BUS5 187: Smartbook Chp 15

Select all that apply: Turnkey projects would be commonly associated with which three industries?

1. chemical 2. pharmaceutical 3. metal-refining

Select all that apply: What are three advantages of acquisitions?

1. fast to execute 2. less risk than greenfield venture 3. beat out the competition

Select all that apply: What are the two big trends in the macro environment that have become more evident in the last few decades?

1. for the most part, countries have become more welcoming of FDI 2. declining trade barriers made exporting more attractive

Select all that apply: What are the six modes companies use to enter foreign markets?

1. franchising 2. turnkey projects 3. exporting 4. licensing 5. wholly-owned subsidiaries 6. joint ventures

Select all that apply: Two disadvantages of franchising are

1. franchisor may not be able to take profits out of one country to support another 2. lack of quality control

Select all that apply: When determining whether a company would make a good partner, the text suggests three things a firm needs to do. Which of the following are included in that list?

1. gather as much publicly-available information as possible about the company 2. conduct face-to-ace meetings to get to know the potential partner 3. check with informed third party sources like investment bankers and former employees

Select all that apply: What are three disadvantages of joint ventures?

1. giving up control of technology to host country partner 2. not having tight control over a local partner to realize experience curve or location economies 3. shared ownership arrangements can lead to conflicts and battles for control

Select all that apply: Choose three reasons why acquisitions fail.

1. inadequate pre-acquisition screening 2. culture clash between acquired and acquiring firms 3. not realizing gains from combining operations

Select all that apply: Which three of these statements accurately describe franchising?

1. it is similar to a license but with a longer time commitment 2. the franchisee commits to abiding by strict rules on how it does business 3. the franchiser typically receives a royalty payment

Select all that apply: Killian's company has developed proprietary technology that it wants to maintain control over when entering a foreign market. Because of this, Killian's company would NOT want to consider which two types of entry into the foreign market?

1. joint venture 2. licensing

Select all that apply: The two drawbacks of the large scale entry strategy are

1. lack of flexibility 2. resulting risks

Select all that apply: What are three factors that a company should strive for to maximize the benefits of an alliance?

1. learn from the partners 2. build trust between the partners 3. be sensitive to cultural differences

Select all that apply: What three factors can cause exporting to be uneconomical?

1. low-cost manufacturing locations abroad 2. tariff barriers 3. transport costs

Select all that apply: Screening of the foreign firm to be acquired should include detailed auditing of which three aspects of the business?

1. management culture 2. financial position 3. operations

Select all that apply: What are the four advantages associated with a strategic alliance?

1. may facilitate entry into a foreign market 2. helps a firm establish technological standards that will benefit the firm 3. allow firms to share the fixed costs of developing new products 4.brings together complementary skills that neither company could easily develop on their own

Select all that apply: What are the three basic decisions firms must make when looking at foreign expansion?

1. on what scale to enter markets 2. when to enter markets 3. which markets to enter

Select all that apply: What are the three factors that can lead to the success of a strategic alliance?

1. partner selection 2. alliance management 3. alliance structure

Select all that apply: What are three examples of intangible property that might be covered by a licensing agreement?

1. patents 2. copyrights 3. designs

Select all that apply: What are two benefits associated with entering a market on a large scale?

1. putting limitations on other institutions considering entry 2. easier to attract customers

Select all that apply: What are three advantages of a joint venture?

1. take advantage of a local partner's knowledge of the host country 2. share the development costs and risks of operating in the host country 3. meet political considerations which make a joint venture the only feasible entry mode

Select all that apply: What are three disadvantages of greenfield ventures?

1. uncertainty of future revenue 2. preemption by other competitors 3. take longer to establish

Select all that apply: Which three characteristics are associated with a good ally in a strategic alliance?

1. unlikely to try and exploit alliance for its own ends 2. helps the firm achieve strategic goals 3. shares the firm's vision for purpose of alliance

Select all that apply: Bart's company wants to structure an alliance with another firm but it wants to do this with the assurance of minimal risk. What three methods should Bart's company consider in order to achieve this?

1. write contractual safeguards into an alliance agreement to avoid opportunism by a partner 2. make it difficult to transfer technology not meant to be transferred to a partner 3. both parties agree in advance to swap skills and technology that is coveted to ensure equitable gain

Select all that apply: What are three disadvantages to licensing for the licensor?

1. a licensor can lose control over its technology by licensing it 2. a licensor does not have control over manufacturing, marketing and strategy 3. licensing limits the ability to coordinate strategic moves across several countries

Select all that apply: What are the two methods for establishing a wholly owned subsidiary?

1. acquisition of an established firm 2. greenfield venture

Select all that apply: What are three advantages of a wholly owned subsidiary?

1. can retain competitive advantage based on technology 2. firm may realize location and experience curve economies 3. firm has tight control over foreign operations

True or False: When a company enters a market on a large scale, it would be common for potential competitors to decide against entering that market.

True Reason: A large scale entrant means potential competitors would have to compete against the existing institution but also the now-successful new institution and this would cause other competitors to question the value of their entry into the same market

True or false: A disadvantage of small scale entry is a lack of commitment to build market share and capture first-mover advantages.

True Reason: The risk-averse firm that enters a market on a small scale may miss the chance to capture first-mover advantages

Nelson Warm Air Corp. entered into a short-term agreement with Hudson Heating as they developed systems to install in all rental units, such as apartments and town homes, throughout France. This short-term agreement is an example of

a strategic alliance

Firms that are pursuing a global standardization strategy tend to prefer establishing this strategy through

a wholly owned subsidiary

Bob's Bicycle Company is planning to enter into foreign markets where there are already well-established incumbent enterprises and global competitors are also interested in establishing a presence. Based on these circumstances, Bob's Bicycle Company should enter the foreign markets via

acquisition

When a company decides that it will take too long to establish a sizable presence in a country by using a greenfield venture, it might instead benefit the firm to enter the country by using a(n)

acquisition

As a way to enter the foreign market, Camille's company is considering purchasing a business in their target market rather than trying to build a subsidiary from scratch. They are considering a(n)

acquisition strategy

What is the term used for when one company enters markets before its competitors?

early entry

Exporting, licensing, and establishing a joint venture are types of ______ companies can use

entry modes

Terence realized that it didn't make sense to try to ship the product to Italy because there were lower-costs for producing the product already in place there. Terence decides not to use ______ as a way to get his product to Italy.

exporting

True or False: Cultural differences do not typically play a role in acquisitions.

false reason: many acquisitions fail because there is a clash between the cultures

True or false: As the pressure to reduce costs increases, the best entry modes are franchising and joint ventures.

false reason: As the pressure to reduce costs increases, the best entry modes are wholly owned subsidiaries and exporting

While Jason's company was excited to be the initial company to introduce the new line of power tennis rackets in Europe, his company was also forced to spend countless time and money to get the foreign subsidiaries the information and product needed to sell the rackets. This demonstrates the idea of a

first-mover

There are potential hazards associated with entering a market early. These are called

first-mover disadvantages

Fast food restaurants like McDonald's and Pizza Hut which have sold their trademark to thousands of operations around the world are good examples of

franchising

After his company had already committed to an alliance with a company based in Indonesia, Tomas realized that the Indonesian company had made five poor investments over the past twelve months and its financial records were unsound. Which step in selecting a good alliance partner would have helped Tomas's company avoid this situation?

gather data from third parties such as former employees and investment bankers

The main criticism of a strategic alliance is that it

gives the competition a low-cost way to access new technology and markets

The major disadvantages of ______ ventures is that they are slower to establish and come with financial risks.

greenfield

If incumbent competitors are not available to be acquired in a foreign country, a company will enter the country using a(n)

greenfield venture

Starting a subsidiary in a foreign country from "scratch" where nothing is established is called a(n)

greenfield venture

The management team decided it would be more productive to build the foreign subsidiary from scratch than to try to change the culture that existed in the companies available to acquire. The team is planning a

greenfield venture

What entry mode's major advantage is that a firm has more control over the kind of subsidiary it wants in a foreign market?

greenfield venture

Strategic alliances tend to fail at a

high rate

Potentially giving up control of technology to its local partner and not having tight control over the local partner are disadvantages of a

joint venture

Strategic inflexibility is associated with ______ scale entry into a market

large

Stephen's US based company entered the European market long after its competitors had established themselves. This is known as

late entry

In more recent years, increased trade barriers have made exporting _______ attractive to companies.

less

Even though the formula for the new paint process was created by Eliza's company, her company decided it didn't want the expense of manufacturing the paint so it provided the formula to another company in exchange for a royalty fee. This shows an advantage of

licensing

The potential of losing control over technological know-how is a major drawback associated with

licensing

Stanley invented a new way to make a book out of photos taken with a smart phone. He made an arrangement with Shutterfly which granted the company the right to use his idea in exchange for a 10% royalty fee each time his concept was sold. This is an example of a

licensing agreement

Mallory believes her company's newest technology product will be quickly imitated by others. In order to gain global acceptance before other companies imitate the product, Mallory's company should consider

licensing the technology to foreign firms

There is some evidence which shows that a joint venture with a local partner is associated with a _____ risk of potential adverse government interference

low

In order to make sure that a foreign enterprise has an organizational culture that is not antagonistic to an acquiring enterprise, it is vital that the acquiring enterprise screen the

management culture

Kedrik's company has developed an alliance with a partner firm in Argentina. Kendrik's job is to recognize if any cultural differences exist between the two firms and build interpersonal relationships between his company and the partner firm. Kendrik is in the process of

managing the alliance

Nora's company is considering going into a foreign market. They have determined which markets to go into and the timing for going into them. What other basic entry decision do they need to make?

on what scale should they go in

TRW Automotive has clauses in each of its contracts with Japanese auto component suppliers which bar the Japanese firms from supplying US-owned auto companies with component parts. This protects TRW from the possibility of these Japanese firms from entering into alliance with TRW just to gain access to US markets. By including this clause in its contracts, TRW is avoiding the threat of

opportunism

While McDonald's has thousands of franchises around the world, it is difficult for the company to assure that every McDonald's strives to present the restaurant as the corporation wants it to. This shows how _____ is a concern with franchise agreements

quality control

Andre wants his company to take its time and learn as much as it can about the foreign market it is considering. He wants to limit as much risk as possible. Andre is interested in a ____ scale entry mode

small

The entry mode that may allow competitors to access markets and technology at a low cost is a

strategic alliance

Which form of market entry refers to a cooperative agreement between potential or actual competitors?

strategic alliance

Henry's company decided to introduce a line of winter clothing to its product mix available in South Africa. One year later, the line was removed from the mix since it failed to sell. What was the most likely reason this product failed to sell in South Africa?

the products were not suitable for the market

Which statement is true of acquisitions?

they help preempt competitors

True or false: In a licensing agreement, a company doesn't have to be responsible for the development costs of opening a foreign market.

true Reason: Development costs and risk are not associated with a licensing agreement

True or false: If a company is concerned with losing control over its technology, it might want to license the technology rapidly to foreign firms before imitation occurs.

true Reason: The benefits of a licensing agreement might be outweighed by the risk of losing control over technology

True or false: When a company has a skill that is difficult to articulate, it is easier for that company to enter a foreign market through a greenfield venture.

true reason: a greenfield venture is built from the ground up and takes away the need to try and teach the skill as it would have to in an acquisition

True or False: One advantage of a strategic alliance is that it can help the firm develop technological standards for the industry that will, in turn, benefit the firm.

true reason: establishing the technological standard for an industry give a firm an advantage over the competition

Bruce works as a contractor and agrees to oversee every aspect of a new plant a US company is building in Norway. Next week he enters the final phase of the project as he organizes the training of all company personnel. This is an example of a(n)

turnkey project

Belinda's company introduced a line of water filtration devices for the home market. These were brought to Haiti and sold at an affordable price. Soon, the demand for the product outweighed the availability in Haiti. This shows how Belinda's company created _____ for their product

value

Garrett believes it is important for his company to retain control over the new technology they have developed. Based on this, it would be MOST beneficial for his company to pursue a ______ when entering a foreign market

wholly owned subsidiary

The best way for a company to profit from technological know-how that it wants to maintain control over when entering a foreign market, is to enter the market through a(n)

wholly owned subsidiary

When Kent's US-based firm acquired an established European investment firm, it used that firm to promote its financial products. Kent's company owns 100% of the stock of the European firm making it a

wholly owned subsidiary

Companies that have a reputation based on _____ probably make the best allies in a strategic alliance.

"fair play"