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CPA Australia GSL study materials
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CPA Australia GSL practice questions

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Question 1Global Strategy and Leadership

A multinational retailer wants to enter a foreign market quickly while retaining strong control over brand standards and operating processes. Which foreign market entry mode best matches these two objectives simultaneously?

  1. Wholly owned subsidiary Correct answer.
  2. Franchising
  3. Exporting through local distributors
  4. Licensing

Explanation

A wholly owned subsidiary gives the parent full ownership and managerial control, so brand standards and processes can be enforced directly. It also allows rapid scale-up once established, although it requires the highest capital commitment and carries the greatest risk.

Question 2Global Strategy and Leadership

In international strategy, what distinguishes a 'born global' firm from a firm that internationalises incrementally through staged market commitments?

  1. It seeks significant international markets from or near founding rather than following gradual psychic-distance stages Correct answer.
  2. It only sells through export intermediaries until it reaches a set revenue threshold
  3. It restricts operations to a single regional trade bloc for its first decade
  4. It delays foreign direct investment until domestic market share exceeds fifty percent

Explanation

Born globals internationalise early and rapidly, often using networks and digital channels to bypass incremental stage models. The staged view, by contrast, describes firms expanding gradually as they accumulate market knowledge and reduce perceived psychic distance.

Question 3Global Strategy and Leadership

A firm's industry is global, but its managers configure each country subsidiary independently, producing duplicated product development and conflicting pricing. Which strategic deficiency does this most directly illustrate?

  1. Insufficient use of export intermediaries
  2. Overreliance on joint ventures for market access
  3. Failure to balance global integration with local responsiveness Correct answer.
  4. Excessive centralisation of decision rights at headquarters

Explanation

The integration-responsiveness framework holds that global industries require coordinated configuration across countries while still adapting to local needs. Independent subsidiary fiefdoms duplicate effort and fragment pricing, showing integration is missing.

Question 4Global Strategy and Leadership

Under a transnational strategy, what is the primary role of subsidiary knowledge flows in sustaining competitive advantage?

  1. Subsidiaries act as conduits that diffuse innovations from the home country outward
  2. Subsidiaries are confined to local adaptation with no cross-border knowledge mandate
  3. Subsidiaries generate and share innovations that are integrated and leveraged worldwide Correct answer.
  4. Subsidiaries are used only to arbitrage labour costs across borders

Explanation

The transnational model treats dispersed subsidiaries as sources of innovation, not merely recipients of home-country knowledge. Advantage arises when locally generated capabilities are integrated and diffused across the network.

Question 5Global Strategy and Leadership

Which statement best captures the concept of 'liability of foreignness' as a strategic challenge for entering firms?

  1. Foreign entrants incur costs and legitimacy deficits that local incumbents do not bear Correct answer.
  2. Foreign entrants pay higher tariffs than domestic firms under WTO rules
  3. Foreign entrants are prohibited from hiring home-country nationals
  4. Foreign entrants must adopt the host country's accounting standards

Explanation

Liability of foreignness refers to the additional relational, legitimacy and information costs a foreign firm faces relative to local competitors. It arises from unfamiliarity with the local environment and from host-country stakeholders' scepticism, not from tariff or accounting rules.

Question 6Global Strategy and Leadership

A diversified conglomerate's corporate parent adds value by imposing tight financial controls and demanding high returns from each business unit, while giving units autonomy over operating decisions. This most closely resembles which portfolio management style?

  1. Centralised functional style
  2. Strategic planning style
  3. Financial control style Correct answer.
  4. Strategic control style

Explanation

Goold and Campbell's financial control style relies on strict budget targets and short-term financial results, with little central involvement in business strategy. Strategic planning and strategic control styles involve greater headquarters engagement in shaping business strategy.

Question 7Global Strategy and Leadership

In corporate strategy, what does the 'parenting advantage' concept require of a corporate parent?

  1. That the parent acquires businesses solely to diversify risk across industries
  2. That the parent matches the average returns of its industry peers
  3. That the parent's ownership adds more value to its businesses than alternative owners would Correct answer.
  4. That the parent centralises all operating decisions in its businesses

Explanation

Parenting advantage exists when the centre creates more value in its businesses than they would enjoy under different ownership, net of the costs it imposes. Simply owning diverse businesses or matching peers does not establish that advantage.

Question 8Global Strategy and Leadership

A company uses a BCG growth-share matrix and labels a business unit with low market growth and high relative market share. According to the matrix, what is the recommended strategic treatment of this unit?

  1. Harvest cash to fund other units while defending the position Correct answer.
  2. Divest immediately because the market is unattractive
  3. Invest heavily to build share because growth is expected to accelerate
  4. Inject capital to convert it into a question mark

Explanation

A low-growth, high-share unit is a cash cow: it generates surplus cash that should be harvested to fund stars and selected question marks. Immediate divestment is not the standard prescription and would sacrifice the cash flow the unit provides.

Question 9Global Strategy and Leadership

A firm's value chain analysis reveals that its downstream distribution activities are the main source of differentiation, while upstream component production is a commodity cost centre. What does this suggest about strategic configuration?

  1. The firm should concentrate investment where differentiation value is created and minimise cost elsewhere Correct answer.
  2. The firm should internalise upstream production and outsource distribution
  3. The firm should divest downstream activities to focus on manufacturing
  4. The firm should replicate identical activities in every country to achieve scale

Explanation

Value chain analysis directs resources to activities that create competitive advantage while treating non-differentiating activities as cost to be minimised. Outsourcing commodity production and investing in downstream differentiation is the logical configuration.

Question 10Global Strategy and Leadership

Which action is the clearest example of a firm pursuing a corporate-level diversification strategy rather than a business-level competitive strategy?

  1. Entering an unrelated industry through acquisition of a new business Correct answer.
  2. Increasing advertising spend to build brand awareness in its current segment
  3. Reducing unit costs through lean manufacturing in its current plant
  4. Launching a premium product line within its existing market

Explanation

Corporate-level strategy concerns the scope of the firm, including which businesses it operates and how the centre adds value across them. Entering an unrelated industry through acquisition changes the portfolio of businesses, whereas the other options concern how to compete within existing markets.

Question 11Global Strategy and Leadership

A firm decides to enter a foreign market via a joint venture with a local partner. Which combination of benefits and risks is most characteristic of this entry mode?

  1. Complete avoidance of host-government regulatory scrutiny
  2. Lowest capital commitment with no local partner obligations
  3. Full control of operations with no need to share proprietary knowledge
  4. Rapid local knowledge and legitimacy, offset by shared control and potential partner conflict Correct answer.

Explanation

Joint ventures give access to a partner's local knowledge, networks and legitimacy, which helps offset liability of foreignness. The trade-off is shared control, coordination costs and the risk of opportunistic behaviour or conflict over objectives.

Question 12Global Strategy and Leadership

According to the CAGE distance framework, which category of distance best explains why two countries sharing a language still face difficulties trading because of differing legal systems and colonial histories?

  1. Cultural distance
  2. Geographic distance
  3. Economic distance
  4. Administrative distance Correct answer.

Explanation

Administrative distance captures differences in colonial ties, legal systems, currencies and political structures that affect trade and investment. Shared language belongs to cultural distance, so the legal and historical differences point to the administrative dimension.

Question 13Global Strategy and Leadership

A global firm standardises its core product platform worldwide but permits local units to adapt packaging and marketing messages. This approach is best described as:

  1. A pure global standardisation strategy
  2. A glocal or transnational adaptation of standardisation and responsiveness Correct answer.
  3. A localisation strategy with no global integration
  4. A multidomestic strategy with fully autonomous subsidiaries

Explanation

Combining a standardised core platform with locally adapted packaging and marketing reflects simultaneous pursuit of integration and responsiveness, often called glocalisation or a transnational approach. Neither pure standardisation nor full local autonomy describes this blend.

Question 14Global Strategy and Leadership

An organisation wants to build a global mindset among managers. Which human resource practice most directly supports this objective?

  1. Standardising all performance appraisals to home-country criteria
  2. Restricting promotion to managers with lengthy domestic tenure
  3. Rotating high-potential managers through assignments in multiple country operations Correct answer.
  4. Centralising all recruitment in the headquarters country

Explanation

International assignments expose managers to diverse markets and build the cognitive and relational capabilities associated with a global mindset. Home-country-centric appraisal, promotion and recruitment practices tend to reinforce parochial rather than global perspectives.

Question 15Global Strategy and Leadership

A firm uses a global account management structure to serve multinational customers. What is the main strategic rationale for this arrangement?

  1. To transfer all customer relationships to external distributors
  2. To reduce the number of products offered in each country
  3. To coordinate consistent service and pricing for customers across multiple national markets Correct answer.
  4. To give each country manager full pricing authority over key customers

Explanation

Global account management assigns dedicated teams to coordinate relationships with customers that operate across borders. This delivers consistency in service, pricing and terms that fragmented country-by-country management cannot achieve.

Question 16Global Strategy and Leadership

In the context of emerging-market multinationals, what does the 'springboard' perspective suggest about outward foreign direct investment?

  1. Firms use foreign investment as a springboard to acquire strategic resources and overcome latecomer disadvantages Correct answer.
  2. Firms invest abroad only after fully saturating their home markets
  3. Firms avoid foreign investment because they lack ownership advantages
  4. Firms invest abroad mainly to escape home-market competition and permanently relocate

Explanation

The springboard view holds that emerging-market firms use outward investment to acquire brands, technology, knowledge and market access that compensate for latecomer and home-country institutional constraints. It is a resource-seeking and capability-building logic rather than permanent relocation.

Question 17Global Strategy and Leadership

Which of the following best describes the role of a 'centre of excellence' in a multinational network?

  1. A regional office that translates headquarters directives into local plans
  2. A subsidiary mandated to hold and develop a specific capability for the whole organisation Correct answer.
  3. A headquarters unit that approves all capital expenditure globally
  4. A shared services centre that processes transactions for one country

Explanation

Centres of excellence are subsidiaries or units recognised for a distinctive capability and given a network-wide mandate to develop and disseminate it. They differ from headquarters control units, regional translation offices and single-country shared service centres.

Question 18Global Strategy and Leadership

A firm operates in an industry where consumer tastes and regulations differ sharply by country and scale economies are limited. Which organisational configuration is most consistent with this environment?

  1. Global product division with strong central coordination
  2. Multidomestic configuration with strong local responsiveness Correct answer.
  3. Export department attached to the domestic head office
  4. Transnational network with integrated worldwide product mandates

Explanation

When local tastes and regulations diverge and scale economies are weak, responsiveness dominates and a multidomestic configuration with empowered local units fits best. Global product divisions and transnational integration suit settings where standardisation and scale matter more.

Question 19Global Strategy and Leadership

What is the primary purpose of conducting a country risk assessment before committing foreign direct investment?

  1. To determine the host country's corporate tax rate for financial reporting
  2. To calculate the exact exchange rate at which future profits will be repatriated
  3. To establish the market entry price for acquiring a local competitor
  4. To evaluate political, economic and operational risks that could affect investment returns Correct answer.

Explanation

Country risk assessment examines political instability, regulatory change, economic volatility and operational hazards that threaten investment returns. It informs the decision on whether and how to enter, rather than predicting exchange rates or setting acquisition prices.

Question 20Global Strategy and Leadership

A firm's global strategy involves locating each value-chain activity in the country where it can be performed most advantageously and coordinating those dispersed activities. This is best described as:

  1. Local responsiveness without integration
  2. Multidomestic replication
  3. Export-led standardisation
  4. Global configuration and coordination of activities Correct answer.

Explanation

The integration of location decisions across the value chain with cross-border coordination is the essence of global configuration and coordination. It goes beyond replication in each market or pure export standardisation because activities are dispersed by comparative advantage and then linked.

Question 21Global Strategy and Leadership

A multinational faces pressure to reduce costs and also needs to respond to local customer preferences. Which strategic posture is most appropriate under the integration-responsiveness framework?

  1. Export strategy relying on agents in each market
  2. Transnational strategy balancing efficiency, responsiveness and learning Correct answer.
  3. Multidomestic strategy emphasising local autonomy
  4. Global strategy emphasising standardisation and scale

Explanation

The transnational posture is designed for simultaneous pressure for cost efficiency and local responsiveness, adding worldwide learning as a third objective. Global and multidomestic strategies each address only one of the two pressures fully.

Question 22Global Strategy and Leadership

In a strategic alliance, which governance mechanism most directly mitigates the risk of knowledge leakage to a partner?

  1. Rotating alliance managers frequently between partners
  2. Specifying contractual safeguards and defining the scope of shared knowledge Correct answer.
  3. Increasing the number of partners involved in the alliance
  4. Relying on informal trust alone without written agreements

Explanation

Alliance governance manages leakage through contractual protections, clear scope definition and boundary-setting around proprietary knowledge. More partners and trust alone increase exposure, and rotating managers does not address the underlying knowledge boundary.

Question 23Global Strategy and Leadership

Which of the following is a key limitation of using the PESTEL framework in global strategy analysis?

  1. It focuses exclusively on competitor behaviour and industry rivalry
  2. It applies only to domestic markets and cannot be used internationally
  3. It identifies macro-environmental factors but does not by itself assess their relative impact or competitive implications Correct answer.
  4. It provides quantitative forecasts of market size and profitability

Explanation

PESTEL is a scanning checklist that surfaces political, economic, social, technological, environmental and legal factors. It does not weight their significance or link them to competitive dynamics, which requires further analysis such as scenario planning or five forces.

Question 24Global Strategy and Leadership

A firm's competitive advantage in a foreign market depends on resources that are valuable, rare, hard to imitate and non-substitutable. Which theoretical lens does this describe?

  1. Industry life-cycle theory
  2. Product life-cycle theory of trade
  3. Transaction cost economics
  4. Resource-based view of the firm Correct answer.

Explanation

The resource-based view attributes sustained advantage to resources meeting the valuable, rare, inimitable and non-substitutable criteria. Industry life cycle, transaction cost economics and product life cycle address different questions about industry evolution, governance and trade patterns.

Question 25Global Strategy and Leadership

A firm pursuing a global strategy faces a decision on whether to standardise its product offering worldwide. Which condition most strongly supports standardisation?

  1. Local competitors dominate each market with tailored offerings
  2. Consumer incomes and preferences vary widely between countries
  3. Host governments require locally differentiated products in every market
  4. Customer needs are homogeneous across markets and scale economies are significant Correct answer.

Explanation

Standardisation pays when customer needs converge globally and scale economies make a common offering efficient. Regulatory requirements, entrenched local competitors and divergent incomes and preferences all push toward adaptation rather than standardisation.

Question 26Global Strategy and Leadership

In the integration-responsiveness framework, which industry condition most strongly increases the pressure for global integration rather than local responsiveness?

  1. Customer preferences that differ sharply between national markets
  2. Strict local content rules that require sourcing from domestic suppliers
  3. High economies of scale in production combined with globally converging customer needs Correct answer.
  4. Distribution channels controlled by local intermediaries in each country

Explanation

Cost pressures for integration rise when scale economies, learning effects and universal needs allow standardised offerings to be leveraged worldwide. Local content rules, divergent preferences and fragmented channels all push the firm toward responsiveness instead.

Question 27Global Strategy and Leadership

A mining multinational must decide whether to invest in a country where the government has recently changed royalty rates twice in three years. Which analytical step most directly addresses this specific uncertainty?

  1. Mapping the industry value chain to identify activities suitable for outsourcing
  2. Calculating the net present value of the project using the home-country discount rate
  3. Assessing political and regulatory risk as part of a structured country risk assessment Correct answer.
  4. Benchmarking the project against competitors' global average return on capital

Explanation

Policy instability that alters the economic terms of an investment is a political and regulatory risk, which structured country risk assessment is designed to surface and quantify. Financial appraisal techniques assume a stable cash-flow regime and do not by themselves explain or price sudden rule changes.

Question 28Global Strategy and Leadership

A software firm enters a foreign market by licensing its platform to a local distributor. Which outcome is the most characteristic trade-off of this entry mode?

  1. Rapid scale through shared equity, with profits divided according to ownership share
  2. Full ownership of local operations with high capital commitment and full control
  3. Direct control of distribution while bearing the full cost of local infrastructure
  4. Low capital commitment and fast access, but limited control over how the technology is exploited Correct answer.

Explanation

Licensing transfers rights to a partner in exchange for fees, so the firm commits little capital and gains quick market presence. The cost is weaker control over quality, positioning and the partner's use of the proprietary technology.

Question 29Global Strategy and Leadership

A consumer goods multinational finds that its emerging-market subsidiary has developed a low-cost packaging process that outperforms the parent's method. Which organisational capability best allows the parent to capture value from this innovation?

  1. Standardisation of every subsidiary process to the home-country template
  2. Reverse innovation transfer supported by mechanisms that identify and diffuse subsidiary knowledge Correct answer.
  3. Reduction of subsidiary autonomy to prevent deviation from global policy
  4. Tight centralisation of all process decisions at headquarters

Explanation

Value from subsidiary-generated knowledge is realised when the multinational has processes to recognise local innovations and transfer them across the network, often called reverse innovation or knowledge diffusion. Centralising or standardising everything would suppress the very source of the advantage.

Question 30Global Strategy and Leadership

Which statement best distinguishes a transnational strategy from a multidomestic strategy?

  1. A transnational strategy decentralises all decisions to country units and treats each market independently
  2. A transnational strategy simultaneously pursues efficiency, local responsiveness and worldwide learning through an integrated network Correct answer.
  3. A transnational strategy concentrates every value activity at headquarters to maximise scale economies
  4. A transnational strategy abandons local adaptation in favour of a single undifferentiated global product

Explanation

The transnational model is defined by seeking cost efficiency, local responsiveness and cross-border learning at the same time, using an interdependent network of dispersed but linked units. The other descriptions correspond to multidomestic, global or simple centralised configurations.

Question 31Global Strategy and Leadership

A firm's managers observe that its foreign subsidiary performs better than local rivals despite using broadly similar inputs. Resource-based analysis would attribute this most plausibly to which factor?

  1. Access to the same local labour market available to all competitors
  2. Subsidiary-specific capabilities such as tacit knowledge and relationships that rivals cannot easily replicate Correct answer.
  3. Government subsidies offered equally to all firms in the sector
  4. Favourable exchange-rate movements affecting reported subsidiary profits

Explanation

Under the resource-based view, superior performance persists only where the underlying resources are valuable, rare, hard to imitate and not readily substitutable. Inputs available to all rivals or transient currency effects cannot sustain an advantage.

Question 32Global Strategy and Leadership

In an alliance between a manufacturer and a foreign partner, which design choice most directly reduces the risk that proprietary process know-how is appropriated by the partner?

  1. Defining the scope of collaboration narrowly and using contractual and structural safeguards around sensitive activities Correct answer.
  2. Sharing all technical documentation to demonstrate good faith
  3. Increasing the number of joint projects so that trust develops faster
  4. Extending the alliance term to reduce the frequency of renegotiation

Explanation

Knowledge leakage is contained by limiting what falls inside the alliance scope and by erecting contractual and structural protection around core know-how. Broader disclosure or longer, wider collaboration increases exposure rather than reducing it.

Question 33Global Strategy and Leadership

A multinational appoints a manager who has worked in three regions and can interpret cues from different national contexts without treating one culture as the default. Which competency does this most directly illustrate?

  1. Ethnocentric orientation toward home-country practices
  2. Functional expertise in a single technical discipline
  3. Local responsiveness limited to one national market
  4. A global mindset characterised by cognitive complexity and cultural self-awareness Correct answer.

Explanation

A global mindset involves the capacity to perceive and interpret the world from multiple cultural vantage points and to avoid assuming one context is standard. International experience across regions is a common antecedent of this cognitive complexity.

Question 34Global Strategy and Leadership

A firm considering foreign direct investment asks whether it can protect its proprietary technology once production is located abroad. Which element of the investment decision does this concern?

  1. The appropriability regime and the risk of imitation in the host environment Correct answer.
  2. The choice between a cost-leadership and differentiation generic strategy
  3. The design of the annual performance appraisal cycle
  4. The firm's dividend policy toward foreign shareholders

Explanation

Whether a firm can capture returns from its technology depends on the appropriability regime, meaning the strength of legal protection and the difficulty of imitation in the host country. This is a distinct locational consideration in the investment decision.

Question 35Global Strategy and Leadership

Which factor most clearly argues against standardising a product across all national markets?

  1. Growth of global media that spreads common consumer tastes
  2. Converging income levels across target countries
  3. Falling trade barriers within a regional bloc
  4. Mandatory national technical standards that differ substantively between target countries Correct answer.

Explanation

Binding local technical standards force product variation because compliance is a condition of market access. Converging incomes, lower trade barriers and global media all support greater standardisation.

Question 36Global Strategy and Leadership

A firm's board wants to know whether its portfolio of businesses creates more value together than they would as independent entities. Which concept is the board applying?

  1. Competitor benchmarking of unit costs
  2. Functional-level efficiency in a single value activity
  3. Corporate advantage derived from the fit between the parent's capabilities and the needs of its businesses Correct answer.
  4. Industry attractiveness measured by five-forces intensity

Explanation

The test of corporate-level strategy is whether the parent adds more value to its businesses than alternative owners would, which depends on fit between parenting capabilities and business needs. Industry attractiveness or unit cost comparisons address only parts of that question.

Question 37Global Strategy and Leadership

Under the CAGE framework, which pair of countries would be expected to face the greatest administrative and political distance, all else equal?

  1. Two countries sharing a colonial legal heritage and a common language
  2. Two countries with no shared trading agreement, different legal systems and a history of conflict Correct answer.
  3. Two countries with a free-trade agreement and integrated border procedures
  4. Two countries in a common customs union with mutual recognition of standards

Explanation

Administrative and political distance reflects the absence of shared institutional arrangements such as trade blocs, common legal traditions, currency arrangements and historical ties. The absence of a trade agreement, incompatible legal systems and a conflict history combine to maximise that distance.

Question 38Global Strategy and Leadership

A firm's foreign subsidiary is granted autonomy over pricing and product mix but must report to a global business unit for technology standards. Which structural arrangement does this describe?

  1. A single-dimension divisional structure with no dual reporting
  2. A holding company in which units are financially independent
  3. A pure functional structure organised only by discipline
  4. A matrix structure balancing geographic and product dimensions Correct answer.

Explanation

Dual reporting, where a unit answers to both a geographic and a product authority, is the defining feature of a matrix. Each of the other options has only one line of authority.

Question 39Global Strategy and Leadership

A firm plans to expand into a market where the rule of law is weak and contracts are costly to enforce. Which entry approach is most consistent with limiting exposure under these conditions?

  1. A wholly owned greenfield plant financed entirely with local debt
  2. A long-term equity joint venture with unlimited capital contribution
  3. An immediate acquisition of the largest domestic competitor
  4. A non-equity arrangement such as a narrowly scoped contract with staged commitment Correct answer.

Explanation

Where contract enforcement is unreliable, firms limit exposure by committing gradually and keeping arrangements narrow and reversible. Large irreversible equity commitments magnify the loss if disputes cannot be adjudicated fairly.

Question 40Global Strategy and Leadership

Which measure most directly captures whether a firm has achieved operating economies by locating production in a low-cost country?

  1. Increase in the number of expatriate managers assigned abroad
  2. Unit production cost after adjusting for logistics, tariffs and quality-related rework Correct answer.
  3. Number of foreign subsidiaries established in the region
  4. Growth in the firm's global brand awareness index

Explanation

Location economies are realised only if the total landed cost, including freight, duties and quality costs, is lower than alternatives. Counting subsidiaries or brand metrics does not demonstrate cost advantage.

Question 41Global Strategy and Leadership

A global retailer uses a single global account team to serve a large multinational supplier, coordinating service across twenty countries. What governance challenge does this arrangement most typically create?

  1. Removal of the need for performance measurement in country units
  2. Conflict between global account priorities and the profit accountability of country managers Correct answer.
  3. Elimination of the need for local market knowledge
  4. Reduction of coordination costs to zero across markets

Explanation

Global account management centralises the customer relationship, which can clash with country managers who carry local profit-and-loss responsibility. The structure adds coordination demands rather than removing them.

Question 42Global Strategy and Leadership

Which characteristic of emerging-market multinationals does the springboard perspective emphasise?

  1. Preference for exporting over any form of foreign direct investment
  2. Avoidance of international expansion until domestic markets are fully saturated
  3. Outward investment used as a deliberate means to acquire strategic resources and overcome latecomer disadvantages Correct answer.
  4. Reliance on home-country cost advantages alone to sustain global competitiveness

Explanation

The springboard view holds that emerging-market firms invest abroad to obtain capabilities, brands and market access that compensate for their late arrival. It treats outward investment as a deliberate learning and catch-up mechanism rather than a passive consequence of domestic maturity.

Question 43Global Strategy and Leadership

A multinational is deciding whether a country's market is large enough to justify a manufacturing plant rather than exports. Which consideration is most relevant to that judgment?

  1. The interaction of local demand size with tariff and transport costs relative to minimum efficient scale Correct answer.
  2. The average age of the firm's board of directors
  3. The host country's ranking on a global happiness index
  4. The number of languages spoken in the host country

Explanation

Whether to serve a market locally depends on whether demand, protected by tariffs or transport costs, is large enough to support a plant at minimum efficient scale. Cultural or governance variables unrelated to scale do not determine that choice.

Question 44Global Strategy and Leadership

Which scenario best illustrates a centre of excellence within a multinational network?

  1. A unit that holds recognised expertise in a specific technology and is mandated to develop it for the whole group Correct answer.
  2. A unit that is required to implement headquarters instructions without discretion
  3. A unit that serves only its domestic market with locally tailored products
  4. A unit that exists solely to hold intellectual property for tax purposes

Explanation

A centre of excellence is a subsidiary or unit assigned a strategic mandate over a particular competence and expected to create and diffuse knowledge for the wider network. It is distinguished by expertise and a group-wide role, not by compliance or local service.

Question 45Global Strategy and Leadership

A firm's global strategy assigns each value activity to the country where it can be performed best, but the activities are poorly coordinated. Which risk is most likely to materialise?

  1. Loss of coherence across the value chain that undermines the intended differentiation or cost advantage Correct answer.
  2. Guaranteed protection of proprietary knowledge across locations
  3. Elimination of the need for cross-border logistics management
  4. Automatic improvement in responsiveness to every local market

Explanation

Dispersing activities internationally creates advantage only when the pieces are linked; without coordination, handoffs, quality and consistency suffer and the intended benefit erodes. Coordination is a necessary complement to location choices, not something they remove.

Question 46Global Strategy and Leadership

Which action most clearly constitutes a business-level rather than corporate-level strategic decision?

  1. Selecting which foreign markets the group will enter as a whole
  2. Deciding to divest an entire division to refocus the portfolio
  3. Choosing to compete in a niche segment through superior after-sales service Correct answer.
  4. Acquiring a firm in an unrelated industry to diversify

Explanation

Business-level strategy concerns how a unit competes within its chosen market, such as selecting a niche and a basis of differentiation. Portfolio divestment, unrelated acquisition and group-level market selection are corporate-level decisions about the scope of the firm.

Question 47Global Strategy and Leadership

A firm's managers note that a rival's success in a foreign market rests on a relationship with a local regulator that cannot be purchased or quickly replicated. In resource-based terms, this advantage is best described as which?

  1. A socially complex and path-dependent resource that is costly to imitate Correct answer.
  2. A readily tradable asset available to any bidder
  3. A temporary advantage arising from a favourable exchange rate
  4. A generic factor of production with no isolating mechanism

Explanation

Advantages rooted in relationships, reputation and history are socially complex and path dependent, which makes imitation difficult even when rivals understand the source. Tradable assets or currency effects lack such isolating mechanisms.

Question 48Global Strategy and Leadership

A firm wants to reduce the risk of misjudging a foreign market before committing substantial capital. Which approach best serves that objective?

  1. Committing the full investment immediately to capture first-mover advantages
  2. Delegating the decision entirely to a single local agent without verification
  3. Relying solely on the home-country sales history of a similar product
  4. Conducting staged market research and a pilot entry with defined review points before full commitment Correct answer.

Explanation

Staged commitment with explicit review points allows the firm to learn about the market and withdraw before losses become large. Immediate full commitment or unverified single-source information removes the option to correct course.

Question 49Global Strategy and Leadership

Which statement best explains why a purely global strategy may fail in an industry requiring local responsiveness?

  1. Global scale economies always outweigh any loss of local relevance
  2. Standardised offerings can lose share where customers value adaptation that local competitors provide Correct answer.
  3. Uniform products automatically satisfy differing national regulations
  4. Centralised decision making guarantees faster response to local demand shifts

Explanation

When buyers in each market value adaptation, a standardised offering cedes advantage to rivals that tailor to local needs. Scale economies may still matter, but they do not automatically compensate for lost relevance or unmet regulation.

Question 50Global Strategy and Leadership

A firm uses a decision tree to compare entering a foreign market now versus waiting one year, incorporating the value of information gained by waiting. Which concept does the option to wait represent?

  1. Sunk cost already incurred in market research
  2. Real option value embedded in managerial flexibility Correct answer.
  3. Transfer price set between two subsidiaries
  4. Agency cost arising from manager-shareholder conflict

Explanation

The ability to defer, stage or abandon an investment has value analogous to a financial option, because it lets managers act on information that arrives later. It is not a sunk cost, an agency problem or a transfer pricing matter.