Chapter 13

Question 1

Companies lack resources to

Answer 1

take advantage of all international opportunities

Question 2

Companies need to

Answer 2

• determine the order of country entry
• allocate resources among countries

Question 3

In choosing geographic sites, a company must decide

Answer 3

• where to sell
• where to produce

Question 4

Scanning techniques

Answer 4

used by managers to examine countries on broad indicators of opportunities and risks

Question 5

Without scanning

Answer 5

a company may examine too many or too few possibilities

Question 6

Problems with data

Answer 6

• Inaccurate information
• Non-comparability
• Limited resources
• Misleading data
• Reliance on only legal and reported market activities
• Poor research methodology

Question 7

Scanning utilizes

Answer 7

“yes” or “no” questions, direct statistics, indirect indicators, and qualitative assessment

Question 8

Yes or no questions:

Answer 8

Ex. a question like “Does the country allow 100% ownership of foreign direct investments?”

Question 9

Direct statistics:

Answer 9

Ex. a question like “What is the highest marginal tax rate on corporate earnings?”

Question 10

Indirect indicators:

Answer 10

Ex. a question like “What are the potential sales for my product?”

Question 11

Qualitative assessment:

Answer 11

Ex. a question like “What will be the future political leaders’ philosophy about IB?”

Question 12

On-site visits follow

Answer 12

scanning and are part of the final location decision process

Question 13

Escalation of commitment

Answer 13

The more time and money companies invest in examining an alternative, the more likely they are to accept it regardless of its merits

Question 14

Companies may simplify the scanning of research

Answer 14

by first eliminating countries with conditions unacceptable to them

Question 15

Expectation of large market and sales growth

Answer 15

are probably a potential location’s major attractions

Question 16

Companies must consider

Answer 16

variables other than income and population when estimating potential demand for their products in different countries

Question 17

Costs - especially labour costs - are an important factor in

Answer 17

companies’ production-location decisions

Question 18

Disadvantages of moving companies to emerging economies because of low-labour-wages

Answer 18

• Competitors follow leaders into low-wage areas
• There is little first-mover advantage for this type of production migration
• The costs may rise quickly as a result of pressure on wage or exchange rates

Question 19

Infrastructure problems

Answer 19

add to operating costs

Question 20

The need to integrate operations among countries

Answer 20

influences location decisions

Question 21

Government practices may

Answer 21

increase or decrease companies’ costs

Question 22

External sources of information

Answer 22

government agencies, specialized services, and trade associations

Question 23

Internal sources of information

Answer 23

Observation and questionnaires

Question 24

Estimation of risk varies

Answer 24

because of different perceptions, company situations, product lines, and operating forms

Question 25

To predict political risk, companies can

Answer 25

- analyze past patterns - get a cross-section of opinions - examine unsatisfactory social and economic conditions

Question 26

Companies may accept

Answer 26

a lower return in order to move their financial resources more easily

Question 27

Diversification strategy

Answer 27

go to many markets fast and then build up slowly in each

Question 28

Concentration strategy

Answer 28

go to one or a few markets and build up fast before going to others

Question 29

Natural disasters and debilitating diseases

Answer 29

upset operations and are spread unevenly around the world

Question 30

Companies are highly attracted to countries that

Answer 30

- share the same language - have institutions similar to those in their home countries - are located nearby

Question 31

Go-no-go decisions

Answer 31

- need to respond quickly - interdependent operations

Question 32

In terms of location strategies, some options are to go

Answer 32

- first to a few versus many foreign countries - to similar versus dissimilar countries - to places to prevent competitors from gaining advantages - into markets that competitors have not entered versus where there are clusters of competitors

Question 33

First-mover advantage

Answer 33

Being first into a country enables a firm to more easily gain the best partners, best locations, and best suppliers

Question 34

Teams comprising people from different functional areas

Answer 34

are useful in choosing and rating indicators of countries' opportunity and risk

Question 35

Grids are tools that

Answer 35

- may depict acceptable or unacceptable country conditions - rank countries by important variables

Question 36

With an opportunity-risk matrix

Answer 36

a company can decide on factors to consider and compare them

Question 37

Information is needed at

Answer 37

all levels of control. Companies should compare the cost of information with its value

Question 38

Information inaccuracies result from

Answer 38

- difficulty in collecting and analyzing data - purposefully misleading data, exclusion of non-market and illegal activity

Question 39

6 Basic reasons why reported information may be inaccurate:

Answer 39

1. Governmental resources may limit accurate data collection 2. Governments must depend on estimates and revisions 3. Governments may omit or purposely publish misleading information 4. Respondents may give false information to data collectors 5. Official data may include only legal and reported market activities 6. Questionable methodology may be used

Question 40

Problems in information comparability arise from

Answer 40

- differences in definitions and base years - distortions in currency values

Question 41

Information sources differ by

Answer 41

cost and detail

Question 42

Companies may reduce risks from the liability of foreignness by

Answer 42

- going first to countries with characteristics similar to those of their home countries - having experienced intermediaries handle operations for them - operating in formats requiring commitment of fewer resources abroad - moving initially to one or a few, rather than many, foreign countries

Question 43

Strategies for ultimately reaching a high level of commitment in many countries are

Answer 43

- diversification - go to many fast and then build up slowly in each - concentration - go to one or a few and build up fast before going to others - a hybrid of the two

Question 44

Reasons for choosing a diversification or a concentration strategy

Answer 44

1. Need for Rapid Growth in Country 2. Competitive Lead Time 3. Need for Product, Communication, and Distribution Adaptation 4. Program Control Requirements

Question 45

A company may have to make

Answer 45

new commitments in a locale to maintain its competitiveness

Question 46

Companies must decide how to get out of operations if

Answer 46

- they no longer fit their overall strategy - there are better alternative opportunities

Question 47

Most companies examine proposals one at a time and accept them if they meet minimum-threshold criteria

Answer 47

- because unforeseen opportunities give little time to make decisions - because of difficulty incorporating global performance into single-country analyses