International Business Chapter 12
51) Sub-Saharan Africa accounts for ________ of world GDP. A) 2% B) 12% C) 20% D) 32%
Answer: A Diff: 1 Skill: Concept Objective: 1 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
11) ________ are tangible or intangible resources owned by a firm which grant it a competitive advantage over its industry rivals. A) Ownership advantages B) Location advantages C) Internalization advantages D) Competitive advantages
Answer: A Diff: 1 Skill: Concept Objective: 2
19) ________ for exporting are those that push a firm into foreign markets. A) Reactive motivations B) Proactive motivations C) Opportunity motivations D) Avoidance motivations
Answer: A Diff: 1 Skill: Concept Objective: 3
47) The Mitsubishi Corporation is a firm that is directly engaged in importing and exporting a wide variety of goods for its own account and is a part of a keiretsu system. What type of export intermediary is it? A) export management company B) sogo shosha C) freight forwarder D) export and import broker
Answer: B Diff: 2 Skill: Application Objective: 3 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
6) Gameware recently entered the German market. Gameware incurred significant costs associated with setting up a business operation in Frankfurt, transferring managers to Germany, and shipping equipment to the German facility. Gameware's expenses are best described as ________. A) opportunity costs B) setup costs C) direct costs D) indirect costs
Answer: C Diff: 2 Skill: Application Objective: 1
36) A(n) ________ is a group of U.S. firms that operate within the same industry and are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws. A) Webb-Pomerene association B) Greenfield organization C) export management company D) international trading company
Answer: A Diff: 1 Skill: Concept Objective: 3
43) Which of the following solicits domestic orders for foreign manufacturers on a commission basis? A) manufacturers' agent B) export and import broker C) freight forwarder D) manufacturers' export agent
Answer: A Diff: 1 Skill: Concept Objective: 3
23) Franklin Carpets engages in indirect exporting, so the firm sells its carpets to a(n) ________. A) domestic customer who then sells the carpets to a foreign customer B) foreign customer who then sells the carpets to a domestic customer C) affiliated company located in a foreign country D) foreign customer through e-commerce
Answer: A Diff: 2 Skill: Application Objective: 3 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
25) When Hewlett-Packard buys microchips from Intel to use in manufacturing computers and then exports the completed computers to Europe, ________ has occurred. A) indirect exporting of Intel's chips B) direct exporting of Intel's chips C) an intercorporate transfer of Intel's chips D) an intracorporate transfer of Intel's chips
Answer: A Diff: 2 Skill: Application Objective: 3 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
54) Carmichael Candies, a U.S. firm, is considering the idea of entering the EU market through an international franchising agreement. What is the main advantage to Carmichael if the firm chooses this entry method? A) avoidance of tariffs B) independence from franchisee C) potential public relations problems D) high managerial and financial risks
Answer: A Diff: 2 Skill: Application Objective: 5 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
63) Juanita recently purchased a FDX Computer. She needs assistance setting it up and contacts the firm's customer service center, which is located in Bangalore, India. FDX Computer most likely engages in which of the following? A) business process outsourcing B) foreign direct investment C) brownfield strategies D) B-O-T projects
Answer: A Diff: 2 Skill: Application Objective: 6
58) British Airways has an arrangement with a state-owned airline headquartered in Brazil. British Airways provides the Brazilian airline with advice on reservation services and scheduling. Which entry mode for international business is used by British Airways? A) management contract B) turnkey project C) greenfield strategy D) licensing
Answer: A Diff: 2 Skill: Application Objective: 6 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
2) What is the first step in selecting a foreign market? A) assessing market potential B) monitoring major markets C) evaluating host country's trade policies D) assessing general legal and political environments
Answer: A Diff: 2 Skill: Concept Objective: 1
30) Which of the following would most likely discourage an international firm from relying on exports as an entry mode? A) tariffs B) export promotion policies C) export financing programs D) home country subsidization
Answer: A Diff: 2 Skill: Concept Objective: 3
31) What are the third parties that specialize in facilitating imports and exports called? A) intermediaries B) wholesalers C) exporters D) distributors
Answer: A Diff: 2 Skill: Concept Objective: 3
32) ________ offer services including export management companies, Webb-Pomerene associations, and international trading companies. A) Intermediaries B) Wholesalers C) Exporters D) Distributors
Answer: A Diff: 2 Skill: Concept Objective: 3
34) Tanya is employed by an export management company that provides its services to many exporters in the Chicago area. Tanya would likely be responsible for ________. A) shipping goods B) advertising C) creating strategic marketing plans D) customer service
Answer: A Diff: 2 Skill: Concept Objective: 3
16) ________ is the most common form of international business activity. A) Exporting B) Licensing C) Greenfield strategy D) Management contract
Answer: A Diff: 2 Skill: Concept Objective: 3 Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international business
24) ________ occur(s) when a firm sells its products to a domestic customer, which in turn exports the product, in either its original form or a modified form. A) Indirect exporting B) Direct exporting C) Intercorporate transfers D) Intracorporate transfers
Answer: A Diff: 2 Skill: Concept Objective: 3 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
21) Which mode of entry has the most potential to create a future competitor? A) licensing B) exporting C) turnkey project D) contract manufacturing
Answer: A Diff: 2 Skill: Concept Objective: 4 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
42) Which of the following best explains the success of the sogo shosha? A) access to information about global economic conditions B) ability to generate e-commerce profits and sales C) support from local and foreign governments D) acquisition of intellectual property rights
Answer: A Diff: 3 AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international business
40) Where are the world's most important international trading companies located? A) Germany B) Japan C) Canada D) China
Answer: B Diff: 1 AACSB: Dynamics of the global economy Skill: Concept Objective: 3
4) ________ refer to expenses incurred by the firm as it enters a new foreign market. A) Indirect costs B) Direct costs C) Opportunity costs D) Variable costs
Answer: B Diff: 1 Skill: Concept Objective: 1
12) ________ are those factors that affect the desirability of host country production relative to home country production. A) Ownership advantages B) Location advantages C) National competitive advantages D) Internalization advantages
Answer: B Diff: 1 Skill: Concept Objective: 2
9) The informational, political, and cultural disadvantages that foreign firms face when trying to compete against local firms in the host country market are referred to as ________. A) opportunity costs B) liability of foreignness C) internalization disadvantages D) the burden of internationalization
Answer: B Diff: 1 Skill: Concept Objective: 2
18) ________ are those that pull a firm into foreign markets as a result of opportunities available there. A) Reactive motivations B) Proactive motivations C) Opportunity motivations D) Avoidance motivations
Answer: B Diff: 1 Skill: Concept Objective: 3
26) Which term refers to sales made to either distributors or end-users located outside the firm's home country? A) indirect exporting B) direct exporting C) intercorporate transfers D) intracorporate transfers
Answer: B Diff: 1 Skill: Concept Objective: 3
45) ________ can bring together international buyers and sellers of standardized commodities like coffee and grains. A) A manufacturers' agent B) An export and import broker C) A freight forwarder D) A sogo shosha
Answer: B Diff: 1 Skill: Concept Objective: 3
49) The firm that leases the right to use intellectual property is called the ________. A) leasor B) licensor C) licensee D) franchisee
Answer: B Diff: 1 Skill: Concept Objective: 4
68) When two or more firms agree to work together and create a joint owned firm to promote mutual interest, ________ has occurred. A) an acquisition B) a joint venture C) a licensing agreement D) a franchise agreement
Answer: B Diff: 1 Skill: Concept Objective: 7 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
14) Toyota's efficient manufacturing techniques and reputation for producing high-quality automobiles are examples of ________. A) location advantages B) ownership advantages C) internalization advantages D) internationalization advantages
Answer: B Diff: 2 Skill: Application Objective: 2
15) Delvin Pharmaceuticals, a U.S. firm, is considering the idea of entering the Japanese market. Which entry mode will Delvin most likely use? A) exporting B) licensing C) turnkey D) franchising
Answer: B Diff: 2 Skill: Application Objective: 2 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
59) Bechtel, a construction and engineering firm, has a contract with the Indian government to expand the airport in New Delhi. Bechtel will design, construct, and equip the airport before turning the facility over to the Indian government upon completion. Which entry mode for international business is used by Bechtel? A) B-O-T project B) turnkey project C) contract manufacturing D) foreign direct investment
Answer: B Diff: 2 Skill: Application Objective: 6 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
35) Wine consumption in China has been at an annual growth rate of ________. A) 2% B) 20% C) 200% D) 2,000%
Answer: B Diff: 2 Skill: Concept Objective: 2
61) Which term refers to a firm building and operating a facility before transferring ownership of the facility to another party? A) FDI B) B-O-T project C) turnkey project D) greenfield strategy
Answer: B Diff: 2 Skill: Concept Objective: 6 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
64) Which of the following is a method for foreign direct investment? A) participating in business process outsourcing B) buying existing assets in a foreign country C) exporting services and products D) entering licensing agreements
Answer: B Diff: 2 Skill: Concept Objective: 7 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
55) In comparison to licensing, franchising offers a firm ________. A) less taxation B) more control C) higher profit margins D) fewer financial risks
Answer: B Diff: 2 Skill: Synthesis Objective: 4, 5 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
13) ________ are those factors that make it desirable for a firm to produce a good or service itself rather than contracting with another firm to produce it. A) Ownership advantages B) National competitive advantages C) Internalization advantages D) Resource availabilities
Answer: C Diff: 1 Skill: Concept Objective: 2
33) A(n) ________ is a firm that acts as its client's export department. A) Webb-Pomerene association B) Greenfield organization C) export management company D) international trading company
Answer: C Diff: 1 Skill: Concept Objective: 3
38) A(n) ________ is a firm directly engaged in importing and exporting a wide variety of goods for its own account. A) Webb-Pomerene association B) export management company C) international trading company D) management broker
Answer: C Diff: 1 Skill: Concept Objective: 3
5) Gameware recently entered the German market. Gameware executives also wanted to enter the Canadian market but had to delay the entry because of limited resources. What type of costs will Gameware incur as a result of being unable to enter the Canadian market? A) indirect costs B) direct costs C) opportunity costs D) variable costs
Answer: C Diff: 2 Skill: Application Objective: 1
46) BTV Enterprises specializes in the physical transportation of goods for its clients by arranging customs documentation and obtaining transportation services. BTV Enterprises is most likely a(n) ________. A) manufacturers' agent B) export and import broker C) freight forwarder D) manufacturers' export agent
Answer: C Diff: 2 Skill: Application Objective: 3
28) When British Petroleum ships crude oil from its storage facilities in Kuwait to its Australian subsidiary, ________ has occurred. A) indirect exporting B) direct exporting C) an intracorporate transfer D) an intercorporate transfer
Answer: C Diff: 2 Skill: Application Objective: 3 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
48) The Nintendo Company manufactures electronic video consoles and game cartridges. Nintendo provides game design firms with technical specifications for how Nintendo consoles function. The game design firms create the games and then pay Nintendo a fee to manufacture those games. What mode of entry is described in this example? A) exporting B) franchising C) licensing D) joint venture
Answer: C Diff: 2 Skill: Application Objective: 4 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
53) Vinson Bicycles, a U.S. firm, is considering the idea of entering the EU market through an international licensing agreement. What is the main disadvantage of this entry method for Vinson? A) significant financial and political risks B) foreign investment restrictions C) limited market opportunities D) high tariff costs
Answer: C Diff: 2 Skill: Application Objective: 4 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
57) Kodak focuses on developing photo editing software, and the firm has agreements with a Chinese manufacturer to assemble most Kodak cameras. Which entry mode for international business is used by Kodak? A) management contracting B) international franchising C) contract manufacturing D) international licensing
Answer: C Diff: 2 Skill: Application Objective: 6 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
1) Which of the following is not one of the three steps in increasing market share, revenue, and profits? A) assess alternative markets B) evaluate respective costs, benefits, and risks C) perform a situation analysis D) select market with most potential for entry or expansion
Answer: C Diff: 2 Skill: Concept Objective: 1
7) Which of the following are potential benefits of entering a new market? A) eliminating synergy with other operations B) increasing manufacturing costs C) limiting competitors' profits D) logistical complexities
Answer: C Diff: 2 Skill: Concept Objective: 1
8) Which theory listed below is useful in deciding which mode of entry to use when entering foreign markets? A) ownership advantage theory B) internalization theory C) eclectic theory D) relative factor endowments
Answer: C Diff: 2 Skill: Concept Objective: 2
50) Research suggests that in ________ of cases, a firm's initial direct exporting to a foreign market is the result of unsolicited orders. A) one-tenth B) one-quarter C) one-third D) one-half
Answer: C Diff: 2 Skill: Concept Objective: 2 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
41) A sogo shosha is best described as a(n) ________. A) export management company B) freight forwarder C) international trading company D) manufacturers' agent
Answer: C Diff: 2 Skill: Concept Objective: 3
56) International franchising is most likely to succeed when the franchisor has ________. A) specialized machinery B) exported other products C) succeeded in the domestic market D) implemented a diversification strategy
Answer: C Diff: 2 Skill: Concept Objective: 5 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
62) Which country is the market leader in providing international business process outsourcing? A) South Africa B) Brazil C) India D) China
Answer: C Diff: 2 Skill: Concept Objective: 6
22) Which of the following is a characteristic of foreign direct investment? A) relatively low financial investment B) low exposure to political risk C) high profit potential D) simple management
Answer: C Diff: 2 Skill: Concept Objective: 7 Learning Outcome: Explain the implications of foreign direct investment for both host and home country
37) Which of the following statements about Webb-Pomerene associations is most likely true? A) The number of Webb-Pomerene associations is growing due to globalization. B) Most Webb-Pomerene associations facilitate trade in the garment industry. C) Webb-Pomerene associations participate in marketing and promotion. D) Webb-Pomerene associations are unable to negotiate contracts.
Answer: C Diff: 3 Skill: Concept Objective: 3
3) Which of the following is the least effective indicator of a country's potential for economic growth? A) GDP B) per capita income C) energy consumption D) television viewing patterns
Answer: D Diff: 1 Skill: Concept Objective: 2
10) Which of the following is the most intensive mode of entry into foreign markets? A) exporting B) importing C) international licensing D) FDI
Answer: D Diff: 1 Skill: Concept Objective: 2 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
44) The ________ acts as a foreign sales department for domestic producers by selling those firms' goods in foreign markets. A) manufacturers' agent B) export and import broker C) freight forwarder D) manufacturers' export agent
Answer: D Diff: 1 Skill: Concept Objective: 3
27) Which term refers to the sale of goods by a firm in one country to an affiliated firm in another country? A) indirect exporting B) direct exporting C) intercorporate transfers D) intracorporate transfers
Answer: D Diff: 1 Skill: Concept Objective: 3 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
52) Which term refers to compensation under a licensing agreement? A) sales commission B) fixed amount C) sales percentage D) royalty
Answer: D Diff: 1 Skill: Concept Objective: 4
67) The licensees that built Tokyo Disneyland insisted on a ________ licensing agreement with the Walt Disney Company before agreeing to invest the funds necessary to build the park. A) one-year B) ten-year C) twenty-five year D) one-hundred year
Answer: D Diff: 2 Skill: Application Objective: 3
65) Comtex, a U.S. clock manufacturer, recently built a new production facility in Bangladesh. Which term best describes the activities of Comtex? A) joint venture strategy B) brownfield strategy C) acquisition strategy D) greenfield strategy
Answer: D Diff: 2 Skill: Application Objective: 7 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
29) Which form of exporting is used by firms in order to lower their production costs? A) indirect exporting B) direct exporting C) intercorporate transfers D) intracorporate transfers
Answer: D Diff: 2 Skill: Concept Objective: 3
17) Which of the following is a characteristic of exporting? A) high financial exposure B) rapid market entry C) logistical simplicity D) local market knowledge
Answer: D Diff: 2 Skill: Concept Objective: 3 Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international business
20) Which of the following is an advantage of exporting? A) vulnerability to tariffs B) logistical complexities C) potential conflicts with distributors D) access to new markets
Answer: D Diff: 2 Skill: Concept Objective: 3 Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
60) Which of the following is typically critical to a turnkey project? A) business processes B) low-wage labor force C) environmental regulations D) home government financing
Answer: D Diff: 2 Skill: Concept Objective: 6
66) What is a common disadvantage of using a greenfield strategy? A) paying high tariffs B) using outdated equipment C) taking over existing debts D) complying with local regulations
Answer: D Diff: 2 Skill: Concept Objective: 7 Learning Outcome: Explain the implications of foreign direct investment for both host and home country
39) Unlike an export management company, an international trading company ________. A) offers customer financing B) facilitates customs documentation C) manages international transportation logistics D) participates in exporting and importing activities
Answer: D Diff: 3 Skill: Concept Objective: 3