CHAPTER 15: Entry Strategy and Strategic Alliances
In which of the following industries are turnkey projects the most common? A. Fresh fruit, grain and meat products B. Chemical, pharmaceutical and metal refining C. Consumer durables, computer peripherals and automotive parts D. Apparel, shoes and leather products
B
Manufacturing bulk products regionally A.Increases the firm's costs of transportation B.Enables a firm to realize some economies from large-scale production C.Leads to diseconomies of scale D.Makes exporting uneconomical for the firm
B
The advantages frequently associated with entering a market early are commonly known as A.Primary advantages B.First-mover advantages C.Initial-entrant premiums D.Proactive-mover benefits
B
Which of the following is a disadvantage of licensing? A.It does not help firms that lack capital to develop operations overseas B.It does not give a firm the tight control over strategy that is required for realizingexperience curve and location economies C.It cannot be used when a firm possesses some intangible property that might have businessapplications D.The firm has to bear the development costs and risks associated with opening a foreignmarket
B
Which of the following is a distinct advantage of exporting? A.Absolute control over operations in the foreign nation B.It may help a firm achieve experience curve and location economies C.Avoids the threat of tariff barriers by the host-country government D.It is useful for bulk products and also in situations where transportation costs are high
B
Which of the following is a drawback associated with a turnkey strategy? A. Creates long-term commitment in the foreign country B. Possible creation of a competitor C. Not useful if FDI is limited by host-government regulations D. Riskier than conventional FDI
B
Early entrants to a market that are able to create switching costs that tie the customer to the product are capitalizing on A.Economies of scale B.Pioneering costs C.First-mover advantages D.Late-mover advantages
C
High transportation costs, trade barriers and problems with local marketing agentsare all disadvantages of A.Licensing B.Turnkey projects C.Exporting D.Franchising
C
To increase the potential for a successful acquisition, a firm should A.Always bid low to allow for partial failure B.Try to acquire a firm with a very different corporate culture so there is no forced "overlap" C.Seek companies only from similar national cultures D.Screen the foreign enterprise to be acquired
D
A _____ is the most costly method of serving a foreign market from a capitalinvestment standpoint. A.Wholly owned subsidiary B.Franchising agreement C.Turnkey project D.Joint venture
A
A large-scale entrant is more likely than a small-scale entrant to be able to capture first-mover advantages associated with A.Demand preemption B.Diseconomies of scale C.Pioneering costs D.Diseconomies of scope
A
Firms entering markets where there are no incumbent competitors to be acquired should choose A. Greenfield investments B.Joint ventures C.Acquisitions D.Takeovers
A
Firms may prefer acquisitions to greenfield investments for all of the following reasons except A.They allow companies to completely sidestep government regulations on investment B.They are quick to execute C.They enable the firm to preempt competitors D.Managers believe acquisitions are less risky
A
If a firm can realize location economies by moving production elsewhere, it should avoid A.Exporting B.Turnkey contracts C.Licensing D.Wholly owned subsidiaries
A
If a firm's core competency is based on control over proprietary technological know-how, it should avoid _____ and _____ arrangements if possible, to minimize the risk of losing control over that technology. A.Licensing; joint-venture B.Wholly owned subsidiary; exporting C.Turnkey contracts; exporting D.Exporting; joint-venture
A
Many Western firms that sold oil-refining technology to firms in Gulf states nowfind themselves competing with these firms in the world oil market. This is an example of A.The firm entering into a turnkey project with a foreign enterprise, inadvertently creating acompetitor B.The firm entering into a turnkey deal having no long-term interest in the foreign country C.The country subsequently proving to be a major market for the output of the process thathas been exported D.Selling the firm's process technology through a turnkey project which is also sellingcompetitive advantage to potential competitors
A
Most service firms have found that _____ with local partners work best for controlling subsidiaries. A. Joint ventures B.Licensing agreements C.Greenfield investments D.Turnkey project
A
This mode of entry is primarily used by service firms. A.Franchising B.Licensing C.A strategic alliance D.A turnkey project
A
What is the primary advantage of licensing? A.It helps a firm avoid the development costs associated with opening a foreign market B.It gives a firm the tight control over manufacturing, marketing and strategy C.It helps a firm achieve experience curve and location economies D.It increases a firm's ability to utilize a coordinated strategy
A
When an exporting firm finds that its local agent is also carrying competitors' products, the firm may switch to a _____ to handle local marketing, sales and service. A.Wholly owned subsidiary B.Franchising arrangement C.Turnkey operation D.Licensing agreement
A
Which of the following is a distinct advantage of exporting? A.It avoids the often substantial costs of establishing manufacturing operations in the host country B.Benefits from a local partner's knowledge of the host country's competitive conditions C.Avoids the threat of tariff barriers by the host-country government D.Appropriate if lower cost locations for manufacturing the product can be found abroad
A
A firm that establishes a _____ must bear the full costs and risks of entering aforeign market. A.Licensing agreement B.Wholly owned subsidiary C.Franchise D.Joint venture
B
A strategic commitment A.Has a short-term impact alone B. Is difficult to reverse C.Cannot change the competitive playing field D.Does not have any influence on the nature of competition in a market
B
A wholly owned subsidiary is appropriate when A.The firm wants to share the cost and risk of developing a foreign market B.The firm wants 100 percent of the profits generated in a foreign market C.The firm wants a plant that is ready to operate D.The firm wants to test a market
B
Cross-licensing agreements are increasingly common in the _____ industry. A.Transportation B.High-technology C.Construction D.Consumer durables
B
Firms engaging in _____ with a local company can benefit from a local partner'sknowledge of the host country's competitive conditions, culture, language, political systemsand business systems. A.Turnkey projects B.Joint ventures C.Greenfield investments D.Licensing arrangements
B
Firms that lack the capital necessary to develop foreign operations may choose _____ as a means of expanding internationally. A.Turnkey projects B.Licensing C.Greenfield investments D.Acquisitions
B
Identify the incorrect statement about turnkey projects. A.The contractor agrees to handle every detail of the project for a foreign client B.They are most common in industries which use inexpensive production technologies C.This is a means of exporting process technology to other countries D.They create efficient global competitors in the process
B
Which of the following is an advantage of franchising? A. A firm takes profits out of one country to support competitive attacks in another B. A firm is relieved of many of the costs and risks of opening a foreign market on its own C. It guarantees consistent product quality D. It achieves experience curve and location economies
B
Which of the following statements about small-scale entry is true? A. The commitment associated with a small-scale entry makes it possible for the small-scale entrant to capture first-mover advantages B. Small-scale entry is a way to gather information about a foreign market before deciding whether to enter on a significant scale C. By giving a firm time to collect information, small-scale entry increases the risks associated with a subsequent large-scale entry D. Small-scale entry limits a firms ability to learn about a foreign market thereby also limiting the firm's exposure to that market
B
Which of the following statements about value creation by an international business in a foreign market is false? A.Value depends on the suitability of the product offering to that market B.Greater value translates into an ability to charge lower prices C.Value depends on the nature of indigenous competition D.Greater value translates into an ability to build sales volume more rapidly
B
A turnkey strategy A.Is always riskier than conventional FDI B.Is never used in a country with unstable political and economic environments C.Is useful where FDI is limited by host-government regulations D.Is a strong indicator of a firm's long-term interest in a foreign country
C
An arrangement whereby a firm grants the rights to intangible property to another entity for a specified time period in exchange for royalties is a(n) _____ agreement. A.Wholly owned subsidiary B.Turnkey C.Licensing D.Exporting
C
Identify the advantage of establishing wholly owned subsidiaries. A.It is the least expensive method of serving a foreign market from a capital investmentstandpoint B.Political considerations make it the most feasible entry mode C.It may be required if a firm is trying to realize location and experience curve economies D.It is particularly useful where FDI is limited by host-government regulations
C
Identify the correct statement concerning cross-licensing agreements. A.They may reduce the risks associated with licensing technological know-how B.They may enable firms to hold each other hostage C.They increase the probability that parties will behave opportunistically toward each other D.They are increasingly common in high-technology industries
C
Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in A.Politically unstable developing nations that operate with a mixed or command economy B.Nations where there is a dramatic upsurge in either inflation rates or private-sector debt C. Politically stable developed and developing nations that have free market systems D.Developing nations where speculative financial bubbles have led to excess borrowing
C
Patents, inventions, formulas, processes, designs, copyrights and trademarks are allforms of A.Licensing agreements B.Franchising agreements C. Intangible property D.Tangible property
C
Pioneering costs are A.The costs of establishing manufacturing operations in the host country B.The fixed costs of developing new products or processes C. Costs that the firm has to bear that a later entrant can avoid D.The switching costs involved in moving from one market to another
C
Switching costs A.Drive early entrants out of the market B.Make it easy for later entrants to win business C.Make it difficult for later entrants to win business D.Give later entrants a cost advantage over early entrants
C
The _____ entrant is more likely than the _____ entrant to be able to capture the first-mover advantages associated with demand preemption, scale economies and switching costs. A. Small scale; large scale B.Small scale; moderate scale C.Large scale; small scale D.Moderate scale; large scale
C
The costs of promoting and establishing a product offering when a firm enters a foreign market prior to its rivals are known as A.Switching costs B.Market development costs C.Pioneering costs D.Promotional development costs
C
The hubris hypothesis attempts to explain A.The risks involved in franchising B.The reasons behind the underperformance of an economy C.Why acquisitions fail D.How FDI limits affect growth
C
When a company has some intangible property that might have businessapplications, but the firm does not want to develop those applications itself, _____ makessense. A.Exporting B.A turnkey project C.Licensing D.A wholly owned subsidiary
C
When a firm wants to enter a market where there are already well-established incumbent companies and where global competitors are also interested in establishing a presence, the firm should consider A.Joint ventures B.Turnkey projects C.Acquisitions D.Greenfield investments
C
When local agents carry the products of competing firms and have divided loyalties, _____ is not appropriate. A.Franchising B.Licensing C.Exporting D.Greenfield investment
C
Which mode of entry is pursued primarily by manufacturing firms? A.Franchising B.Turnkey C.Licensing D.Strategic alliance
C
Which of the following statements about franchising is true? A.It guarantees consistent product quality B.It tends to involve more short-term commitments than licensing C.It is a specialized form of licensing D.It is employed primarily by manufacturing firms
C
According to the _____, top managers typically overestimate their ability to createvalue from an acquisition. A.Misvaluation theory B.Performance extrapolation hypothesis C.Market timing theory D.Hubris hypothesis
D
All of the following are examples of pioneering costs except the costs of A.Business failure B.Educating consumers C.Promoting and establishing a product offering D.Learning from the mistakes of early entrants
D
If a service firm wants to build a global presence quickly and at a relatively low costand risk, _____ makes sense. A.A wholly owned subsidiary B.Exporting C.A turnkey project D.Franchising
D
The threat of tariff barriers by the host government can make _____ very risky. A.Greenfield investment B.Franchising C.Licensing D.Exporting
D
When a firm faces significant transportation costs, _____ can be uneconomical. A.Joint ventures B.Greenfield investments C.Licensing agreements D.Exporting
D
Which of the following is not an advantage associated with entering a foreign market before other international businesses? A.Ability to preempt rivals and capture demand by establishing a strong brand name B.Ability to ride down the experience curve ahead of rivals C.Ability to create switching costs D.Ability to avoid pioneering costs
D
Which of the following is not important in the acquisition process? A.Firms should strive to limit unwanted management attrition after acquisition B.An integration plan should quickly be implemented C.Proper screening of the company to be acquired should take place D.The hubris hypothesis should be maintained
D
_____ are the preferred method of market entry for firms pursuing global standardization or transnational strategies. A.Joint ventures B.Licensing agreements C.Turnkey projects D.Wholly owned subsidiaries
D