BMAL-590 GLOBAL DIMENSIONS OF
BUSINESS EXAM COMBINED SET
QUESTIONS AND ANSWERS
strategists make five arguments: - Answer-First, strategists argue that dominated by IO
(industrial organization) economics, anti-trust laws were created in response to the old
realities of mostly domestic competition. Richard D' Aveni argues that "applying
traditional U.S. anti-trust enforcement in an environment of hyper competition is like
driving a Model T on the expressway."
Second, to the extent that competition is increasingly global and that foreign anti-trust
laws are more permissive, U.S. anti-trust laws may become "a self-imposed impediment
to U.S. economic performance."
Third, the very actions accused of being "anti-competitive" may actually be highly
"competitive" or "hypercompetitive." In 1972, the U.S. government accused Kellogg,
General Mills, General Foods, and Quaker Oats of product proliferation, that is, too
much competition. Today, the cereal firms face competition from a number of new
breakfast options as well as significant demographic changes in the U.S. that have
changed the way people consume their first meal of the day.
Fourth, U.S. anti-trust laws create strategic confusion. Because the intent to destroy
rivals is a smoking gun of anti-trust cases, the U.S. thus has become a "fantasyland" in
which many firms go bankrupt, but ideally, none is destroyed by a competitor.
Strategists are forced to use milder language; otherwise, they may end up in court.
Fifth, U.S. anti-trust laws designed to combat "unfair" practice, may be unfair. First, the
laws are ambiguous. If a firm's prices are viewed as too low, it can be charged for
predatory pricing. Conversely, if prices are seen as too high, a firm can be sued for tacit
collusion with rivals.
there are two arguments against anti-dumping: - Answer-First, because dumping
centers on selling "below cost," it is often difficult (if not impossible) to prove the case
given the ambiguity concerning "cost."
The second argument is that if foreign firms are indeed selling below cost, so what?
This is simply a (hyper) competitive action. When entering a new market, virtually all
firms lose money on day one. Until some point in the future when the firm breaks even,
it will lose money because it sells below cost. Given the competitive nature of most
industries, it is often difficult (if not impossible) to eliminate all rivals and recoup
dumping losses by charging higher monopoly prices.
,Anti-dumping laws - Answer-laws that block imports sold below the cost of production
and impose tariffs that would increase the price of these imports to reflect their cost of
production
These laws are fundamentally at odds with the spirit of promoting competition, which
underpins competition/anti-trust laws in the first place. Anti-dumping laws are also at
odds with the recent trends toward more globalization
A solution for anti-dumping laws - Answer-phase out anti-dumping laws and use the
same standards against domestic predatory pricing when dealing with foreign firms.
Such a waiver of anti-dumping charges against each other has been in place between
Australia and New Zealand, between Canada and the United States, and within the
European Union. That is, a Canadian firm, essentially treated as a U.S. firm, can be
accused of predatory pricing, but cannot be accused of dumping within the United
States.
Managing global competitive dynamics comes down to - Answer-how industry-,
resource-, and institution-based considerations influence their competitive/cooperative
actions
What is industry-based strategy concerned with? - Answer-The inter-firm rivalry when
engaging in strategic actions
What are the main types of attacks observed in the market? - Answer-Thrust, feint, and
gambit.
Which of the following would not be considered an initial set of actions to gain
competitive advantage? - Answer-Counterattacks
Which of the following is not a legal means of signaling? - Answer-Direct discussion of
reduced rivalry with competitors.
Firms must learn to deal with two sets of pressures - Answer-to reduce costs and to
develop local responsiveness.
Pressures for cost reductions are almost universal, especially for firms competing on
cost leadership. For example, MNEs aggressive outsourcing of call center functions to
India and Ireland is indicative of how companies respond to pressures for cost
reductions.
However, the pressures for local responsiveness are unique to international competition
and these pressures are reflected in consumer preferences, distribution channels, and
host country demands. Consumer preferences vary tremendously around the world
, Based on the integration-responsiveness framework, the four strategic choices for
MNEs are - Answer-(1) home replication, (2) localization (multi-domestic), (3) global
standardization, and (4) transnational
home replication strategy - Answer-often known as "international" or "export" strategy,
emphasizes the international replication of the home country-based competencies such
as scale of production, distribution efficiencies, and brand power. In manufacturing, this
is usually manifested in an export strategy. In services, this is often done through
licensing and franchising. It is relatively easy to implement and usually the first one
adopted for global ventures.
localization (multi-domestic) strategy is - Answer-an extension of the home replication
strategy and focuses on a number of foreign countries/regions, each of which is
regarded as a stand-alone "domestic" market worthy of attention and adaptation.
Although this choice sacrifices global efficiencies, it is effective when there are clear
differences among national and regional markets and low pressures for cost reductions;
a multi-domestic strategy comes at higher costs.
Global standardization strategy - Answer-the opposite of the multi-domestic strategy
and is sometimes referred to as "global strategy." Its hallmark is the development and
distribution of standardized products worldwide in order to reap the maximum benefits
from low-cost advantages. The MNE may designate "centers of excellence,"
subsidiaries recognized as a source of important capabilities, so these capabilities can
be leveraged and/or disseminated to other subsidiaries.
Transnational strategy - Answer-aims to capture "the best of both worlds" by
endeavoring to be both cost efficient and locally responsive. In addition, this choice also
facilitates global learning and diffusion of innovations.
The International Division Structure - Answer-typically set up when firms initially expand
abroad, often engaging in a home replication strategy. Problems inherent in this
organizational structure are two-fold: (1) Foreign subsidiary managers in the
international division are not given sufficient voice relative to the heads of domestic
divisions. (2) The "silo" effect appears because international division activities are not
coordinated with the rest of the firm, which focuses on domestic activities. Firms often
phase out this structure after their initial overseas expansion.
The Geographic Area Structure - Answer-the most appropriate structure for a multi-
domestic strategy. This structure organizes the MNE according to different geographic
areas (countries and regions) where its ability to facilitate local responsiveness is both a
strength and a weakness. Since being locally responsive can be a virtue, it may also
encourage the fragmentation of the MNE into highly autonomous, hard-to-control
"fiefdoms."
The Global Product Division Structure - Answer-which is the opposite of the geographic
area structure, supports a global strategy in treating each product division as a stand-
BUSINESS EXAM COMBINED SET
QUESTIONS AND ANSWERS
strategists make five arguments: - Answer-First, strategists argue that dominated by IO
(industrial organization) economics, anti-trust laws were created in response to the old
realities of mostly domestic competition. Richard D' Aveni argues that "applying
traditional U.S. anti-trust enforcement in an environment of hyper competition is like
driving a Model T on the expressway."
Second, to the extent that competition is increasingly global and that foreign anti-trust
laws are more permissive, U.S. anti-trust laws may become "a self-imposed impediment
to U.S. economic performance."
Third, the very actions accused of being "anti-competitive" may actually be highly
"competitive" or "hypercompetitive." In 1972, the U.S. government accused Kellogg,
General Mills, General Foods, and Quaker Oats of product proliferation, that is, too
much competition. Today, the cereal firms face competition from a number of new
breakfast options as well as significant demographic changes in the U.S. that have
changed the way people consume their first meal of the day.
Fourth, U.S. anti-trust laws create strategic confusion. Because the intent to destroy
rivals is a smoking gun of anti-trust cases, the U.S. thus has become a "fantasyland" in
which many firms go bankrupt, but ideally, none is destroyed by a competitor.
Strategists are forced to use milder language; otherwise, they may end up in court.
Fifth, U.S. anti-trust laws designed to combat "unfair" practice, may be unfair. First, the
laws are ambiguous. If a firm's prices are viewed as too low, it can be charged for
predatory pricing. Conversely, if prices are seen as too high, a firm can be sued for tacit
collusion with rivals.
there are two arguments against anti-dumping: - Answer-First, because dumping
centers on selling "below cost," it is often difficult (if not impossible) to prove the case
given the ambiguity concerning "cost."
The second argument is that if foreign firms are indeed selling below cost, so what?
This is simply a (hyper) competitive action. When entering a new market, virtually all
firms lose money on day one. Until some point in the future when the firm breaks even,
it will lose money because it sells below cost. Given the competitive nature of most
industries, it is often difficult (if not impossible) to eliminate all rivals and recoup
dumping losses by charging higher monopoly prices.
,Anti-dumping laws - Answer-laws that block imports sold below the cost of production
and impose tariffs that would increase the price of these imports to reflect their cost of
production
These laws are fundamentally at odds with the spirit of promoting competition, which
underpins competition/anti-trust laws in the first place. Anti-dumping laws are also at
odds with the recent trends toward more globalization
A solution for anti-dumping laws - Answer-phase out anti-dumping laws and use the
same standards against domestic predatory pricing when dealing with foreign firms.
Such a waiver of anti-dumping charges against each other has been in place between
Australia and New Zealand, between Canada and the United States, and within the
European Union. That is, a Canadian firm, essentially treated as a U.S. firm, can be
accused of predatory pricing, but cannot be accused of dumping within the United
States.
Managing global competitive dynamics comes down to - Answer-how industry-,
resource-, and institution-based considerations influence their competitive/cooperative
actions
What is industry-based strategy concerned with? - Answer-The inter-firm rivalry when
engaging in strategic actions
What are the main types of attacks observed in the market? - Answer-Thrust, feint, and
gambit.
Which of the following would not be considered an initial set of actions to gain
competitive advantage? - Answer-Counterattacks
Which of the following is not a legal means of signaling? - Answer-Direct discussion of
reduced rivalry with competitors.
Firms must learn to deal with two sets of pressures - Answer-to reduce costs and to
develop local responsiveness.
Pressures for cost reductions are almost universal, especially for firms competing on
cost leadership. For example, MNEs aggressive outsourcing of call center functions to
India and Ireland is indicative of how companies respond to pressures for cost
reductions.
However, the pressures for local responsiveness are unique to international competition
and these pressures are reflected in consumer preferences, distribution channels, and
host country demands. Consumer preferences vary tremendously around the world
, Based on the integration-responsiveness framework, the four strategic choices for
MNEs are - Answer-(1) home replication, (2) localization (multi-domestic), (3) global
standardization, and (4) transnational
home replication strategy - Answer-often known as "international" or "export" strategy,
emphasizes the international replication of the home country-based competencies such
as scale of production, distribution efficiencies, and brand power. In manufacturing, this
is usually manifested in an export strategy. In services, this is often done through
licensing and franchising. It is relatively easy to implement and usually the first one
adopted for global ventures.
localization (multi-domestic) strategy is - Answer-an extension of the home replication
strategy and focuses on a number of foreign countries/regions, each of which is
regarded as a stand-alone "domestic" market worthy of attention and adaptation.
Although this choice sacrifices global efficiencies, it is effective when there are clear
differences among national and regional markets and low pressures for cost reductions;
a multi-domestic strategy comes at higher costs.
Global standardization strategy - Answer-the opposite of the multi-domestic strategy
and is sometimes referred to as "global strategy." Its hallmark is the development and
distribution of standardized products worldwide in order to reap the maximum benefits
from low-cost advantages. The MNE may designate "centers of excellence,"
subsidiaries recognized as a source of important capabilities, so these capabilities can
be leveraged and/or disseminated to other subsidiaries.
Transnational strategy - Answer-aims to capture "the best of both worlds" by
endeavoring to be both cost efficient and locally responsive. In addition, this choice also
facilitates global learning and diffusion of innovations.
The International Division Structure - Answer-typically set up when firms initially expand
abroad, often engaging in a home replication strategy. Problems inherent in this
organizational structure are two-fold: (1) Foreign subsidiary managers in the
international division are not given sufficient voice relative to the heads of domestic
divisions. (2) The "silo" effect appears because international division activities are not
coordinated with the rest of the firm, which focuses on domestic activities. Firms often
phase out this structure after their initial overseas expansion.
The Geographic Area Structure - Answer-the most appropriate structure for a multi-
domestic strategy. This structure organizes the MNE according to different geographic
areas (countries and regions) where its ability to facilitate local responsiveness is both a
strength and a weakness. Since being locally responsive can be a virtue, it may also
encourage the fragmentation of the MNE into highly autonomous, hard-to-control
"fiefdoms."
The Global Product Division Structure - Answer-which is the opposite of the geographic
area structure, supports a global strategy in treating each product division as a stand-
