Practice Questions Introduction to International Business - International Business - Year 1 - RUG

Questions

1. What is the most important reason for MNEs to go abroad?

   1. Export platform

   2. Efficiency seeking

   3. Technology seeking

   4. Market seeking

2. Levitt’s (1983) view on the globalization of markets:

   1. implies that the FSAs of an MNE will all be location-bound

   2. incorporates the idea that cultures and national societal tastes are fixed; whereas the technology changes constantly

   3. implies the replacement of centralized exporters and international projectors by multi-centred MNEs

   4. implies the replacement of multi-centred MNEs by centralized exporters and international projectors

3. What is one the main challenges of an international strategic alliance?

   1. Successful firms go from a beachhead strategy to developing a long term relationship with the local partner.

   2. Learn as much as possible from this partner while giving away as few of your own FSAs as possible.

   3. Proactively select locations and only then alliance partners.

   4. Reduce risk associated with high demand uncertainty in the host market.

4. What is the difference between equity and non-equity entry modes?

   1. The amount of control imposed by the headquarter.

   2. Equity modes are based on the principle of equality, and non-equity entry modes are not.

   3. Equity modes involve an ownership dimension, and non-equity modes do not.

   4. The degree of centralization.

5. Khanna et al. (2005) say that emerging economies are filled with institutional voids? What do they mean with this?

   1. Emerging economies have well developed regulations.

   2. Emerging economies offer a good market for MNEs to sell their product.

   3. Emerging economies lack intermediary firms and macro-level institutions.

   4. Emerging economies offer efficiency for MNEs.

6. Consider the following two statements:

I: Expatriation is the most direct and rigorous way to give managers in-depth knowledge of the MNEs internal network.

II: Managers with extensive expatriate experience are often the best equipped to reduce bounded reliability problems in headquarter-subsidiary relations, and to anticipate bounded rationality problems arising in home country affiliates.

1. Both statements are correct.

2. Both statements are incorrect.

3. Only statement I is correct.

4. Only statement II is correct.

7. When considering a merger or an acquisition, senior managers will often follow the traditional mindset in an industry even it has become obsolete. Ghemawat and Gadar (2000) refer to this phenomenon as:
   

   1. top line obsession

   2. herd behavior

   3. complementary FSA development

   4. grooved thinking

8. The strength of Porter's Diamond Model is that:
   

   1. It shows how home country conditions determine the internationalization process

   2. It focuses on the relationship between home country and host country conditions

   3. It recognizes that the attractiveness of a specific host country is not just based on the conditions in the home country and the host country but also on the score of the host country on the various diamond-dimensions relative to other strategic markets than the host country.

   4. It incorporates the CAGE-framework in the standard international business (IB) theory

9. MNEs must develop managers with a broad mental map covering the entirety of the MNEs geographically dispersed operations. This is critical to the MNE’s long-term profitability, especially in an era:

   1. where foreign markets are becoming increasingly important contributors to mainly the MNE’s downstream activities.

   2. where foreign markets are becoming increasingly important contributors to mainly the MNE’s upstream activities.

   3. where individual foreign markers are losing their attractiveness and can no longer contribute to the MNE’s upstream and downstream activities in the manner the used to do.

   4. where foreign markets are becoming increasingly important contributors to both the MNE’s upstream and downstream activities.

10. Non-location bound FSAs:

    1. can only be successfully transferred between home country and host country in the absence of government-imposed trade barriers.

    2. do not stop creating value when the border is crossed between home and host country, though their precise value may be somewhat different in both countries.

    3. do not stop creating value when the border is crossed between home and host country, unless the MNE in question is a centralized exporter.

    4. can successfully be transferred from the home country to the host country in the form of final products; however, they cannot be transferred in the form of intermediate products.

11. Which of the four archetypes of administrative heritage embraces economic distance?

    1. International coordinator

    2. Centralized exporter

    3. International projector

    4. All of the above

12. In the context of MNEs, economic exposure means:

    1. that firms selling or producing in countries with a different currency run the risk that the exchange rate changes, thereby affecting the profits and price level in the host country currency;

    2. that firms selling or producing in countries with a different currency run the risk that the prices change, thereby affecting the profits in the home country currency;

    3. that firms selling or producing in countries with a different currency run the risk that the prices change, thereby affecting the profits in the host country currency.

    4. that firms selling or producing in countries with a different currency run the risk that the exchange rate changes, thereby affecting the profits and price level in the home country currency.

13. When dealing with a distributor, a typical MNE invests ……. in marketing and business development and assumes that the local distributor will …….. the areas critical to foreign market penetration. Which of the following makes this a correct statement?

    1. a lot; mainly supervise

    2. a lot; actively take care of

    3. very little; actively take care of

    4. very little; mainly supervise

14. International marketing implies developing a pricing strategy. What is the correct definition for differential pricing?

    1. It entails selling the same product at different prices in different markets.

    2. It entails selling a different product at the same price in different markets.

    3. It entails an upward pressure on prices in developed markets, due to cultural distance from home markets.

    4. It entails a downward pressure on prices in developed markets, due to distance from less developed countries.

15. Consider the following statements:

I: Factor conditions in Porter’s diamond model include not only factors of production in the home country, but also, and more importantly, factors of production in the host country.

II: Demand conditions in Porter’s diamond model focus on both domestic market size and domestic buyer sophistication.

1. Only statement I. is correct.

2. Only statement II. is correct

3. Both statements are correct.

4. Both statements are incorrect.

16. In the relationship between an MNE and a distributor it is very important to balance three competing objectives. Which of the following is one of these objectives?
    

    1. Focus on distributors’ market development capabilities.

    2. To reduce risk associated with high demand uncertainty in the host market.

    3. Manage distributors as long-term partners.

    4. Do not delegate marketing strategy.

17. Which of the following statements on emerging markets is correct?

    1. Because emerging markets are characterized by institutional voids, the notion of adaptation is not important in emerging markets.

    2. One of the characteristics of emerging markets is the high level of corruption of all government officials, especially the local ones.

    3. One of characteristics of emerging markets is the high growth of the market combined with a high uncertainty of how that market will develop.

    4. All surveys on emerging markets show that MNEs entering those markets focus on cultural distance and tend to ignore institutional distance.

18. If an MNE has many alliances:

    1. it can benefit from the economies of scale associated with re-allocating the production between the alliance partners

    2. it maximizes the coherence between the different units within the MNE

    3. this may lead to an overemphasis of the role of management

    4. it can benefit from the economies of scale associated with re-allocating the marketing activities between the alliance partners

19. A firm needs recombination skills:

    1. because they are key to an MNE’s exploitation of its unique resources

    2. because this is the only manner in which an MNE can resolve the paradox of transferable FSAs

    3. because without these, it will lose its competitive advantage

    4. unless the MNE in question is a centralized exporter

20. Home-base-exploiting labs:

    1. should be managed by prominent local scientists

    2. should be managed by outside managers that do not yet have a close relationship with the MNE’s culture and systems

    3. should be located close to key markets and the MNE’s own foreign manufacturing units

    4. should be located in critical knowledge clusters relevant to the MNE’s business

21. Developing FSAs is difficult:

    1. mainly because of bounded reliability issues, as bounded rationality issues can easily be resolved.

    2. because of both bounded reliability issues and bounded rationality issues.

    3. mainly because of bounded rationality issues, as bounded reliability issues can easily be resolved.

    4. because of various factors that are, however, unrelated to both bounded reliability issues and bounded rationality issues.

22. An international projector:

    1. Forms vertical value chains across boarders

    2. Has FSAs that are not developed in terms of a physical presence in a host country

    3. Has no need for systematic and continuous transfer of tacit knowledge to a host country

    4. Assumes that its competitive strength in its home market can be used in a host country without any adaptation to the new environment

23. Total sales by US subsidiaries in Brazil are 15,000 million dollars. These subsidiaries sell for a total of 9,000 million dollars in Brazil. Sales to the USA by these subsidiaries is 1,000 million dollars. Total foreign sales by the subsidiaries are 14,000 million dollars. What is the amount of export platform sales by these US subsidiaries in Brazil?

    1. 14,000 million dollars

    2. 6,000 million dollars

    3. 5,000 million dollars

    4. 1,000 million dollars

24. In their article on CSR (2003) Dunn and Yamashita:

    1. suggest that MNEs should create an ecosystem of partners that brings together government, local leadership, business people, health care professionals, NGOs, informal networks with the community and local and international technology partners.

    2. suggest that profitable business models cannot go hand-in-hand with good citizenship and produce positive CSR-outcomes

    3. basically disagree with Friedman’s views on CSR

    4. suggest that MNEs should entrust community development initiatives to individuals with a background in philanthropy or development

25. Consider the following statements:

I: In the case of a home base exploiting subsidiary, the key challenge and difficulty is to overcome the distance between headquarter and subsidiary.

II: In the case of a home base augmenting subsidiary, the difficulty is to get the knowledge from the actors in the host market.

1. Only statement I is correct.

2. Only statement II is correct.

3. Both statements are incorrect.

4. Both statements are correct.

26. Upgrading involves substantial resource recombination spread over three stages, according to Ferdows. One of these stages is:
    

    1. accessing other firm’s FSAs to benefit the overall MNE;

    2. developing new knowledge that can benefit the overall MNE network;

    3. accessing and developing internal resources.

    4. enhancing internal knowledge;

27. One of the archetypes of administrative heritage is the international coordinator. This ………….. managed firm’s international success does ………. primarily on the home country FSA embodied in the products that are exported internationally. Which words should be on the dotted lines?

    1. decentrally; build

    2. centrally; build

    3. centrally; not build

    4. decentrally; not build

28. Subsidiary managers often view market opportunities in a host market different from corporate level managers in the home country. This is an example of:

    1. Power distance

    2. Bounded reliability

    3. Bounded rationality

    4. Uncertainty avoidance

29. According to Verbeke there are four types of location-bound FSAs. These location-bound FSAs:

    1. have in common that they are always linked to some form of location advantage in the home market.

    2. may result from the fact that the firm’s recombination capability is not capable of dealing with the additional complexities of foreign markets.

    3. have in common that they are not valued to the same extent by foreign stakeholders as they are by home-country-stakeholders.

    4. have in common that they are always linked to some form of location advantage in the home market or that they are not valued to the same extent by foreign stakeholders as they are by home-country-stakeholders.

30. The exploitation of FSAs transferred abroad:

    1. can be done by the MNE itself (including its foreign affiliates) and network partners (such as joint venture partners).

    2. can only be done by the MNE itself (including its foreign affiliates).

    3. is impossible without the help of local partners, since they are required to add their own complementary resources to the foreign operations and thereby strengthen the MNE’s position in a foreign market.

    4. can be done by the MNE itself (including its foreign affiliates) and network partners (such as joint venture partners); however, it cannot be done by external actors (such as licensees).

31. Which of the following entry modes strategies is associated with the so-called beachhead approach of Arnold (2000)?

    1. Licensing

    2. Acquisition

    3. Joint venture

    4. Distributor

32. The FSA framework of Verbeke (2013) can be seen as a balanced view of two extremes. These more extreme views are:

    1. Prahalad and Hamel’s theory on the one hand and Bartlett and Ghoshal’s theory on the other hand.

    2. Porter’s view on home country advantages on the one hand and the core competence approach on the other hand.

    3. The Diamond model on the one hand and the Five Forces approach on the other hand.

    4. Black’s theory on the one hand and Gregersen’s theory on the other hand.

33. IKEA’s expansion from its base in Scandinavia into markets in Western Europe and North America is an example of which motive for an MNE to move abroad?

    1. Market seeking

    2. Strategic resource seeking

    3. Natural resource seeking

    4. Efficiency seeking

34. Which statement applies to the “beachhead strategy” of David Arnold (2000)?

    1. Highly centralized strategic marketing decisions by MNEs.

    2. Zero investments by MNEs in marketing and business development, the local partner being responsible for all investments.

    3. MNEs invest very little in marketing and business development, due to the assumption that the local distributor will take care of this.

    4. Minimum investments by MNEs in marketing and business development, ceding less control of strategic marketing decisions to the local partner than they would in the home market.

35. The advantages of entry mode strategy “X” include support from the host countries, low transportation costs, avoidance of trade restrictions, tax incentive advantages, and avoidance of being negatively affected by fluctuations in the foreign exchange rate. The main disadvantages of “X” are being more expensive to set up and the higher level of risks involved. What entry mode strategy does “X” refer to?

    1. Joint venture.

    2. All non-equity strategies.

    3. Strategic alliance.

    4. Greenfield.

36. What critique does Verbeke give on the concept of core competencies?

    1. According to Verbeke it relies too much on the idea that managers can change and develop anything and everything.

    2. None; he completely agrees with the various aspects of the concept of core competencies.

    3. According to Verbeke, the concept is too static and its does not capture and incorporate the dynamics of international business activities.

    4. According to Verbeke, the concept overestimates the role of external factors, such as demand conditions and related and supporting industries.

37. Which of the following has a central role in the explanation so-called paradox of internationally transferable FSAs?

    1. The inability to transfer tacit knowledge across borders.

    2. The inability to transfer codifiable knowledge across borders.

    3. Both codifiable knowledge and tacit knowledge can no longer serve as a key source of competitive advantage when doing business abroad.

    4. The characteristics of both tacit knowledge and codifiable knowledge.

38. An outsourcing decision of an MNE is similar to:

    1. a decision on the choice between a joint venture or a strategic alliance

    2. a make or buy decision

    3. a decision on how much autonomy to give to a subsidiary

    4. a decision on how many expatriates to hire

39. An M&A is preferred over a strategic alliance if:

    1. all of the other firm’s FSAs are needed

    2. only part of the partner’s FSAs are needed

    3. one of the firms has more FSAs than the other

    4. both firms only have a few FSAs

40. Which of the following statements regarding the influence of the Internet on international marketing is NOT correct?

    1. The Internet is a tool that reduces bounded reliability problems faced by MNEs.

    2. The Internet is a tool that reduces bounded rationality problems faced by MNEs.

    3. The Internet increases the importance of a worldwide approach to crisis management and maintaining reputational resources.

    4. The Internet will have both revenue-enhancing and cost-reducing effects on international marketing operations.

41. Which of the following statements with regard to location advantages is correct?

    1. Locations and therefore location advantages matter because an MNEs economic activities occur in a spatially homogeneous environment.

    2. The set of usable strengths of a specific location should always be assessed relative to the useable strengths of other locations.

    3. Location advantages normally do not have an effect on the type of FSAs that can be developed by locally operating firms in comparison to firms operating elsewhere.

    4. Location advantages as such are not one of the main elements of Verbeke’s unifying framework since they can always be linked to either LB FSAs or NLB FSAs.

42. Which of the following cannot be labeled as a "higher-order FSA" contributing to the firm's competitiveness?

    1. the firm's routines / recombination skills

    2. the ability to integrate multiple technologies

    3. the firm's shared knowledge

    4. technological know-how

43. Prahalad and Hamel (1990) argue that; core competencies, meaning the firm’s ……………….., produce components called cored products, which are put together to create end products. Which of the following makes this a correct statement?

    1. stand-alone FSA, routines and recombination skills

    2. explicit and tacit knowledge

    3. technological know-how and strengths derived from vertical integration

    4. routines and recombination skills

44. If cultural distance (CD) increases, then:

    1. The type of investment changes from high to low level of commitment

    2. The investing firm will want to cooperate with a local partner in the host country

    3. The investing firm will want to cooperate with a partner in its home country that already has gained sufficient knowledge about the host country in question

    4. The level of investment in culturally distant countries increases because of the so-called psychic-distance paradox

45. FSAs are location bound:

    1. If they are embodied in intermediate products

    2. If they only provide a competitive advantage for the firm in a specific market

    3. If the exploitation of the FSAs requires the involvement of external actors or network partners such as joint venture partners or distributors

    4. If they are embodied in final products

46. Which sentence below best describes the idea of cultural adaptation?

    1. Adopting a universal set of principles wherever the company operates.

    2. Taking an ethnocentric approach to business decision making.

    3. An approach that recognizes country differences but, because there are so many differences adopts home country standards wherever the company operates.

    4. “When in Rome do as the Romans do.”

47. Resource recombination:

    1. is both a key driver and a key constraint of MNE growth.

    2. refers to an MNE’s capability of growing by innovating, diversifying and collaboration.

    3. does involve combining existing resources in novel ways; however it does not involve using newly acquired resources.

    4. will be difficult to implement in case of existing slack in an MNE.

48. Alliances are preferred over M&A if:

    1. one of the firms has more FSAs than the other

    2. all of the firm's FSAs are needed

    3. both firms only have few FSAs

    4. only part of the partner´s FSAs are needed

49. What the optimal entry mode is depends on:

    1. the degree of control, the level of resource commitment and the dissemination of risk

    2. the degree of control

    3. the degree of control, the level of resource commitment, the dissemination of risk and the degree of top line obsession

    4. the degree of control and the level of resource commitment

50. The centralized exporter is essentially:

    1. strategic resource seeker

    2. an efficiency seeker

    3. a market seeker

    4. none of the above

51. The optimal entry mode is determined by many factors according to Hill Hwang and Kim (1990). Which of the following is NOT one these factors?

    1. The dissemination of risk.

    2. The level of resource commitment.

    3. The level of market commitment.

    4. The degree of control.

52. Franchising is a potential entry mode strategy. Which of the following companies was listed as the top global franchise organization for 2015?

    1. Burger King

    2. Subway

    3. McDonald’s

    4. Pizza Hut

53. Consider the following quote from V. Mahajan. 2013; “Understanding the Arab consumer”, Harvard Business Review, pp.128-132: “Moreover, Sunnis (the majority in Saudi Arabia), Shias (Bahrain's dominant community), and Ibadis (Oman's most common denomination) rely on different sets of hadith, so companies operating in the Arab world must understand the nuances of each.” To which assumption of cultural distance does this quote refer?

    1. Illusion of symmetry

    2. Illusion of spatial homogeneity

    3. Illusion of stability

    4. Illusion of causality

54. When crossing its home country border to create value in a host country, the MNE is:

    1. at a disadvantage compared to local firms because the MNE not only has to compete with these local firms, but will be faced with competition from other MNEs that are already established in that host country.

    2. at an advantage as compared to local firms because it possesses knowledge that is not available to these local firms.

    3. at an advantage as compared to local firms because the MNE hardly incurs any additional cost when entering an additional market and can therefore compete effectively with these local firms.

    4. at a disadvantage as compared to local firms because these firms possess a knowledge base that is more appropriately matched to local stakeholder requirements.

55. The multi-centred MNE:

    1. is characterized by a high degree of national responsiveness.

    2. consists of a set of subsidiaries abroad which are primarily focused on the sales of products that were manufactured in the home market.

    3. is held together by a substantial amount of non-location bound FSAs.

    4. is largely a portfolio of mutually interdependent businesses.

56. Consider a company that started its international expansion. This international expansion is characterized by the export of products that had already been successful in the domestic market. Extensive international expansion started about 10 years later. The company opened a limited number of facilitating sales subsidiaries in some markets. The company has centralized R&D facilities in its home market. This company can best be labeled as:

    1. an international projector

    2. an international coordinator

    3. a multi-centred MNE

    4. a centralized exporter

Answers