International Business Chapter 15 exam 3

Which of the following industries considers proximity to customers especially important in the decision to enter a foreign market? A) fashion B) automotive C) biotechnology D) mining

A) fashion

Using individual managers in each European country is more efficient that using the same base of managers all over Europe T/F

False

Vertical integration is an arrangement in which the firm owns, or seeks to own, the activities performed in a single stage of its value chain T/F

False

While franchising facilitates rapid internationalization, compared to FDI, it affords the firm less control over its foreign operations. T/F

True

The purchase of an existing company or facility is known as a(n) ________. A) greenfield investment B) licensing C) acquisition D) equity joint venture

c) acquisition

How does the acquisition of a foreign company most likely benefit a focal firm in the foreign market? A) The focal firm can extend its market reach through readily available distribution networks. B) The MNE avoids domestic and foreign taxation, which enables the firm to invest more resources in the foreign market. C) Firm managers can reduce their workload by ensuring that all decision-making responsibilities are taken up by foreign managers. D) The firm eliminates the need to train its own employees by utilizing the workers previously hired by the foreign firm

A) The focal firm can extend its market reach through readily available distribution networks

A firm that develops the capacity to sell its products by investing in marketing and selling operations is demonstrating ________. A) forward vertical integration B) backward vertical integration C) centralization D) decentralization

A) forward vertical integration

Firms that anticipate close public scrutiny of their foreign operations often avoid potential difficulties by ________. A) locating in culturally similar countries B) investing in international securities C) hiring additional local personnel D) diversifying their corporate activities

A) locating in culturally similar countries

Which of the following is an example of a market-seeking motive for FDI? A) a firm wishes to gain access to raw materials B) a firm follows its key customers abroad C) a company wishes to gain access to knowledge D) a company intends to avoid trade barriers

B) a firm follows its key customers abroad

Which of the following is a characteristic of project-based, non-equity ventures? A) a broad scope of product development B) a specific agenda and timeframe C) long-term sharing of resources D) formation of a new legal entity

B) a specific agenda and timeframe

Which of the following is a characteristic of successful international retailers? A) conservative managers and salespeople and a centralized organizational system B) an entrepreneurial approach to foreign markets and an understanding of the target market C) significant financial borrowings and high foreign and domestic operational costs D) extreme competition and support from home-country governments exclusively

B) an entrepreneurial approach to foreign markets and an understanding of the target market

The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. Which of the following questions would most likely be important for ABC managers to evaluate as they consider expanding into the Asian market? A) What U.S. firms have successfully partnered with Asian companies? B) Where will ABC management locate the staff needed to oversee an Asian plant? C) How much control does ABC management want to have over their Asian operations? D) What are the pricing strategies followed by competitor firms in Asia?

C) How much control does ABC management want to have over their Asian operations?

A(n) ________ is the purchase of an existing company or facility. A) greenfield investment B) outsourcing arrangement C) acquisition D) offshoring arrangement

C) acquisition

A firm that pursues a collaborative venture to access raw materials is demonstrating a(n) ________ motive. A) efficiency-seeking B) novelty-seeking C) asset-seeking D) market-seeking

C) asset-seeking

Which of the following represents an infrastructural factor that firms must consider when selecting an FDI location? A) size and growth of national market B) political stability C) availability and quality of local manufacturing D) stability of currency

C) availability and quality of local manufacturing

A firm that builds a new manufacturing facility in a foreign market is participating in a(n) ________. A) acquisition B) merger C) greenfield investment D) equity participation

C) greenfield investment

A firm that owns the activities performed in a single stage of its value chain is demonstrating ________. A) centralization B) decentralization C) horizontal integration D) reverse integration

C) horizontal integration

Which of the following best exemplifies corporate social responsibility? A) a computer firm charging a high fee for recycling old computers B) an automobile manufacturer selling low-fuel economy cars and trucks C) a telecommunications firm charging high-rates to low-income customers D) an automotive battery firm offering free technical training to students of a deprived community

D) an automotive battery firm offering free technical training to students of a deprived community

A form of collaboration between two firms to form a new, jointly owned enterprise is defined as a joint venture T/F

False

A greenfield investment is a direct investment to purchase an existing company or facility. T/F

False

A new legal entity is created during the formation of a project-based, nonequity venture. T/F

False

Avoiding trade barriers is classified as a market-seeking motive for FDI. T/F

False

Equity joint ventures have the simplest management structure T/F

False

FDI is also known as international portfolio investment T/F

False

FDI is the least taxing entry strategy that a firm can choose. T/F

False

Foreign direct investment is the least risky entry strategy T/F

False

Home Depot made a greenfield investment when it entered the Mexican market by purchasing Home Mart, a domestic store chain. T/F

False

Project-based, nonequity ventures are difficult to set up. T/F

False

Tariff and other trade barriers for exports and FDI are identical. T/F

False

The challenges faced due to FDI are the same all over the world. T/F

False

The strategic purpose behind firms competing with rivals in their own market is to force them to expend resources and thus, defend the firm's own market. T/F

False

With increasing output, the per-unit cost of production increases T/F

False

A merger is a special type of acquisition. T/F

True

By establishing a physical presence inside a country or an economic bloc, the foreign company obtains the same advantages as local firms. T/F

True

Companies opt for FDI to obtain advantages associated with locating at the hub of knowledge development and innovation in a given industry. T/F

True

Compared to small firms, large companies usually can access capital at lower cost. T/F

True

Cross-licensing agreements are a type of project-based, nonequity venture in which the partners agree to allow access to licensed intellectual property developed by the other on preferential terms T/F

True

FDI is the most advanced and complex foreign market entry strategy T/F

True

Firms often follow their key customers abroad to preempt other vendors from serving them T/F

True

Firms that engage in FDI avoid problematic trade barriers because the physical presence of a foreign firm earns it the same privileges as a local firm. T/F

True

Governments encourage inward FDI because it transfers skill and technologies T/F

True

In the fashion industry, customer needs change rapidly and managers often locate factories or assembly operations near important customers T/F

True

International portfolio investment refers to passive ownership of foreign securities T/F

True

Many international firms are investing in local communities and establishing global standards of fair treatment for workers in an effort to be socially responsible. T/F

True

New markets, new resources, and improved efficiency are the three main motives for firms to enter foreign markets through FDI T/F

True

Stability of currency must be considered before selecting the location for FDI. T/F

True

Which of the following is a trend seen in the modern international economy? A) Firms from both advanced and emerging economies employ FDI. B) Emerging markets are the sole recipient countries for FDI. C) Companies primarily use acquisitions to enter foreign markets. D) Firms in the service sector use e-commerce exclusively to enter foreign markets

A) Firms from both advanced and emerging economies employ FDI.

Host-country governments often pressure MNEs to undertake acquisition over greenfield investments. T/F

False

International expansion invariably results in a decrease in a firm's economies of scale T/F

False

International portfolio investment refers to a firm's direct control of foreign operations and is an equity-based method of foreign market entry T/F

False

One of the key advantages to an equity joint venture is that the management structure is very simple which allows for easy adjustments and modifications T/F

False

The complexity of the tax system is one of the factors to be considered in selecting FDI locations T/F

True

The existence of a substantial mark motivates many firms to produce offerings at or near customer locations T/F

True

The failure rate of collaborative ventures is higher in developing economies than in advanced economies T/F

True

An Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in Italy and Spain, and firm managers believe that Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility Which of the following questions is most important for Ciao managers to evaluate in their decision regarding the location of the new manufacturing facility? A) What would be the costs and availability of skilled labor in Canada and Russia? B) What other industries manufacture products in Canada and Russia? C) How much time will it take to train managers in Canada and Russia? D) How should the current marketing strategies be modified to serve markets in Canada and Russia?

A) What would be the costs and availability of skilled labor in Canada and Russia?

An Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in Italy and Spain, and firm managers believe that Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility. Which of the following questions is most important for Ciao managers to evaluate in their decision regarding the location of the new manufacturing facility? A) What would be the costs and availability of skilled labor in Canada and Russia? B) What other industries manufacture products in Canada and Russia? C) How much time will it take to train managers in Canada and Russia? D) How should the current marketing strategies be modified to serve markets in Canada and Russia?

A) What would be the costs and availability of skilled labor in Canada and Russia?

Which of the following is the most likely motive behind firms in the mining industry wanting to enter new foreign markets? A) access to natural resources B) availability of excessive non-skilled labor force C) increase in refining capacity D) payment of wages remain the same in both the new market as well as the existing market

A) access to natural resources

A firm that pursues foreign direct investment to take advantage of government incentives is demonstrating a(n) ________ motive. A) efficiency-seeking B) novelty-seeking C) asset-seeking D) market-seeking

A) efficiency-seeking

Students in Professor Manning's international business class have been assigned the task of explaining the different types of FDI. Professor Manning formed groups among students. The groups are to research their assigned topic and present their information to the class using examples of real-world firms for illustration. Jessica Hanson is the leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the leader of Group C. During her presentation, Jessica describes how two automakers joined forces and formed a separate firm by pooling their assets. Which of the following topics was most likely assigned to Group A? A) equity joint venture B) acquisition C) greenfield investment D) vertical integration

A) equity joint venture

Two catering companies that join to form a new, larger catering company are an example of a(n) ________. A) merger B) acquisition C) wholly owned direct investment D) greenfield investment

A) merger

The rate of inflation is a(n) ________ factor to be considered while selecting the location for FDI. A) profit retention B) market C) infrastructural D) human resource

A) profit retention

Which of the following is a disadvantage of equity joint ventures? A) termination difficulties B) lesser control over future directions C) imbalanced relationship D) vague contractual partnership

A) termination difficulties

Which of the following is a key reason that a focal firm would most likely enter a collaborative venture with a foreign firm? A) the foreign firm can fill an important gap in the focal firm's value chain B) the foreign firm requires the focal firm's financial resources to compete locally as well C) the focal firm wants to duplicate a competitor's marketing strategies abroad D) the market abroad is saturated, there is no scope for the focal firm's products or services

A) the foreign firm can fill an important gap in the focal firm's value chain

An arrangement whereby the firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product or service is termed as ________. A) vertical integration B) horizontal integration C) decentralization D) centralization

A) vertical integration

Which of the following most likely supports a decision to enter the Asian market through a project-based, non-equity collaborative venture with an Asian appliance manufacturer to create an environmentally-friendly dishwasher? A) Asian firms have offered to pool their resources with ABC to create a new legal entity. B) Managers of both firms have decided not to seek ownership, rather they have decided to pool in resources. C) ABC managers have the financial resources to quickly build a new Asian plant. D) The Asian government has offered incentives to ABC if the firm builds a plant.

B) Managers of both firms have decided not to seek ownership, rather they have decided to pool in resources.

The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. Which of the following should most likely be considered in making the decision to expand ABC operations into the Asian market? A) How will domestic competitors of ABC react to an international expansion? B) What technological and managerial know-how can ABC gain from an Asian expansion? C) How many managers will need to relocate to Asia to oversee the Asian project? D) How will ABC utilize the Internet to achieve success in the Asian market

B) What technological and managerial know-how can ABC gain from an Asian expansion?

Which of the following is a characteristic of an equity joint venture? A) simple management structure B) facilitates knowledge transfer between partners C) easy to terminate D) lesser exposure to political risk

B) facilitates knowledge transfer between partners

Collaborative ventures benefit SMEs by providing them with ________. A) better trained employees B) increased amount of capital C) larger and newer facilities D) more advanced technology

B) increased amount of capital

The level of taxes in a country is a part of the ________ factor that is considered when selecting an FDI location. A) political B) profit retention C) market D) infrastructural

B) profit retention

An Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in Italy and Spain, and firm managers believe that Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility. Which of the following should be considered in the decision regarding where to build a new Ciao plant? A) How many Ciao cars are sold in Italy and Spain each year? B) What U.S. automakers are the biggest competitors of Ciao? C) How politically stable are the governments of Russia and Canada? D) How will Ciao managers handle the language barriers in foreign markets?

C) How politically stable are the governments of Russia and Canada?

Which of the following best explains why some service industry firms most likely enter foreign markets through FDI? A) The market abroad is saturated, therefore, the other entry strategies are most likely to fail. B) The service of the firm requires tough intellectual property laws. C) The service offered by the firm requires direct contact with customers. D) The firm's service is not successful domestically, so globalization is required

C) The service offered by the firm requires direct contact with customers.

Students in Professor Manning's international business class have been assigned the task of explaining the different types of FDI. Professor Manning formed groups among students. The groups are to research their assigned topic and present their information to the class using examples of real-world firms for illustration. Jessica Hanson is the leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the leader of Group C. During his presentation, Manu describes how a large U.S. retailer entered the Mexican market by purchasing the stores and assets of a Mexican retailer. Which of the following topics was most likely assigned to Group B? A) merger B) turnkey operation C) acquisition D) collaborative venture

C) acquisition

A firm most likely enters the home market of a foreign competitor in order to ________. A) enter a collaborative venture with the competitor B) gain access to the competitor's government contracts C) force the competitor to expend resources to defend its market D) interfere with the competitor's marketing campaign

C) force the competitor to expend resources to defend its market

Students in Professor Manning's international business class have been assigned the task of explaining the different types of FDI. Professor Manning formed groups among students. The groups are to research their assigned topic and present their information to the class using examples of real-world firms for illustration. Jessica Hanson is the leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the leader of Group C. During his presentation, Mario describes how a large Japanese automaker built a factory in Kentucky. Which of the following topics was most likely assigned to Group C? A) horizontal integration B) equity joint venture C) greenfield investment D) consortium

C) greenfield investment

The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. Which of the following most likely supports a decision to enter the Asian market by building a factory near Tokyo? A) Executives at ABC want the firm to have the flexibility to reconfigure operations at the Japanese plant. B) The Japanese yen has been fluctuating over the last year and analysts do not anticipate it settling down. C) ABC managers want to delegate responsibility of much of the Japanese plant to local intermediaries. D) The CEO of ABC is willing to invest a large amount of capital and other assets to ensure success in Japan.

D) The CEO of ABC is willing to invest a large amount of capital and other assets to ensure success in Japan.

A(n) ________ is a project-based, usually nonequity venture initiated by multiple partners to fulfill a large-scale project. A) greenfield investment B) acquisition C) merger D) consortium

D) consortium

60) Which of the following terms is used to refer to a focal firm's partial ownership of an existing firm? A) turnkey operation B) greenfield investment C) direct investment D) equity participation

D) equity participation

Which of the following represents a human resource factor that firms must consider when selecting an FDI location? A) intellectual property protection B) transparency and corruption C) extent of bureaucracy and red tape D) involvement of labor unions

D) involvement of labor unions

A consortium is defined as ________. A) purchase of an existing company or facility B) two partners forming a new legal entity C) an equity venture to consolidate the value chain D) multiple partners participating on a large-scale project

D) multiple partners participating on a large-scale project

International portfolio investment is characterized by ________. A) short-term foreign market speculation B) long-term administration of MNE stocks C) active control of a foreign business D) passive ownership of foreign stocks and bonds

D) passive ownership of foreign stocks and bonds