mobility (especially people) on world trade.

brain drain

countries lose potentially productive resources when educated people leave

acquired advantage

A form of trade advantage due to technology rather than due to the availability of natural resources, climate, etc.

Protectionism

the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports.

The essence of a differentiation strategy is to _____________.

a. target the most sophisticated segment of the market

b. incorporate the greatest number of features into a product

c. offer a unique product that supports a premium price

d. outspend rivals on product advertising

c. offer a unique product that supports a premium price

Johnson Enterprises manufactures computer chips used in cell phones. The MNE has long production runs that lower the per unit cost of each chip. The firm also purchases materials in bulk from its suppliers with whom Johnson has long-term contracts. Johnson is most likely benefiting from ________.

a. economies of scale

b. the cluster effect

c. digitization

d. location economies

a. economies of scale

The term "_____________" refers to the additional costs that an MNE operating outside its home country incurs above the costs experienced by a local firm.

a. economies of scale

b. liability of foreignness

c. location advantages

d. cost leadership

b. liability of foreignness

A useful way to understanding the purpose of strategy is to think of the firm as a(n) ________, composed of a series of distinct activities, including production, marketing, materials management, R&D, human resources, information systems, and the firm infrastructure.

a. activity network

b. value constellation

c. task succession

d. value chain

d. value chain

Companies adopt a(n) __________ strategy by making and selling common products that vary little to none from country to country.

a. transnational

b. IR grid manipulation

c. multidomestic

d. global

e. international

d. global

Which of the following portrays the global and local pressures that influence a multinational enterprise's strategy?

a. The Integration-Responsiveness Grid

b. Trade liberalization

c. Consumer-divergence

d. Supply-push conditions

a. The Integration-Responsiveness Grid

Corporate level strategy ______.

Select the answer that doesn't apply.

a. articulates how managers plan to reconcile global integration and local responsiveness

b. stipulates how managers will integrate the MNE's various parts into a strategic whole

c. specifies the decision-making role between headquarters and subsidiaries

d. is entirely determined by the use of the IR grid

d. is entirely determined by the use of the IR grid

Which of the following describes the approach of countries that run favorable balances of trade to achieve a social or political objective?

a. Diamond of national competitive advantage

b. Unrestricted trade

c. Neomercantilism

d. Absolute advantage

e. Mercantilism

c. Neomercantilism

A country is likely to have a(n) _________ in the production of particular products because of climatic conditions or access to particular resources.

a. acquired advantage

b. natural advantage

c. efficient advantage

d. specialized advantage

b. natural advantage

Which of the following product types would most likely be produced in developing countries?

a. Products for which companies can use a differentiation strategy as opposed to a cost leadership strategy

b. Luxury products where cost is of little concern

c. Products that require rapid innovation

d. Products that are in the maturity phase of their life cycle

e. Products that require specialized technical skills

d. Products that are in the maturity phase of their life cycle

Which of the following is not an important feature for competitive superiority under the diamond of competitive advantage theory?

a. Strategy, structure and rivalry

b. Related and supporting industries

c. Demand conditions

d. Sales conditions

e. Factor conditions

d. Sales conditions

Which of the following is one of the major effects of outward migration on countries?

a. Lower costs of social services

b. Brain drain

c. Lower startup costs

d. Substitution

b. Brain drain

Factor movement is never a more efficient use of resources than free trade.

T/F

F

Taiwan's second period of import substitution could be seen as an attempt to

a. develop natural advantages

b. develop acquired advantages

b. develop acquired advantages

Taiwan has never been open to increasing competition. T/F

F

The theory of absolute advantage assumes fully employed resources whereas the theory of comparative advantage does not make this assumption. T/F

F

What is a strategic trade policy?

a. MNE use of the IR grid to establish international strategy

b. When a government selects target industries to develop to be internationally competitive

c. A government commitment to free trade

d. A government's use of tariffs to regulate the volume of traded goods

b. When a government selects target industries to develop to be internationally competitive

The notion that a government should protect emerging industries from foreign competition is known as the _______ argument.

a. industrialization

b. diversification

c. essential-industry

d. infant-industry

d. infant-industry

Which of the following presumes that import restrictions will facilitate the development of a domestic industry?

a. The balance of trade adjustment argument

b. The industrialization argument

c. The diversification argument

d. The infant-industry argument

b. The industrialization argument

Providing aid and credits​ to, and encouraging imports​ from, countries based on a political alliance illustrate how governments use trade to​ ____________.

a. extend their spheres of influence

b. maintain essential industries

c. enforce non-tariff barriers

d. prevent dumping

a. extend their spheres of influence

Which of the following is one of the major noneconomic rationales for government intervention in trade?

a. Fighting unemployment

b. Preserving national culture

c. Increasing trade controls

d. Making balance of trade adjustments

b. Preserving national culture

____________ represent(s) a form of direct assistance to local companies to boost their competitiveness.

a. Quotas

b. Subsidies

c. Tied aid

d. Loans

b. Subsidies

A​ company's objection to protection of its own industry usually stems from its own competitive advantage in all of the following areas EXCEPT​ _________.

a. differentiated products

b. supplier relationships

c. foreign direct investments

d. economies of scale

c. foreign direct investments

According to the case on U.S. imports of prescription drugs from Canada, pharmaceutical companies in the U.S. insist that they would have to greatly reduce their research budgets if ____________.

a. The FDA required them to add another round of efficacy tests

b. drug prices were the same in all countries

c. they lost the ability to charge high prices in the U.S. when they introduce new drugs

d. the life of patents was shortened

c. they lost the ability to charge high prices in the U.S. when they introduce new drugs

Which of the following is not among the reasons why the US government started to levy high tariffs on Chinese products imported into the United States:

a. The growing trade deficit

b. The theft of intellectual property

c. The high FDI by Chinese companies in the US

d. The forced transfer of American technology to China

c. The high FDI by Chinese companies in the US

According to the online articles from January 2020, the trade war between the US and China has led to:

a. Difficulties for farmers in the US

b. Difficulties for manufacturers in the US

c. Higher prices for consumers in the US

d. All of the above

d. All of the above

China's exports are surging despite US tariffs and the COVID-19 pandemic. According to the New York Times article from August 31, which of the following is not among the reasons for this surge?

a. Many of the products bought during the pandemic are manufactured in China.

b. China has related and supporting industries for the products it exports.

c. The US suspended most of its tariffs on Chinese products in March 2020.

d. China extended low interest loans and tax breaks to companies operating in China.

c. The US suspended most of its tariffs on Chinese products in March 2020.

Which term refers to money denominated in the currency of another nation or group of nations?

a. Export tariff

b. Foreign exchange

c. Quota

d. Foreign subsidy

b. Foreign exchange

In foreign-exchange markets, reporting dealers are ________.

a. hedge funds and pension funds monitored by the World Bank

b. financial institutions that actively participate in local and global foreign-exchange markets

c. located primarily in New York City since U.S. dollars are the most widely traded currency

d. controlled by the Bank for International Settlements located in Switzerland

b. financial institutions that actively participate in local and global foreign-exchange markets

________ involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction.

a. Outright forward transactions

b. FX swaps

c. Spot transactions

d. Reverse transactions

c. Spot transactions

In which of the following transactions is a currency switched with another on one date and then switched back on a future date?

a. Outright forward transactions

b. Reverse transaction

c. Spot transaction

d. FX swap

d. FX swap

In the spot market, the ________ is the difference between the bid and a. offer rates and is the trader's profit margin.

b. spread

c. cross rate

d. bid

e. offer

b. spread

Melissa, a foreign-exchange trader, wants to buy euros from Stephanie. Which of the following is the price at which Melissa is willing to buy euros?

a. Bid

b. Offer

c. Cross rate

d. Spread

a. Bid

If a foreign currency is quoted in American terms (the direct quote) and the forward rate for a foreign currency is less than the spot rate, the foreign currency is selling at a ________.

a. backward premium

b. forward premium

c. forward discount

d. backward discount

c. forward discount

A(n) ________ is the right but not the obligation to buy or sell a foreign currency within a certain time period or on a specific date at a specific exchange rate.

a. forward rate

b. offer

c. bid

d. option

d. option

Anita, an employee at ABX Partners, a hedge fund firm, has purchased euros because she believes that the euro will strengthen against other currencies. Which term best describes Anita's activities?

a. Outright forward

b. Arbitrage

c. Speculation

d. Spot transaction

c. Speculation

The primary objective of the International Monetary Fund is to ________.

a. establish a unilateral system of payments

b. encourage euro adoption

c. foster the power of the foreign-exchange market

d. promote exchange rate stability

d. promote exchange rate stability

The Bretton Woods Agreement established a system of fixed exchange rates under which each IMF member country set a ________.

a. par value

b. quota

c. nominal interest rate

d. gold standard

a. par value

In order to join the IMF, a country must contribute a certain sum of money, called a ________.

a. monetary reserve

b. quota

c. trade balance

d. special drawing right

b. quota

Which type of exchange rate arrangement is based on supply and demand?

a. soft peg

b. hard peg

c. floating

d. crawling

c. floating

Which of the following was part of the stability and growth pact that was required for countries to be part of the European Monetary Union?

a. The annual government budget must be no greater than 3% of GDP.

b. The annual inflation rate must remain within 1.5% of the three best-performing EU countries.

c. The annual government budget deficit could be no greater than 60% of GDP.

d. The annual inflation rate must remain within 5.5% of the four best-performing EU countries.

b. The annual inflation rate must remain within 1.5% of the three best-performing EU countries.

The major objective of the European Central Bank is to ________.

a. ensure that EU interest rates are equal to U.S. rates

b. reduce spending by EU countries

c. control taxes as a means of monitoring EU debt

d. set monetary policy for EU countries that adopt the euro

d. set monetary policy for EU countries that adopt the euro

If inflation in the United States is relatively higher than inflation in Japan, and the Japanese government wants to keep the exchange rate fixed between the yen and the dollar, it should most likely ________.

a. increase the supply of yen in the market

b. allow its currency to fall against the dollar

c. decrease the supply of yen in the market

d. allow its currency to rise against the dollar

a. increase the supply of yen in the market

The Fed wants to counter downward pressure on the dollar, so it will most likely ________.

a. sell dollars for foreign currency

b. sell dollars and buy foreign stocks

c. buy dollars with foreign currency

d. buy Treasury bills with dollars

c. buy dollars with foreign currency

The International Fisher Effect implies that ________.

a. the country with the higher interest rate should have lower inflation

b. the currency of the country with the higher interest rate will strengthen in the future

c. the currency of the country with the lower interest rate will strengthen in the future

d. interest rates and inflation are not linked at all

c. the currency of the country with the lower interest rate will strengthen in the future

Which of the following accurately explains how producers are affected by exchange rate changes?

a. To save money, a manufacturer may decide to relocate production to a country with a stronger currency.

b. Goods manufactured in a country with a weak currency may be relatively expensive in world markets.

c. A manufacturer with high operating expenses would likely relocate production to a country with a currency that is gaining value.

d. A manufacturing firm relocating to a country with a weak currency can make a cheap initial investment.

d. A manufacturing firm relocating to a country with a weak currency can make a cheap initial investment.

The Integration-Responsiveness (IR) Grid expresses how a company's ________ is a function of the relationship between its value chain and the prevailing pressures for global integration or local responsiveness in its industry.

a. value proposition

b. mission

c. strategy

d. target market

c. strategy

In which of the following transactions is one currency swapped for another on one date and then swapped back on a future date?

a. spot transaction

b. outright forward transaction

c. FX swap

d. reverse transaction

c. FX swap

The 27 member EU negotiates trade agreements as one. The EU and Brazil have negotiated a strategic trade alliance which is an example of a ________.

a. global free trade agreement

b. customs union

c. bilateral agreement

d. multilateral agreement

c. bilateral agreement