International Business exam 4 chapter 16

When consumers buy counterfeit goods, payments accrue to the firm that invented the product and not to illicit enterprises T/F

False

In typical licensing agreements, the licensee compensates the licensor with a down-payment plus ongoing royalties based on sales T/F

True

Key challenges faced by the franchisee is the decreased likelihood of operating an independent business T/F

False

Laws that govern contractual obligations are uniform across countries, therefore, it makes contract enforcement abroad easier for firms T/F

False

One of the advantages for the franchisor is that is it easier to maintain control over the franchisee T/F

False

When compared to licensing agreements, the relationships established in franchising arrangements are typically volatile and short-term T/F

False

In international leasing, a major advantage for the lessor is the ability to gain quick access to target markets, while putting assets to use earning profits T/F

True

Infringement of intellectual property is the unauthorized use or reproduction of products and services protected by a patent, copyright, trademark, or other intellectual property right T/F

True

Licensing agreements enable energy and defense firms to enter nations that restrict the foreign ownership of businesses related to national security T/F

True

Turnkey contracting is an arrangement in which the focal firm or a consortium of firms plans, finances, organizes, manages, and implements all phases of a project abroad and then hands it over to a foreign customer after training local workers T/F

True

Under a build-operate-transfer (BOT) arrangement, a firm or consortium of firms contracts to build a major facility abroad and then transfers ownership to the project sponsor, typically the host-country government or public utility T/F

True

Franchising is an advanced form of licensing in which the the franchisor allows the franchisee, the right to use an entire business system in exchange for compensation T/F

True

Host-country governments often encourage franchising because most of the money generated by the franchise remains in the local economy T/F

True

Licensing and franchising are complex undertakings and require skillful research, planning, and execution. T/F

True

When a firm allows others to use an entire business system in exchange for compensation, the arrangement is known as ________. A) industrial design rights B) franchising C) joint venture D) equity venture

B) franchising

In a franchising agreement, the franchisee provides training, ongoing support, and the right to participate in cooperative marketing programs, to the franchisor T/F

False

In a licensing agreement, the licensee is both the owner and user of intellectual property T/F

False

Which of the following is an example of licensing? A) An American electronics firm has given the right to a new process for manufacturing e-book readers to an electronics manufacturer in Canada. B) An Indian automobile manufacturing company, buys engines from a Japanese manufacturer for its environment friendly cars. C) A South-Korean consumer electronics manufacturer produces the screens for its brand of television and sends orders to a factory in China to manufacture the casing for the television. D) A U.K-based motorcycle manufacturer, produces limited-edition customizations of the company's stock models and sells it to customers around the world

A) An American electronics firm has given the right to a new process for manufacturing e-book readers to an electronics manufacturer in Canada.

The nation of Azoo needs the assistance of a contractor to construct a new bridge and a subway system. The nation lacks the skilled labor and technical know-how to handle such large-scale projects. Representatives of the Azoo government are reviewing the project bids provided by two different international contractors. Contractor A proposes a turnkey contract for Azoo. Contractor B proposes a build-operate-transfer arrangement. Which of the following most likely supports Azoo government's decision to award the project bid to Contractor A? A) Azoo leaders want immediate ownership of the public projects. B) Azoo leaders want long-term help with operation of the subway. C) Azoo lacks qualified workers to maintain public works projects. D) Azoo lacks the financial resources to purchase large machinery.

A) Azoo leaders want immediate ownership of the public projects.

Which of the following countries is home to the largest number of franchisors? A) United States B) Britain C) China D) Canada

A) United States

Which of the following makes it difficult to completely duplicate a food franchise in every global market? A) different local ingredients B) differences in language C) low bargaining power D) need to invest substantial capital

A) different local ingredients

An advantage of licensing is that firms are able to ________. A) enter markets with extensive trade barriers B) guarantee a basis for future expansion C) control how the licensed asset is used D) resolve disputes easily

A) enter markets with extensive trade barriers

Which of the following is NOT provided by the licensor? A) ongoing managerial guidance B) technical information and assistance C) an advisory role D) trademark

A) ongoing managerial guidance

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was created by the ________. A) IMF B) United Nations C) WTO D) World Bank

C) WTO

Leasing is especially beneficial to ________. A) advanced economies B) economies with high PPP C) First World countries D) developing economies

D) developing economies

Contractual entry strategies in international business are cross-border exchanges in which the relationship between the focal firm and its foreign partner is governed by an explicit contract T/F

True

In a master franchising agreement, the master franchisee has the right to subfranchise to other independent businesses and thus assume the role of the local franchisor T/F

True

Patents provide inventors the right to prevent another person or company from selling or using an invention for up to twenty years T/F

True

Where counterfeiting and piracy are commonplace, companies are reluctant to invent, innovate, and market legitimate products, which reduces consumer choices and ultimately lowers living standards T/F

True

In a licensing agreement, ________ is responsible for local sales. A) the licensee B) patent owner C) the licensor D) copyright partner

A) the licensee

Which of the following is an example of franchising? A) An Italian clothing company opens manufacturing factories in China and Bangladesh to reduce manufacturing costs. B) A U.S-based quick-service restaurant gives rights to another business to use its entire business system in exchange for compensation and royalties C) A U.S.-based animation company allows factories in China to use their famous cartoon character on mugs and stationery. D) A Germany automobile manufacturer opens an office in Philippines for its customer care operations.

B) A U.S-based quick-service restaurant gives rights to another business to use its entire business system in exchange for compensation and royalties

Where are the majority of the world's top licensing firms based? ' A) Europe B) United States C) China D) Japan

B) United States

The greatest amount of licensing occurs in the ________ industries. A) pharmaceutical B) music C) toy D) mining

C) toy

Exporting and foreign direct investing are two common types of contractual entry strategies T/F

False

Which of the following is an advantage of franchising to the franchisor? A) It is easier to maintain control over a franchisee. B) It is a low-risk, low-cost entry strategy. C) There is seldom any risk of franchisees becoming future competitors. D) There is seldom requirement for the franchisor to become familiar with foreign laws and regulations.

B) It is a low-risk, low-cost entry strategy.

________ is an arrangement in which a contractor supplies managerial know-how to operate a hotel, hospital, airport, or other facility in exchange for compensation. A) Build-operate-transfer B) Management contract C) Leasing D) Exporting

B) Management contract

Which of the following challenges is applicable to the franchisee in a franchising agreement? A) The franchisee must make their own arrangements to acquire initial training and know-how. B) The franchisor holds much power, including superior bargaining power. C) There is no scope to operate an independent business. D) There is decreased likelihood of business success

B) The franchisor holds much power, including superior bargaining power

Before undertaking contractual entry strategies abroad, management ________. A) should bribe government officials to ensure protection of intellectual property B) should register patents and copyrights with local governments C) should keep information about intellectual property confidential from all franchisees in countries with weak anti-piracy laws D) understand and follow subjective moral and ethical standards across market

B) should register patents and copyrights with local governments

In a licensing agreement, the licensee provides ________. A) the rights to use its industrial design B) intellectual property, technical information and assistance C) a combination of down-payment plus royalty D) the know-how and supporting products such as, raw materials and components

C) a combination of down-payment plus royalty

The purpose of intellectual property rights is to ________. A) prevent excessive regulation and government bureaucracy B) grant a firm permission to use another firm's proprietary names C) allow inventors monopoly advantage for a specified period of time D) allow a firm to use an entire business system in exchange for compensation

C) allow inventors monopoly advantage for a specified period of time

To minimize the complexity of franchising, focal firms must ________. A) bribe government officials to reduce nontariff trade barriers B) have a subjective view of moral and ethical standards C) conduct advance research on the host country's laws on intellectual property D) appoint managers from the home country to avoid legal disputes

C) conduct advance research on the host country's laws on intellectual property

Which of the following is an essential method used by a focal firm to protect its intellectual property in a foreign country? A) lobbying foreign governments for stronger intellectual property laws B) avoiding trade in countries with weak intellectual property laws C) bribing foreign government officials D) password-based security systems

D) password-based security systems

Which of the following is an example of intellectual property? A) systems of measurement B) Volkswagen's logo C) an unpublished book D) a phone directory

B) Volkswagen's logo

A know-how agreement grants a firm permission to use another firm's proprietary names, characters, or logos for a specified period of time in exchange for a royalty. T/F

False

A patent exclusively refers to a distinctive design, symbol, logo, word, or series of words placed on a product label T/F

False

Which of the following is a disadvantage of licensing for technological firms? A) It is not appropriate for entering markets that pose substantial country risk. B) It requires high capital investment and the presence of the technological firm in the foreign market. C) It restricts flexibility in the foreign market due to the technological firm's ownership of key assets in the target market. D) It increases the risk of creating a future competitor

D) It increases the risk of creating a future competitor

Which of the following is characteristic of exclusive licensing agreements? A) The licensor is not allowed to interfere with the production or marketing of the licensed asset. B) It ensures payment from the licensee to the licensor upon receipt of an export shipment. C) The licensee cannot cancel the contract with the licensor even if sales of the licensed asset are poor. D) The licensee is prohibited from sharing the licensed asset with another company within a specified region

D) The licensee is prohibited from sharing the licensed asset with another company within a specified region

A collective mark ________. A) is intended to improve the product's aesthetics and usability as well as increase its production efficiency, performance, or marketability B) protects original works of authorship, giving the creator the exclusive right to reproduce the work, display and perform it publicly, and authorize others to perform these activities C) is a distinctive design, symbol, logo, word, or series of words placed on a product label D) is a logo belonging to an organization whose members use it to identify themselves and associate their products with a level of quality or accuracy, geographical origin, or other positive characteristic

D) is a logo belonging to an organization whose members use it to identify themselves and associate their products with a level of quality or accuracy, geographical origin, or other positive characteristic

An arrangement in which a contractor supplies managerial know-how to operate a hotel, hospital, airport, or other facility in exchange for compensation is known as offshoring T/F

False

An industrial design is a logo belonging to an organization whose members use it to identify themselves and associate their products with a level of quality T/F

False

Excluding noncompete clauses in employee contracts help prevent employees from serving competitors for some years after leaving the firm T/F

False

In a typical licensing agreement, after the relationship is established, the licensor is required to be directly involved in the market and provide ongoing managerial guidance T/F

False

One of the advantages of licensing is that the profits generated from such agreements are typically higher than for FDI T/F

False

One of the disadvantages of licensing is that it requires the licensor to make a high capital investment in the foreign market T/F

False

Treaties that support international protection of intellectual property harm developing economies due to high capital investment T/F

False

Big Boy Burgers (BBB) is an American fast food restaurant chain that has franchises around the world. Recently, BBB managers have been concerned about protecting the firm's intellectual property, which includes the recipes for its unique burger sauces and specialty burger buns. Although BBB has never experienced a theft of intellectual property, the firm's managers feel BBB should be more cautious. Managers are meeting with security and legal experts to discuss the options available to the firm which would protect BBB from future international problems. Which of the following statements most likely supports BBB legal experts fully investigating the intellectual property laws of each nation in which BBB has franchises? A) Intellectual property laws and its enforcement varies from country to country. B) Patents and trademarks granted in one country will transfer to another country. C) TRIPS protects the intellectual property of firms doing business in any nation. D) Nations with numerous IPR violators are beginning to comply with the WTO

A) Intellectual property laws and its enforcement varies from country to country.

Which of the following is an advantage of licensing? A) It is ideal for products, services, or knowledge that is highly complex. B) It is easy to maintain control over how the licensed asset is used. C) It requires very little capital investment in the foreign market. D) It guarantees a basis for future expansion in the market

C) It requires very little capital investment in the foreign market

Which of the following statements is true of leasing? A) It is an arrangement in which a contractor supplies managerial know-how to operate a hotel, hospital, airport, or other facility in exchange for compensation. B) The lessor transfers ownership of the property in exchange for a lump-sum payment. C) It is a high-risk and high-cost method of entering a foreign market. D) A major advantage for the focal firm is the ability to gain quick access to target markets, while putting assets to use in earning profits

D) A major advantage for the focal firm is the ability to gain quick access to target markets, while putting assets to use in earning profits

Wonder Cat is a popular, new cartoon series created by the U.S-based All Cartoon Channel (ACC). Currently, the only Wonder Cat item available for sale are shirts that are sold exclusively through the ACC Web site. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions. Which of the following most likely supports an ACC decision to not enter a licensing agreement with the Chinese firm? A) ACC does not want to invest capital for FDI in the Chinese market. B) ACC desires a low-risk, low-cost strategy to internationalize the Wonder Cat character. C) The Chinese market restricts ownership of local operations by foreign firms. D) ACC wants to maintain firm control of how the Wonder Cat character is used.

D) ACC wants to maintain firm control of how the Wonder Cat character is used.

Which of the following is characteristic of cross-border contractual relationships? A) When compared to FDI, they are less susceptible to volatility and risk, and tend to bring both parties a predictable stream of revenue. B) The focal firm attains maximum control by establishing a physical presence, and ownership of key assets, in the foreign market. C) It attracts high attention and criticism for the focal firm because of the local perception of foreign entities. D) They are governed by a contract that provides the focal firm with no control over the foreign partner.

A) When compared to FDI, they are less susceptible to volatility and risk, and tend to bring both parties a predictable stream of revenue.

By establishing a brand name and market power through a licensing agreement, licensors are able to ________. A) establish a more durable presence in the local market B) control the use of the licensed asset C) control the dissipation of important intellectual property to competitors D) avoid the risk of creating a future competitor

A) establish a more durable presence in the local market

Which of the following is characteristic of master franchise arrangements? A) subfranchises to other independent businesses and thus assumes the role of the local franchisor B) franchisee provides completely standardized business activities, replicated across diverse markets C) franchise networks where franchisor provides a lump-sum payment to get started in a foreign market D) franchise networks that pay fewer royalties to franchisors

A) subfranchises to other independent businesses and thus assumes the role of the local franchisor

Big Boy Burgers (BBB) is an American fast food restaurant chain that has franchises around the world. Recently, BBB managers have been concerned about protecting the firm's intellectual property, which includes the recipes for its unique burger sauces and specialty burger buns. Although BBB has never experienced a theft of intellectual property, the firm's managers feel BBB should be more cautious. Managers are meeting with security and legal experts to discuss the options available to the firm which would protect BBB from future international problems. Which of the following questions would be more important for the experts to evaluate when determining how to ensure intellectual property protection for Big Boy Burgers? A) What should be the penalties for theft of the recipes for their unique burger sauces and specialty burger buns? B) Is BBB partnering with ethical franchisees that have no intention of becoming BBB competitors in the future? C) What are the commonly counterfeited goods in the market? D) How are BBB franchisees modifying recipes and menus to meet the needs and desires of customers in local markets?

B) Is BBB partnering with ethical franchisees that have no intention of becoming BBB competitors in the future?

Which of the following statements is true of infringement of intellectual property? A) The most commonly counterfeited goods include heavy machinery and computer manufacturing. B) It amounts to piracy and takes the form of production and distribution of counterfeit goods. C) It is the ability to control important intellectual property before it reaches competitors. D) Counterfeiting and piracy can be particularly troublesome in advanced economies because of subjective ethical standards.

B) It amounts to piracy and takes the form of production and distribution of counterfeit goods.

Which of the following is provided by the licensor in a licensing agreement? A) a monetary down-payment plus royalties for all products sold locally B) a combination of intellectual property and technical information and assistance C) a storefront or facility and the necessary materials to make the product D) a combination of a lump-sum payment and the intellectual know-how

B) a combination of intellectual property and technical information and assistance

A cross-border contractual relationship provides the focal firm with ________ over the foreign partner. A) a low level of control B) a moderate level of control C) a high level of control D) seldom any control

B) a moderate level of control

Professional service firms, such as PriceWaterhouseCooper, often enter large international markets through FDI but usually use ________ to enter small markets. A) equity-based collaborative ventures B) affiliates C) BOT arrangement D) turnkey contracting

B) affiliates

Cross-licensing often occurs in the semiconductor and chemical industries in order to ________. A) divide the costs of production and marketing between competing firms B) avoid research duplication and building on each other's innovations C) protect the inventions and designs of small firms from large MNEs D) decrease the likelihood of industrial spying and theft among firms

B) avoid research duplication and building on each other's innovations

An industrial design is intended to ________. A) eliminate the possibility of the design being copied B) improve a product's performance and marketability C) protect firms from intellectual property theft D) protect information of commercial value

B) improve a product's performance and marketability

Information technology has increased the success and growth of international franchising operations by ________. A) eliminating the need for corporate meetings to discuss quality control B) improving communication between MNE managers and their franchisees C) reducing Internet sales and the need for freight forwarding services D) assigning franchisors maximum control to oversee franchisees activities

B) improving communication between MNE managers and their franchisees

The nation of Azoo needs the assistance of a contractor to construct a new bridge and a subway system. The nation lacks the skilled labor and technical know-how to handle such large-scale projects. Representatives of the Azoo government are reviewing the project bids provided by two different international contractors. Contractor A proposes a turnkey contract for Azoo. Contractor B proposes a build-operate-transfer arrangement. Contractor A would most likely oversee each of the following EXCEPT ________. A) designing the bridge B) operating the subway system continuously C) engineering the bridge D) constructing the subway system

B) operating the subway system continuously

In a system franchising agreement, the franchisor provides ________. A) down-payment plus royalty B) production and marketing methods C) lump-sum payment D) sale of related products

B) production and marketing methods

Which of the following is protected under copyright laws? A) the Nike swoosh B) the art of Jackson Pollack C) McDonald's clown shaped man with puffed out costume legs D) Winnie the Pooh image

B) the art of Jackson Pollack

The reputation of a licensor will be jeopardized by a licensing agreement if the licensee ________. A) markets competing products for significantly lower prices B) uses the licensing asset to create products of poor quality C) refuses to pay the agreed upon royalties to the licensor D) does not guarantee future expansion in the market

B) uses the licensing asset to create products of poor quality

Which of the following is true about cross-border contractual relationship? A) It is a more visible strategy than FDI and draws a lot of criticism from the local market. B) They are more susceptible to volatility and risk compared to FDI. C) A local firm allows the focal firm to blend into the local market, attracting less attention. D) Focal firms use contractual relationships as an advanced entry strategy in foreign markets.

C) A local firm allows the focal firm to blend into the local market, attracting less attention.

Which of the following is true about franchising as an entry strategy? A) It provides firms with minimum control over foreign operations. B) It is an ownership-based international business activity. C) It restricts a firm's ability to expand more rapidly abroad. D) It is typically characterized as an unstable, short-term entry strategy.

C) It restricts a firm's ability to expand more rapidly abroad.

________ is a fee paid periodically to compensate a licensor for the temporary use of its intellectual property, often based on a percentage of gross sales generated from the use of the licensed asset. A) Duty B) Residual C) Royalty D) Tariff

C) Royalty

Wonder Cat is a popular, new cartoon series created by the U.S-based All Cartoon Channel (ACC). Currently, the only Wonder Cat item available for sale are shirts that are sold exclusively through the ACC Web site. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions. Which of the following statements most likely supports an ACC decision to enter into a licensing agreement with the Chinese firm? A) Royalties from toys and apparel would be initially minimal. B) The Wonder Cat brand's products could be easily counterfeited in other markets except in the Chinese markets. C) The Chinese government restricts complete ownership of local operations by foreign firms. D) China exclusively opts for high-control strategies such as FDI.

C) The Chinese government restricts complete ownership of local operations by foreign firms.

________ is an arrangement in which the focal firm or a consortium of firms plans, finances, organizes, manages, and implements all phases of a project abroad and then hands it over to a foreign customer after training local workers. A) Home-replication strategy B) Exporting C) Turnkey contracting D) Equity-based collaborative venture

C) Turnkey contracting

Which of the following is an example of trademark licensing agreement? A) a China based consumer electronic company that has invented a flexible casing for its MP3 players B) a Thailand-based pharmaceutical company that receives manufacturing knowledge from a U.S-based pharmaceutical C) a U.K.-based cosmetics manufacturer that is allowed to use an American cosmetics manufacturing firm's logo for its new line of "Titanium" makeup products D) a U.S.-based clothing company that opens a factory in Vietnam and Cambodia to utilize lowlabor costs

C) a U.K.-based cosmetics manufacturer that is allowed to use an American cosmetics manufacturing firm's logo for its new line of "Titanium" makeup products

The nation of Azoo needs the assistance of a contractor to construct a new bridge and a subway system. The nation lacks the skilled labor and technical know-how to handle such large-scale projects. Representatives of the Azoo government are reviewing the project bids provided by two different international contractors. Contractor A proposes a turnkey contract for Azoo. Contractor B proposes a build-operate-transfer arrangement. The government of Azoo might select Contractor B in order to ________. A) prevent the builder from operating in the country for even a short period of time B) avoid rental fee, user fee, and tolls during the operational stage of the bridge and subway system C) build the projects cost-effectively D) increase the number of visitors to Azoo

C) build the projects cost-effectively

In a system franchising agreement, the franchisee provides ________. A) training and ongoing support B) trademark-protected business concepts C) down-payment plus royalty D) usage rights for products and patents

C) down-payment plus royalty

Which of the following is characteristic of a know-how agreement? A) exclusive rights to reproduce original art work B) permission to use manufacturing facilities for a fee C) exchanging technological or management information for royalties D) trading the use of a name brand for management advice

C) exchanging technological or management information for royalties

Which of the following is an advantage of franchising to the franchisee? A) reduced expenses as the franchisor provides supplies, equipment, and products B) minimum initial investments or royalty payments are applicable C) use of a well-known, recognizable brand name D) franchisee holds much power, including superior bargaining power

C) use of a well-known, recognizable brand name

Which of the following statements is true about international franchisors? A) Entry into numerous foreign markets is tough and costly. B) Maintaining control over franchisee is seldom difficult. C) Franchisors need to invest substantial capital. D) Franchisees may use franchise knowledge to start a competing business.

D) Franchisees may use franchise knowledge to start a competing business.

Wonder Cat is a popular, new cartoon series created by the U.S-based All Cartoon Channel (ACC). Currently, the only Wonder Cat item available for sale are shirts that are sold exclusively through the ACC Web site. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions. Which of the following questions would be more important to evaluate before ACC enters a licensing agreement with the Chinese firm? A) What other cartoon characters in the U.S. have been licensed to Chinese firms? B) Should the Wonder Cat shirts that were available on the firm's Web site be removed from sale? C) Will the Wonder Cat products made by the Chinese firm be available for sale on the ACC Web site? D) How much control will ACC be able to maintain over the use of the Wonder Cat brand?

D) How much control will ACC be able to maintain over the use of the Wonder Cat brand?