Ch 13 International Business

The most typical joint venture involves a ____ stake in ownership between two companies.

50-50

______ generally occur(s) between companies that hold patents over different aspects of the same product. By entering into this type of agreement, both companies can avoid litigation over infringement disputes.

Cross-licensing

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

Early entry

Which is an example of a major strategic commitment by a company?

Entering a foreign market on a significant scale

______ involves one firm selling intangible property to another firm and insisting that the receiver of the intangible property abides by strict rules on how it does business.

Franchising

Which 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

______ might be one disadvantage on acquisitions.

Increased debt

At Jackson Electric, the company's core competence is based in the proprietary technology it has developed for kitchen appliances. Which foreign entry mode should Jackson Electric avoid in order to protect this technology?

Joint venture

If a firm's core competency is based on technological know-how, a firm generally should NOT use which two entry modes? (Check all that apply.)

Joint venture Licensing

If a service firm's core competency is managerial know-how, which two foreign entry modes make the most sense? (Check all that apply.)

Joint ventures Franchising

If a firm is determining which foreign entry strategy to use, but is concerned with maintaining control over its proprietary technology, which two entry modes should it AVOID? (Check all that apply.)

Joint ventures Licensing

John's U.S.-based company is considering doing business in London, England. The costs and risks associated with doing business in London are considered--------because it is economically advanced and politically stable.

Low

______ costs arise when the foreign business system is so different from that in the home market that the firm must devote considerable time, effort and expense to learning the rules of the game.

Pioneering

What are three disadvantages of greenfield ventures? (Check all that apply.)

Slower to establish Risky to establish Preemption by other competitors

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, 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.

Harrison Freight Inc. felt it was important to release their newest product to the European market before everyone else so they could establish their brand before their competition did. The company wants to benefit from _____.

a first-mover advantage

When determining whether or not to engage in a business in a foreign country, analysts should consider that future economic growth rates within any country are a function of both ______ and ______. (Check the two that apply.)

a free market system a country's capacity for growth

A company that gains entry into a foreign market through ______ has total control over the products or services manufactured or sold.

a greenfield venture

If a firm is highly concerned about choosing a politically acceptable entry mode, the firm should choose

a joint venture.

A type of entry mode that is common in the chemical, pharmaceutical, and petroleum-refining industries in which a contractor agrees to handle every detail of a project for a foreign client is called ______.

a turnkey project

The foreign entry mode that is the most costly, with firms bearing the full capital costs and risks of operating overseas, is ______.

a wholly owned subsidiary

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

acquisition

Prior to purchasing a foreign company, it is imperative that the potential buyer screens the financial position and management culture of the foreign company and obtains a detailed audit of operations. These are all vital steps in the ______ strategy.

acquisition

When a company decides that it will take too long to establish a sizable presence in a country, it will likely use ______ to enter the country.

an acquisition

What are two disadvantages of small-scale entry?

difficult to capture first-mover advantages difficult to build market share

If a business wants lower costs and less risk when doing business in a foreign country, it should consider those countries that are

economically advanced.

Exporting, licensing and joint ventures with a host-country firm are examples of ______ for serving global markets.

entry modes

Not being able to take advantage of lower-cost locations for manufacturing, dealing with high transport costs, and facing tariff barriers are disadvantages of ______.

exporting

Quick Auto Parts does not want to establish a manufacturing facility in Mexico but does want to get component parts to the 75 dealers it has in that country. Which form of entry should it use?

exporting

As pressures for cost reductions increase, the two most appropriate foreign market entry modes would be (Check all that apply.)

exporting. wholly owned subsidiary.

When a company enters a market early, it usually has a(n) _____ advantage.

first-mover

Kettle-Bright Corp. was the first company to introduce electric teapots in South America. The company had to establish production standards and educate customers about the benefits of the product which cost hundreds of thousands of dollars to do. These expenses are examples of _____.

first-mover disadvantages

Pioneering costs are associated with _____.

first-mover disadvantages

A company that enters a foreign market on a large scale must consider the lack of _____ associated with significant commitments.

flexibility

Who is typically responsible for the costs and risks in a franchise agreement?

franchisee

Quiet-Night Hotel Corp. has developments around the globe. Customers expect the same experience in every hotel but that has been a problem as not every hotel follows the expectations set down by the company. Quality control is a significant disadvantage of ______.

franchising

A(n) ______ is a form of foreign direct investment where a parent company builds its operations in a foreign country from the ground up. In addition to the construction of new production facilities, these projects can also include the building of new distribution hubs, offices and living quarters.

greenfield strategy

A company that enters a country where there are no existing competitors may have to rely on ______ as the only mode of entry.

greenfield venture

Slim-Stuff Yogurt would like to enter into a foreign market and build a production facility. The company knows there are currently no competitors or similar companies currently in that market. Which entry mode would be most appropriate for the company to use?

greenfield venture

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

greenfield venture.

Entering a large developing nation like China before most other international companies, and entering on a large scale, will be associated with-------levels of risk.

high

One way to control technology in a joint venture arrangement is for one company to

hold majority ownership.

Something of worth that cannot be touched or held, such as a formula, is considered to be ______ property.

intangible

A shared business risk and shared resources and responsibility are both advantages of ______.

joint ventures

A firm enters a market on a(n) ______ scale when it commits significant resources to this effort.

large

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

late

When a business enters a foreign market after other foreign firms, the situation is defined as ______ entry.

late

A turnkey project can be _____ risky than conventional foreign direct investment in a country with an unstable political climate.

less

Parul believes her company's newest technology product will be quickly imitated by others. When a company's competitive advantage is based on control of proprietary technological know-how, that company should AVOID a(n) ______ arrangement as it might lead to losing control of the technology.

licensing

The benefits of franchising are similar to the benefits of ______.

licensing

Company ABC is unwilling to commit the necessary capital to construct a facility in Malaysia. However, they have determined that they want to enter that market. One option for the company might be a

licensing agreement.

Firms that do not have access to the capital necessary to develop overseas operations should engage in a(n)

licensing agreement.

Cross-licensing agreements allow firms to do what two things?

make the partner accountable protect technological know-how

In order to make sure that a foreign enterprise has organizational customs and behaviors that are NOT antagonistic to an acquiring enterprise, it is vital that the acquiring enterprise screen the

management culture.

Many service firms base their competitive advantage on

management know-how.

Costs that companies entering a market early have to pay, but which firms late to the market do not have to bear, are called ______ costs.

pioneering

As an early entrant into the German market, Jason's company made several significant and expensive mistakes. Jason underestimated the financial liability the company would face as a foreign firm. This liability is an example of

pioneering costs.

What are three advantages of acquisitions?

preempt the competition less risky than greenfield ventures quick to execute

Acquisitions are considered _____ (slow or quick?) to execute.

quick

In a licensing deal, the licensor receives payment in the form of ____ from the licensee.

royalties

An early strategic commitment to large scale entry may mean that a firm can benefit from what three things? (Check all that apply.)

scale economies demand preemptions switching costs

The strategy that allows firms to take their time to acquire information about a prospective market so they can determine how best to enter the market is

small-scale entry.

One serious risk associated with licensing is the risk of losing competitive advantage because of licensing a company's _____.

technology

An international business can create value when bringing products to another country; however, this primarily depends on the attractiveness of the product being offered and

the existence of competition.

According to _____, top managers typically overestimate their ability to create value from an acquisition because they have an exaggerated sense of their own capabilities.

the hubris hypothesis

When considering the three basic decisions a firm must make when it decides to enter a foreign market, it must determine the market to enter, the timing of entrance, and

the scale.

Lisette works for Southwest Petroleum Corp. Her company is responsible for every aspect of setting up a refinery location for its clients. Southwest Petroleum builds the site, trains personnel, and notifies the client when the refinery is ready for operation. What foreign entry mode does this represent?

turnkey project

If a high-tech firm wants to set up operations in a foreign country in order to profit from a core competency in technological know-how, it will typically do this by establishing a(n) ______ as a way to protect their technological advantage.

wholly owned subsidiary

Which entry mode would be preferred when a company does not want to risk losing control over technological competence?

wholly owned subsidiary

In which entry mode, does a firm own 100% of the stock?

wholly-owned subsidiary

One disadvantage of a turnkey project is that a company might inadvertently

create a competitor

Among other things, being first typically enables a company to establish ______ and ______ before other entrants to the market arrive. (select the two options that apply)

customer loyalty brand recognition

According to Bartlett and Ghoshal, a late mover company should try to learn as much as it can from competitors and _____ in order to succeed.

differentiate its product offering