CBA 396 ch. 13

Which of the following postulates that top managers typically overestimate their ability to create value from an acquisition?

Hubris hypothesis

Which of the following is an example of a first-mover advantage?

The ability to create switching costs that tie customers into one's products or services

The risk of failure of an acquisition can be reduced by:

a detailed auditing of operations, financial position, and management culture.

According to Christopher Bartlett and Sumantra Ghoshal, firms from developing countries cannot succeed in foreign markets in the presence of other established global competitors.

false

Exporting, as a mode of entry into foreign markets, does not help a firm achieve experience curve and location economies.

false

Which of the following is a disadvantage of small-scale entry for an international firm considering foreign expansion?

The difficulty of building market share and capturing first-mover advantages

Which of the following is an advantage of franchising as a mode of entry into foreign markets?

The franchiser is relieved of many of the costs and risks of opening a foreign market on its own.

Why do acquisitions fail sometimes?

There is a clash between the cultures of the acquiring and acquired firm.

Large-scale entry allows an international firm to learn about a foreign market while limiting the firm's exposure to that market.

false

The attractiveness of a country as a potential market for an international business depends solely on the size of its consumer market.

false

Under a cross-licensing agreement, a firm can either request a royalty payment or license some valuable intangible property to a foreign partner.

false

Spring, an American firm, recently acquired another company, Tazel Inc., in Indonesia. The high-level managers at Tazel quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because:

there is a clash between the cultures of the acquired and the acquiring firm.

A drawback of exporting is that tariff barriers can make it uneconomical as a mode of entry into a foreign market.

true

According to David Ravenscraft and Mike Scherer's study, many acquisitions destroy rather than create value.

true

Firms pursuing global standardization or transnational strategies tend to prefer setting up wholly owned marketing subsidiaries.

true

In terms of the entry modes into a foreign market, a joint venture does not give an international firm the tight control over subsidiaries that might be required to realize experience curve or location economies.

true

In terms of the various modes of entry into a foreign market, franchising is employed primarily by service firms, whereas licensing is pursued primarily by manufacturing firms.

true

Shared ownership agreements can lead to conflicts and battles for control between investing firms.

true

The need for preempting competitors is particularly great in the telecommunications market.

true

Which of the following is a disadvantage of greenfield ventures?

It is slower to establish than acquisitions.

Which of the following is a drawback of licensing as a mode of entry into foreign markets?

Licensing does not give a firm tight control over manufacturing, marketing, and strategy.

Which of the following is a risk of entering developing nations like India and China on a large scale?

Absence of prior foreign entrants

Which of the following is the most likely outcome of a foreign firm entering a developed nation on a small scale after other international businesses in the firm's industry?

Limited future growth potential

If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, what would be the preferable mode of entry?

Greenfield Venture

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country. The firm's core competency is in technological know-how. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology?

Wholly owned subsidiary

The risks associated with learning to do business in a new culture are less if the firm:

acquires an established host-country enterprise.