IBUS 380 CH. 15

What are three disadvantages to licensing for the licensor? A licensor can lose control over its technology by licensing it A licensor gets royalty payments for providing access to intangible property A licensor does not have control over manufacturing, marketing and strategy A licensor does not have to make a large capital investment in a licensing arrangement Licensing limits the ability to coordinate strategic moves across several countries

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

What are three advantages associated with first-movers? (check all that apply) Establish investments Build sales volume Preempt rivals Create switching costs Sell mature products

Build sales volume Preempt rivals Create switching costs

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 Learn from the partners Establish partner bias Be sensitive to cultural differences Develop organizational control

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

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? Check with informed third party sources like investment bankers and former employees Conduct face-to-face meetings to get to know the potential partner Gather as much publicly-available information as possible about the company Analyze financial transactions with other foreign entities over the past twelve months

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

What is the term used for when one company enters markets before its competitors? Early entry Concurrent entry Complacent entry Late entry

Early entry

Exporting, licensing, and establishing a joint venture are types of Blank______ companies can use. marketing plans tax relief Entry modes sales tactics

Entry modes

What are three advantages of a wholly owned subsidiary? Firm can share development costs and risks of entering a foreign market Firm provides intangible assets and collects royalties Can retain competitive advantage based on technology Firm may realize location and experience curve economies Firm has tight control over foreign operations

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

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? Screen all current customer transactions affiliated with the firm under consideration. Get to know potential partners as well as possible through face-to-face meetings. Gather data from third parties such as former employees and investment bankers.

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 Exporting Joint venture Franchise Need help? Review these concept re

Greenfield venture

What are the two methods for establishing a wholly owned subsidiary? Greenfield venture Joint venture Acquisition of an established firm Franchising and licensing

Greenfield venture Acquisition of an established firm

Choose three reasons why acquisitions fail. Not realizing gains from combining operations Inadequate pre-acquisition screening More risky than exporting Culture clash between acquired and acquiring firms High costs to establish business from the ground up

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

Which three of these statements accurately describe franchising? The franchiser typically receives a royalty payment. It is similar to a license but with a longer time commitment The franchisor does not sell intangible property as part of the franchise The franchisee commits to abiding by strict rules on how it does business It is similar to a license but with a shorter time commitment

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

What are the four advantages associated with a strategic alliance? May facilitate entry into a foreign market Provides competitors with a low-cost way to access new technology Allow firms to share the fixed costs of developing new products Brings together complementary skills that neither company could easily develop on their own Diminishes competitive advantage Helps a firm establish technological standards that will benefit the firm

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

What are three advantages of a joint venture? Meet political considerations which make a joint venture the only feasible entry mode The local partner may gain access to proprietary technology Share the development costs and risks of operating in the host country Firm does not have tight control over its partner 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 Share the development costs and risks of operating in the host country Take advantage of a local partner's knowledge of the host country

What are three disadvantages of joint ventures? Choose all that apply. Giving up control of technology to host country partner Not having tight control over a local partner to realize experience curve or location economies Relying on a local partner for all financing arrangements Shared ownership arrangements can lead to conflicts and battles for control.

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

What are the three factors that can lead to the success of a strategic alliance? Alliance management Partner selection Alliance tax implications The integration of financial systems Alliance structure

Partner selection Alliance structure Alliance management

What are two benefits associated with entering a market on a large scale? (Check all that apply.) Diminishing product differentiation Putting limitations on other institutions considering entry Limiting firms strategic flexibility Easier to attract customers

Putting limitations on other institutions considering entry Easier to attract customers

The attractiveness of a country as a potential market should be assessed by balancing what three items associated with doing business in that country? Risks Climate Benefits Geography Costs

Risks Benefits Costs

Which three characteristics are associated with a good ally in a strategic alliance? Shares the firm's vision for purpose of alliance Able to expropriate firm's technological know-how Holds a larger share of the existing market Helps the firm achieve strategic goals Unlikely to try and exploit alliance for its own ends

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

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 poorly made. Indigenous competitors owned the market. The products were not made locally. The products were not suitable for the market.

The products were not suitable for the market.

Which statement is true of acquisitions? They create more value rather than destroy it. They cannot be easily executed. They help preempt competitors. They are more risky compared to greenfield ventures.

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

What are the three basic decisions firms must make when looking at foreign expansion? Which markets to enter When to enter markets What products to market What stock they should issue On what scale to enter markets

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

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? Write contractual safeguards into an alliance agreement to avoid opportunism by a partner Allow partner the advantage of opportunism in order to establish equitable gain 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 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

What is a common motive in most strategic alliance agreements? increases political risk improves trade barriers a means of market access allows cost savings

a means of market access

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 Blank______. a strategic alliance a licensing agreement a greenfield venture a franchise

a strategic alliance

A business would be better off entering into a country with an unstable political environment through Blank______. conventional FDI a turnkey project

a turnkey project

Firms that are pursuing a global standardization strategy tend to prefer establishing this strategy through Blank______. a franchising agreement licensing a wholly owned subsidiary joint ventures

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) Blank______ strategy. franchise acquisition greenfield licensing

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 Blank______. greenfield venture franchise acquisition

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) Blank______. joint venture acquisition strategic alliance

acquisition

What are three advantages of acquisitions? less risk than greenfield venture beat out the competition lower costs than exporting fast to execute small investment

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

Pioneering costs are associated with businesses that enter a national market Blank______ other businesses. after before at the same time as in place of

before

Not having to establish manufacturing operations overseas and being able to work to achieve experience curve and location economies are advantages of Blank______. exporting turnkey projects importing greenfield investments

exporting

Not having to establish manufacturing operations overseas and being able to work to achieve experience curve and location economies are advantages of Blank______. turnkey projects greenfield investments exporting importing

exporting

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

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 -usually 50/50

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 Blank______ advantage. first-mover concurrent-mover stable-mover late-mover

first-mover

There are potential hazards associated with entering a market early. These are called Blank______ disadvantages. small-scale scale-of-entry first-mover late-mover

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 Blank______ disadvantage. late-mover stable-mover first-mover slow-mover

first-mover

Just as licensing is a way for a firm to avoid many of the costs and risks associated with opening a foreign market, Blank______ also provides this benefit. franchising an acquisition turnkey projects

franchising

If a firm's core competency is management know-how, which two foreign entry modes make the most sense? licensing franchising joint ventures wholly owned subsidiary

franchising joint ventures

The main criticism of a strategic alliance is that it Blank______. adds substantial cost to products forces the subsidiary to pay first-mover costs relies too heavily on offshoring and government intervention gives the competition a low-cost way to access new technology and markets

gives the competition a low-cost way to access new technology and markets

The major disadvantages of Blank______ ventures is that they are slower to establish and come with financial risks. joint greenfield strategic franchise

greenfield

If incumbent competitors are not available to be acquired in a foreign country, a company will enter the country using a(n) Blank______. joint venture acquisition greenfield venture

greenfield venture

Starting a subsidiary in a foreign country from "scratch" where nothing is established is called a(n) Blank______. merger greenfield venture acquisition joint venture

greenfield venture

When managing an alliance, relational capital refers to Blank______. growing interpersonal relationships between managers of the firms comparing the benefits of an acquisition versus a greenfield venture creating a goodwill alliance between for-profit and non-profit organizations investing in human resource management teams

growing interpersonal relationships between managers of the firms

Potentially giving up control of technology to its local partner and not having tight control over the local partner are disadvantages of a Blank______. franchise turnkey project license agreement joint venture

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 Blank______. a licensing agreement a turnkey project franchise joint venture

joint venture

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) joint venture wholly owned subsidiary greenfield investment licensing

joint venture licensing

What are the six modes companies use to enter foreign markets? joint ventures arbitration unionization franchising wholly-owned subsidiaries turnkey projects licensing exporting

joint ventures franchising wholly-owned subsidiaries turnkey projects licensing exporting

The two drawbacks of the large scale entry strategy are Blank______. demand preemption lack of flexibility switching costs resulting risks

lack of flexibility resulting risks

Two disadvantages of franchising are Blank______. lack of quality control franchisor may not be able to take profits out of one country to support another upfront fees and royalties do not provide sufficient cashflow franchisor cannot get franchisee to follow strict rules of doing business

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

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 Blank______ scale entry. primary small broad large

large

Stephen's US based company entered the European market long after its competitors had established themselves. This is known as Blank______ entry. delayed cautious noncompetitive late

late

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 Blank______. a greenfield venture franchising licensing turnkey projects

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 Blank______ agreement. greenfield licensing franchise turnkey

licensing

The potential of losing control over technological know-how is a major drawback associated with Blank______. exporting wholly owned subsidiaries licensing acquisitions

licensing

If a firm's core competency is management know-how, which two foreign entry modes make the most sense? wholly owned subsidiary licensing joint ventures franchising

licensing franchising

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 Blank______. management culture information technology operations system marketing mix

management culture

Screening of the foreign firm to be acquired should include detailed auditing of which three aspects of the business? (check all that apply) management culture financial position operations natural resources suppliers

management culture financial position operations

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 Blank______. establishing the alliance selecting partners identifying the structure of the alliance managing the alliance

managing the alliance

Nora's company is considering going into a foreign market. They have determined which markets to go into and the timing for going into them. What other basic entry decision do they need to make? where to establish headquarters how to finance on what scale should they go in who to partner with

on what scale should they go in

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 Blank______. arbitration franchising opportunism free trade

opportunism

Turnkey projects would be commonly associated with which three industries? (check all that apply) pharmaceutical fashion chemical agricultural metal-refining

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 Blank______ costs. pioneering parity licensing alliance

pioneering

What are two benefits of franchising? typically high risk but quick return least expensive entry process provides a quick global presence relatively low cost

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 Blank______ is a concern with franchise agreements. quality control set-up cost loss of technology consumer cost

quality control

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

rapid

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 Blank______ scale entry mode. large small

small

The entry mode that may allow competitors to access markets and technology at a low cost is a Blank______. greenfield venture joint venture strategic alliance

strategic alliance

The entry mode that may allow competitors to access markets and technology at a low cost is a Blank______. strategic alliance greenfield venture joint venture

strategic alliance

Which form of market entry refers to a cooperative agreement between potential or actual competitors? acquisition franchise strategic alliance greenfield venture

strategic alliance

What are two disadvantages of operating a wholly owned subsidiary? most costly entry mode do not control operations of subsidiary subject to the full capital costs and risks may lose control of technology

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

What are three disadvantages of greenfield ventures? Choose all that apply. considered first-movers uncertainty of future revenue loss of tax revenue preemption by other competitors take longer to establish

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

What three factors can cause exporting to be uneconomical? (check all that apply) location economies tariff barriers transport costs low-cost manufacturing locations abroad

tariff barriers transport costs low-cost manufacturing locations abroad

Starbucks has thousands of franchises throughout the world. It enters foreign markets via franchising because Blank______. it is a way to get around government intervention there is little risk to losing control over the management skills the technological know-how it possesses cannot be duplicated

there is little risk to losing control over the management skills

The hubris hypothesis blames Blank______ as the reason why acquisitions fail. financial forecasts top management raw materials the marketing mix

top management

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 false question.

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

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) Blank______ project. licensing acquisition turnkey franchise

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) Blank______ strategy can be a disadvantage. licensing import turnkey

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) Blank______ strategy can be a disadvantage. licensing turnkey import

turnkey

The potential for risk is higher when considering a foreign market with a politically Blank______ nation. unstable stable

unstable

What two characteristics are associated with turnkey projects? most common in the agricultural industry more risky than traditional FDI useful when entering markets where FDI is limited by host government earning greater returns from valuable assets

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

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 Blank______ for their product. culture value metrics norms

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 Blank______ when entering a foreign market. joint venture franchising deal wholly owned subsidiary

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) Blank______. acquisition wholly owned subsidiary direct licensing agreement joint ventures

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 Blank______. wholly owned subsidiary franchise master licensing agreement joint venture

wholly owned subsidiary

Which strategy for serving a foreign market comes with the highest financial cost? joint venture licensing agreement franchise agreement wholly owned subsidiary

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 Blank______-licensing agreement. vertical cross secondary parallel

cross

Companies that have a reputation based on Blank______ probably make the best allies in a strategic alliance. "low cost" "general knowledge" "fair play" "high value"

"fair play"