Test on International Business Strategy and Entry Modes

Question 1: A multidomestic strategy, which adapts competitive strategy to each specific country, primarily emphasizes the geographical concentration of operations to achieve significant cost reductions.

A. Ano

B. Ne

Explanation: The multidomestic strategy involves adjusting the competitive strategy to each specific country, which contributes to having dispersed operations and product/service offer differentiation. This approach leads to increased structural costs due to the dispersion of operations, rather than achieving significant cost reductions through geographical concentration, which is characteristic of a global strategy.

Question 2: According to the study materials, which of the following statements accurately describes a benefit of internationalization for a company?

A. Increased exposure to political and economic instability in foreign countries.

B. Enhanced bargaining power with suppliers due to increased purchasing volumes.

C. Higher management risks and increased complexity in adapting to diverse foreign markets.

D. Significant currency and exchange rate fluctuations leading to financial uncertainty.

Explanation: The study materials list 'Increased bargaining power with suppliers: increased purchasing volumes' as an advantage (benefit) of internationalization. The other options describe risks of internationalization, namely exposure to political and economic risk, management risks and increased complexity, and exchange rate risks, respectively.

Question 3: Does licensing allow a company to incur lower entry risks in another country?

A. Ano

B. Ne

Explanation: The licensing company incurs lower entry risks in another country, as it does not have to invest significant resources.

Question 4: An international strategy considers how much to coordinate and integrate activities that are dispersed across different locations within the value chain.

A. Ano

B. Ne

Explanation: International strategy and value chain key issues include 'Coordination: How far should we try to coordinate and integrate activities dispersed across different locations?'

Question 5: Which of the following describes an advantage typically sought by either a global or a multidomestic strategy?

A. Achieving competitive advantages in each country by adapting the strategy to local circumstances.

B. Focusing on cost efficiency and economies of scale through standardized products and global marketing.

C. Maintaining high decision-making autonomy in the units of each country to respond to local needs.

D. Concentrating production facilities in locations that offer maximum competitive advantage globally.

Explanation: A multidomestic strategy aims at achieving competitive advantages in each country by adapting its strategy to local circumstances and involves high decision-making autonomy in local units. A global strategy, conversely, focuses on cost efficiency and economies of scale with standardized products and global marketing, often concentrating production facilities where maximum competitive advantage can be obtained. All options describe advantages inherent in either a global or a multidomestic strategic approach, as detailed in the study materials under 'Summary of main differences' and 'Organizing international activities'.