CH 13 SB

What are the three factors that can lead to the success of a strategic alliance?

Alliance structure Alliance management Partner selection

What are three examples of intangible property that might be covered by a licensing agreement? (Check all that apply.)

Designs Patents Copyrights

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

Early entry

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

False

True or False: The cost of establishing manufacturing or operation facilities in a host country is a distinct disadvantage of exporting.

False

True or False: The most typical joint venture is a 60/40 venture, in which one party holds a 60 percent ownership stake and the other holds a 40 percent ownership stake.

False

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

False

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.

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

What are the two methods for establishing a wholly owned subsidiary?

Greenfield venture Acquisition of an established firm

What are three advantages associated with first-movers? (check all that apply)

Preempt rivals Create switching costs Build sales volume

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: Colin's coffee company made a licensing deal with Folger's brand coffee. This is an example of a strategic alliance.

True

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

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

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

True

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

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

True or false: Using a turnkey operation can create competition for a firm and it could lose its competitive advantage by selling its process technology through the turnkey project.

True

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

What are the three basic decisions firms must make when looking at foreign expansion?

When to enter markets Which markets to enter On what scale to enter markets

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

A business would be better off entering into a country with an unstable political environment through ______.

a turnkey project

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

a wholly owned subsidiary

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) ______ strategy.

acquisition

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

The hubris hypothesis is used to explain why ______ fail(s).

acquisitions

Pioneering costs are associated with businesses that enter a national market ______ other businesses.

before

What are two benefits associated with entering a market on a large scale? (Check all that apply.)

easier to attract customersputs limitations on other institutions considering entry

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

entry modes

Not having to establish manufacturing operations overseas and being able to work to achieve experience curve and location economies are advantages of ______.

exporting

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

What are three advantages of acquisitions?

fast to execute less risk than greenfield venture beat out the competition

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

financial position operations management culture

Meg's company was the initial producer of three-wheeled bikes in parts of Europe and benefited greatly because her company captured the demand early. This is an example of a ______ advantage.

first-mover

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

first-mover

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 ______ disadvantage.

first-mover

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

Just as licensing is a way for a firm to avoid many of the costs and risks associated with opening a foreign market, ______ also provides this benefit.

franchising

If a firm's core competency is management know-how, which two foreign entry modes make the most sense?

franchising joint ventures

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

When managing an alliance, relational capital refers ______.

growing interpersonal relationships between managers of the firms

Strategic alliances tend to fail at a (low or high?) rate.

high

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

When the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson came together to make mobile phones, they became known as Sony-Ericsson. They were sharing consumer electronics expertise and technological leadership in the communications sector. This is an example of a ______.

joint venture

The two drawbacks of the large scale entry strategy are ______.

lack of flexibility resulting risks

Matt's company spent billions of dollars to acquire the financial investment operations of a company in Sweden. This would be an example of a ______ scale entry.

large

Strategic inflexibility is associated with (small or large?) 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 ______ entry.

late

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

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 ______ agreement.

licensing

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

licensing

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? (Check all that apply)

licensing joint venture

What are the six modes companies use to enter foreign markets?

licensing wholly-owned subsidiaries exporting franchising joint ventures turnkey projects

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 (low or high?) 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

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

Turnkey projects would be commonly associated with which three industries? (check all that apply)

pharmaceutical chemical metal-refining

Kylie's company was the first to bring BBQ pork sandwiches to fast-food franchises in England. In order to convince the customer base in England, his company spent thousands of dollars in advertising and promotional efforts to explain the BBQ concept. These expenses are an example of ______ costs.

pioneering

What are two benefits of franchising?

provides a quick global presence relatively low cost

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

When a company makes a commitment to enter a market on a large scale, this implies a ______ entry.

rapid

A successful alliance is the result of building interpersonal relationships between the firms' managers. This is known as ______ capital.

relational

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

What three factors can cause exporting to be uneconomical? (check all that apply)

tariff barriers low-cost manufacturing locations abroad transport costs

Starbucks has thousands of franchises throughout the world. It enters foreign markets via franchising because ______.

there is little risk to losing control over the management skills

The hubris hypothesis blames ______ as the reason why acquisitions fail.

top management

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) ______ project.

turnkey

Oil-refining technology was sold to firms in Saudi Arabia and other Gulf states and now those Western firms that sold the technology have to compete with these countries in the oil industry. This shows how a(n) ______ strategy can be a disadvantage.

turnkey

What are three disadvantages of greenfield ventures? Choose all that apply.

uncertainty of future revenue take longer to establish preemption by other competitors

The potential for risk is higher when considering a foreign market with a politically ______ nation.

unstable

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

Which strategy for serving a foreign market comes with the highest financial cost?

wholly owned subsidiary

In a -licensing agreement, a firm will not only receive a royalty payment for licensing intangible property, but will also request that its foreign partner license its own valuable intangible property back to the firm.

cross

Maureen wants to set up a licensing agreement with a foreign partner but she is worried that the partner might take advantage of the technology she has and use it as a way to create competition against her. To resolve this, Maureen should consider a ______-licensing agreement.

cross

What are the four advantages associated with a strategic alliance?

-Allow firms to share the fixed costs of developing new products -May facilitate entry into a foreign market -Helps a firm establish technological standards that will benefit the firm -Brings together complementary skills that neither company could easily develop on their own

What are three factors that a company should strive for to maximize the benefits of an alliance? (Check all that apply.)

-Build trust between the partners -Be sensitive to cultural differences -Learn from the partners

What are three advantages of a wholly owned subsidiary?

-Can retain competitive advantage based on technology -Firm has tight control over foreign operations -Firm may realize location and experience curve economies

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

"fair play"

What are three disadvantages to licensing for the licensor?

-A licensor does not have control over manufacturing, marketing and strategy -Licensing limits the ability to coordinate strategic moves across several countries -A licensor can lose control over its technology by licensing it

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?

-Conduct face-to-face meetings to get to know the potential partner -Gather as much publicly-available information as possible about the company -Check with informed third party sources like investment bankers and former employees

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?

-Make it difficult to transfer technology not meant to be transferred to a partner -Both parties agree in advance to swap skills and technology that is coveted to ensure equitable gain -Write contractual safeguards into an alliance agreement to avoid opportunism by a partner

What are three disadvantages of joint ventures? Choose all that apply.

-Not having tight control over a local partner to realize experience curve or location economies -Giving up control of technology to host country partner -Shared ownership arrangements can lead to conflicts and battles for control.

Choose three reasons why acquisitions fail.

-Not realizing gains from combining operations -Inadequate pre-acquisition screening -Culture clash between acquired and acquiring firms

What are three advantages of a joint venture?

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

Which three of these statements accurately describe franchising?

-The franchisee commits to abiding by strict rules on how it does business -It is similar to a license but with a longer time commitment -The franchiser typically receives a royalty payment.

Which three characteristics are associated with a good ally in a strategic alliance?

-Unlikely to try and exploit alliance for its own ends -Helps the firm achieve strategic goals -Shares the firm's vision for purpose of alliance

What two characteristics are associated with turnkey projects?

-earning greater returns from valuable assets -useful when entering markets where FDI is limited by host government

Two disadvantages of franchising are ______.

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

What are two disadvantages of operating a wholly owned subsidiary?

-subject to the full capital costs and risks -most costly entry mode