International Business: The New Realities 5th edition by S Tamer Cavusgil test bank
B) a sales outlet established in Indonesia, where Sterling could charge more for its products
C) a marketing and advertising partnership established with a successful French car retailer
D) a distribution center established in London to preempt the growth of a British car manufacturer
Answer: D
Diff: 2: Moderate
Skill: Application
Objective: 1-4: Describe why firms internationalize
AACSB: Analytical Thinking
67) One shareholder wanted clarification about a research effort that investigated the possibility of setting up a plant in China. The CEO explained that serving China's rapidly growing middle class population would enable Sterling to increase the size of its customer base dramatically. In China, the CEO was most likely interested in ________.
A) avoiding government intervention
B) challenging Chinese competitors
C) gaining access to innovative ideas
D) developing economies of scale
Answer: D
Diff: 2: Moderate
Skill: Application
Objective: 1-4: Describe why firms internationalize
AACSB: Analytical Thinking
68) The CEO justified one of the company's moves by pointing out that it not only enabled Sterling to benefit from global sourcing advantages, but it also provided access to new ideas about business methods. The shareholders viewed this justification positively most likely because they understood which of the following?
A) Sourcing advantages are usually more important to growth than obtaining new business ideas.
B) International firms may have more than one motive for international expansion.
C) The most compelling motive for international expansion is to gain new ideas from other markets.
D) This expansion strategy would enable the company to better manage cross-cultural risk.
Answer: B
Diff: 2: Moderate
Skill: Application
Objective: 1-4: Describe why firms internationalize
AACSB: Analytical Thinking
69) In discussing the expansion effort to India, the CEO reminded shareholders of Black and Decker's move to partner with the Indian auto retailer Bajaj. The CEO was most likely attempting to justify which of the following?
A) a joint venture that would position Sterling for long-term sales in India
B) a marketing effort targeted to American citizens living in India
C) a price drop to ward off competition from an emerging Indian auto retailer
D) a new manufacturing protocol based on an efficient Indian production method
Answer: A
Diff: 2: Moderate
Skill: Concept
Objective: 1-4: Describe why firms internationalize
AACSB: Analytical Thinking
70) For manufacturing companies, on a per-unit-of-output basis, high volumes of production are correlated with lower per-unit cost.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
Objective: 1-4: Describe why firms internationalize
AACSB: Analytical Thinking
71) Why might firms choose to pursue internationalization strategies? In a short essay, identify five major motivations for expanding overseas. Classify these motivations as strategic or reactive and provide an example of each.
Answer: Strategic Motivations
a. One reason why firms might expand internationally is to seek opportunities for growth through market diversification. Firms expand to tap into the market potential that exists outside the home country. One example is the expansion of automatic teller machines (ATMs) throughout the world.
b. Firms expand to earn higher margins and profits. Foreign markets are often underserved or not served at all. Less intense competition, combined with strong market demand, implies that companies can command higher margins for their offerings. For example, compared to their respective home markets, bathroom fixtures manufacturers American Standard and Toto (of Japan) have found a more favorable competitive environment in rapidly industrializing countries such as Indonesia, Mexico, and Vietnam.