The Strategy of International Business

_____ can be defined as the rate of return that the firm makes on its invested capital, which is calculated by dividing the net profits of the firm by total invested capital.

• Profitability

• Performance

• Cash flow

• Efficiency

The percentage increase in net profits over time measures:

• capital return

• profitablity

• net profit

• profit growth

Which of the following statements is NOT true?

• The way to increase the profitability of a firm is to create more value.

• The amount of value a firm creates is measured by the difference between its costs of production and the value that consumers perceive in its products.

• The more value customers place on a firm's products, the higher the price the firm is able to charge for those products.

• The price a firm charges for a good or service is typically more than the value the customer places on that good or service.

The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because:

• the customer's disposable income is significantly higher than what the market demands.

• the customer captures some of that value in the form of a consumer surplus.

• regulatory mechanisms ensure that the customer is not overcharged for products/services.

• marketers implement psychological pricing tactics to ensure that customers perceive the prices to be low.

Michael Porter has argued that _____ and _____ are two basic strategies for creating value and attaining a competitive advantage in an industry.

• differentiation; price competition

• economies of scale; diversification.

• low cost; differentiation

• efficiency; promotion

A strategy that focuses on increasing the attractiveness of a product is referred to as a(n):

• differentiation strategy.

• low cost strategy.

• effectiveness strategy.

• efficiency strategy

The _____ shows all of the different positions a firm can adopt with regard to adding value to the product and low cost assuming the firm's internal operations are configured efficiently to support a particular position.

• strategic choice curve

• strategy convex

• efficiency frontier

• experience curve

The basic strategy paradigm suggests that to maximize its profitability, a firm should do all of the following, except:

• choose, according to strategy, any position on the efficiency frontier as all positions are viable.

• pick a position on the efficiency frontier that is viable in the sense that there is enough demand to support that choice.

• configure its internal operations so that they support the position on the efficiency frontier.

• make sure that the right organization structure is in place to execute the strategy.

Which of the following is an example of a primary activity in a firm's value chain?

• Information systems

• Research and development

• Logistics

• Human relations

Global expansion allows firms to achieve all of the following, except:

• standardize their product offering, marketing strategy, and business strategy for all national conditions.

• realize location economies by dispersing value creation activities to the optimal location.

• realize cost economies from experience effects generated by serving a larger market from a central location.

• expand the market for their domestic product offerings by selling those products in international markets.