C211, Ch 10, Entering Foreign Markets

_____ is the difference between two cultures along identifiable dimensions. a. Cultural distance b. Reverse culture shock c. Culture shock d. Cultural cringe

a. Cultural distance

Which of the following entry modes is a type of strategic alliance? a. Licensing b. Wholly owned subsidiary c. Export d. Acquisition

a. Licensing

Which of the following is true of indirect exports? a. They export through domestically based export intermediaries. b. They treat foreign demand as an extension of domestic demand. c. They typically provoke protectionism, potentially triggering antidumping actions. d. They do not enjoy the economies of scale similar to direct exports.

a. They export through domestically based export intermediaries.

Which of the following is an equity mode of entry? a. Wholly owned subsidiaries b. R&D contracts c. Licensing/franchising d. Indirect exports

a. Wholly owned subsidiaries

Assume that a firm is looking to expand into a foreign market, but it needs an opportunity that has low development costs and little risk. Its best choice would be: a. a contractual agreement. b. a partially owned subsidiary. c. exporting. d. a wholly owned subsidiary.

a. a contractual agreement.

Assume that a major technology company is looking to expand into a foreign market but it can't risk losing its core innovations by sharing them with anyone outside the corporation. Its best choice would be: a. a wholly owned subsidiary. b. a contractual agreement. c. exporting. d. a partially owned subsidiary.

a. a wholly owned subsidiary.

A disadvantage of acquisitions is _____. a. high development costs b. the inability to add new capacity to industry c. the inability to coordinate globally d. the slow entry speed

a. high development costs

Miami is an ideal city for both North American firms looking to expand their business to Central and South America and for Latin American companies to expand their business to North America. This is an example of a(n): a. location-specific advantage. b. timing advantage. c. efficiency advantage. d. regulation advantage

a. location-specific advantage.

Imagine that an Australian manufacturing firm would like to open a new plant in Europe. The new plant will house both a research-and-development center and a major production line. In evaluating the best location for the plant, the firm rejects moving to Germany, which is known for its world-class engineers but also for the higher salaries commanded by its union-protected workers, in favor of Bosnia-Herzogovina, where labor is less expensive. The firm has placed a priority on: a. matching efficiency-seeking goals with location. b. matching innovation-seeking goals with location. c. matching natural resource-seeking goals with location. d. matching market-seeking goals with location.

a. matching efficiency-seeking goals with location.

An advantage of joint ventures is _____. a. the access to partners' assets b. the complete equity and operational control c. the ease of global coordination d. the protection of know-how

a. the access to partners' assets

Natural resource-seeking firms have compelling reasons to enter culturally and institutionally distant countries. This is a counter example of _____. a. the stage model b. the country-of-origin effect c. large-scale entry d. the equity mode of entry

a. the stage model

Agglomeration explains why certain cities and regions can attract businesses even in the absence of obvious geographic advantages. a. true b. false

a. true

An acquisition is an example of a wholly owned subsidiary. a. true b. false

a. true

An advantage of joint ventures is the shared costs, risks, and profits. a. true b. false

a. true

Co-marketing has the ability to reach more customers but with limited control and coordination. a. true b. false

a. true

Cultural distance is the difference between two cultures along some identifiable dimensions. a. true b. false

a. true

Emerging MNEs primarily lack proprietary ownership of technology compared to MNEs from developed economies. a. true b. false

a. true

Governments can ban foreigners and foreign firms from owning assets in certain strategic sectors. a. true b. false

a. true

Greenfield operations and acquisitions have complete equity and operational control. a. true b. false

a. true

Market-seeking firms go to countries that have a strong demand for their products and services. a. true b. false

a. true

Non-equity modes do not require the establishment of independent organizations overseas. a. true b. false

a. true

One of the late-mover disadvantages is the establishment of entry barriers by the first-mover. a. true b. false

a. true

Strategic goals and cultural and institutional distances influence the location of foreign entries. a. true b. false

a. true

The "leverage" in the LLL framework focuses on an MNE's deep understanding of its customer needs and wants. a. true b. false

a. true

The preemption of scarce resources is a first mover advantage. a. true b. false

a. true

The resource-based view argues that foreign firms need to deploy overwhelming resources and capabilities to offset their liability of foreignness. a. true b. false

a. true

The scale of entry refers to the amount of resources committed to entering a foreign market. a. true b. false

a. true

_____ refers to the clustering of economic activities in certain locations. a. Expropriation b. Agglomeration c. Intrafirm trade d. Joint venture

b. Agglomeration

Which of the following is a first-mover advantage? a. No difficulty in adapting to market changes b. Avoidance of clash with a dominant firm at home c. Opportunity to free ride on second mover investments d. Resolution of technological and market uncertainty

b. Avoidance of clash with a dominant firm at home

_____ are the most basic non-equity mode of entry, capitalizing on economies of scale in production concentrated in the home country and providing better control over distribution. a. Indirect exports b. Direct exports c. Turnkey projects d. Acquisitions

b. Direct exports

Which of the following is a late-mover advantage? a. Proprietary and technological leadership b. Fewer technological and market uncertainties c. Good relationships with key stakeholders such as governments d. Pre-emption of scarce resources

b. Fewer technological and market uncertainties

Which of the following conforms to the notion put forward by the school of thought associated with stage models? a. Firms will enter culturally distant countries during their first stage of internationalization. b. Firms enter culturally distant countries in later stages when they may gain more confidence. c. Natural resource-seeking firms have compelling reasons to enter culturally and institutionally distant countries. d. Considerations of strategic goals are more important than cultural/institutional considerations.

b. Firms enter culturally distant countries in later stages when they may gain more confidence.

Which of the following characterizes an MNE from a non-MNE? a. It exports or imports with or without FDI. b. It enjoys OLI advantages. c. It enters foreign markets via non-equity modes. d. It enters foreign markets through FPI.

b. It enjoys OLI advantages.

The Triad region includes: a. Europe, Africa, Asia, and Australia. b. North America, Asia, and Europe. c. Asia, North America, and South America. d. North America, Europe, and Asia, and Australia.

b. North America, Asia, and Europe.

_____ refers to the amount of resources committed to entering a foreign market. a. Mode of entry b. Scale of entry c. Institutional distance d. Benchmarking

b. Scale of entry

Disneyland Tokyo became very popular because it played up its American image. This is an example of: a. liability of foreignness. b. asset of foreignness. c. cyberspace foreign entry. d. regional geographic diversification.

b. asset of foreignness.

Co-marketing refers to _____. a. a project in which clients pay contractors to market and distribute the product/service b. efforts among a number of firms to jointly market their products and services c. outsourcing agreements in marketing between firms d. selling the rights to intellectual property to another firm for a royalty fee

b. efforts among a number of firms to jointly market their products and services

A build-operate-transfer (BOT) agreement is an equity mode of entry. a. true b. false

b. false

A disadvantage of licensing is high development costs. a. true b. false

b. false

A firm that exports or imports, with or without FDI, is regarded as an MNE. a. true b. false

b. false

Greenfield operations are a type of wholly owned subsidiary that does not require any FDI. a. true b. false

b. false

Indirect exports are the most basic mode of entry, capitalizing on economies of scale in production concentrated in the home country. a. true b. false

b. false

Industrial parks refer to the clustering of economic activities in certain locations. a. true b. false

b. false

Innovation-seeking firms often single out the most efficient locations featuring a combination of scale of economies and low cost factors. a. true b. false

b. false

Liability of foreignness is the inherent disadvantage firms experience in home countries. a. true b. false

b. false

Location-specific advantages never change and only tend to grow. a. true b. false

b. false

The existence of multiple currencies and the resultant currency risks can be viewed as informal trade and investment barriers. a. true b. false

b. false

The non-equity mode of indirect exports has better control over distribution than direct exports. a. true b. false

b. false

The resource-based view suggests that firms need to take actions deemed legitimate and appropriate by the various formal and informal institutions governing market entries. a. true b. false

b. false

Turnkey projects cannot be established without FDI. a. true b. false

b. false

Licensing and franchising are examples of equity modes of entry. a. true b. false

b. false (Contractual agreements are considered non-equity modes of entry)

Equity modes tend to reflect relatively smaller commitments to overseas markets, whereas non-equity modes are indicative of relatively larger, harder-to-reverse commitments. a. true b. false

b. false (1) Non-equity modes: A mode of entry (exports and contractual agreements) that tends to reflect relatively smaller commitments to overseas markets.) (2) Equity modes (A mode of entry (JV and WOS) that indicates relatively larger, harder-to-reverse commitments to overseas markets.)

One of the advantages of being a first-mover is the opportunity to free ride on late-mover investments. a. true b. false

b. false (The late-mover takes advantage of the opportunity to free ride on the first-mover investments)

Late movers face greater technological and market uncertainties. a. true b. false

b. false (The later-mover takes advantage of the first-mover's hard work to clear those uncertainties.)

Non-equity modes of entry include acquisitions and wholly-owned subsidiaries. a. true b. false

b. false (These are examples of Equity modes of entry)

According to the stage model, firms will enter culturally distant countries for their first internationalization. a. true b. false

b. false (a firm will enter culturally similar countries for their first internationalization.)

Imagine that a French manufacturer of high-end fashion apparel and accessories decides to expand into foreign markets by buying a chain of highly successful high-end fashion retailers in the United Arab Emirates. This is an example of: a. matching efficiency-seeking goals with location. b. matching market-seeking goals with location. c. matching natural resource-seeking goals with location. d. matching innovation-seeking goals with location.

b. matching market-seeking goals with location.

A recent survey revealed that more than nine out of ten people prefer a watch made by firms in Switzerland to one made in India or U.S.A or any other country. This is an example of _____. a. benchmarking b. the country-of-origin effect c. agglomeration d. the liability of foreignness

b. the country-of-origin effect

The country-of-origin effect refers to _____. a. the inherent disadvantages foreign firms experience in home countries b. the positive or negative perception of firms and products from a certain country c. only the negative perception of firms and products from a certain country d. the inherent advantages domestic firms experience in their home countries

b. the positive or negative perception of firms and products from a certain country

Imagine that a major Italian automobile manufacturer has decided to move into the Asian market by setting up a JV with a South Korean automobile manufacturer. The Italian firm is: a. using a non-equity mode of entry. b. using an equity mode of entry. c. must not be an MNE. d. using a mode of entry.

b. using an equity mode of entry.

A(n) _____ is a non-equity mode of entry used to build a longer-term presence by building and then operating a facility for a period of time before transferring operations to a domestic agency or firm. a. JV b. WOS c. BOT agreement d. R&D contract

c. BOT agreement

Which of the following is an advantage of direct exports? a. Low transportation costs for bulky products b. Avoid export processes c. Better control over distribution d. No trade barriersade barriers

c. Better control over distribution

Which of the following is an example of a first mover gaining a competitive advantage? a. A popular Jamaican reggae band goes on tour in the European Union. b. A British chain of fish-and-chip shops starts selling franchises throughout the Pacific Northwest of the United States. c. Due to its lucrative offer, a Chinese state-owned energy company wins the first contract to mine the vast coalfields in Zimbabwe. d. A Canadian man develops a new brand of pet food, which he decides to market internationally through the Internet.

c. Due to its lucrative offer, a Chinese state-owned energy company wins the first contract to mine the vast coalfields in Zimbabwe.

Which of type of entry mode is a wholly owned subsidiary? a. Non equity b. Direct export c. Equity mode d. Strategic alliance

c. Equity mode

Which of the following entry mode(s) are considered equity methods? a. Exports b. Greenfield c. Greenfield and joint ventures d. Joint ventures

c. Greenfield and joint ventures

Which of the following is a disadvantage of licensing and franchising? a. High development costs b. High risk in overseas expansion c. Little control over marketing d. Creation of a monopoly

c. Little control over marketing

Which of the following is a non-equity mode of entry? a. Acquisitions b. Joint ventures c. Turnkey projects d. Green-fields

c. Turnkey projects

A greenfield operation refers to _____. a. a wholly owned subsidiary created by acquisition b. an outsourcing agreement in R&D between firms c. a wholly owned subsidiary created by building a new factory and offices from scratch d. a new corporate entity created and jointly owned by two or more parent companies

c. a wholly owned subsidiary created by building a new factory and offices from scratch

Companies with market-seeking strategic goals search for _____. a. abundance of innovative individuals, firms, and universities b. economies of scale and abundance of low cost factors c. abundance of strong market demand and customers willing to pay d. particular foreign locations where the required resources are found

c. abundance of strong market demand and customers willing to pay

In the LLL framework, _____ refers to an emerging MNE's ability to identify and bridge gaps in its market. a. leverage b. learning c. linkage d. location

c. linkage

Some emerging economy MNEs are using the LLL framework to the challenge the conventional wisdom on international growth. The LLL framework includes: a. leverage. b. linkage. c. linkage and leverage. d. location.

c. linkage and leverage.

Liability of foreignness is _____. a. the positive perception of firms and products of the host country b. the negative perception of firms and products of the home country c. the inherent disadvantage foreign firms experience in host countries d. the inherent advantage foreign firms experience in home countries

c. the inherent disadvantage foreign firms experience in host countries

Greenfield operations are similar to acquisitions in that they are both examples of _____. a. partially owned subsidiaries b. non-equity mode of entry into foreign markets c. wholly owned subsidiaries d. equity mode of entry into foreign markets limited to a contractual agreement

c. wholly owned subsidiaries

Which of the following is an advantage of R&D contracts? a. Continuous improvement of core innovation capabilities b. Easy to negotiate and enforce contracts c. Negligible threat from competitors d. Ability to tap into the best, cost-effective locations

d. Ability to tap into the best, cost-effective locations

The following are examples of location-specific advantages: a. Industry demand that facilitates a pool of specialized suppliers and buyers. b. Industry demand that creates a skilled labor force. c. Knowledge spillovers among closely located firms. d. All of these

d. All of these

What are the possible benefits of being a late mover? a. First mover's difficulty to adapt to market changes b. Opportunity to free ride on first-mover investments c. Resolution of technological and market uncertainty d. All of these answers

d. All of these answers

Which of the following is a first-mover advantage? a. Resolve technological and market uncertainty. b. Difficulty adapting to market changes. c. Provide an opportunity for a free ride. d. Avoid clashing with dominant firms in their home market.

d. Avoid clashing with dominant firms in their home market.

Which of the following is true of modes of entry? a. Non-equity modes are methods used to enter a market in the home country. b. Equity modes do not require the establishment of independent organizations overseas. c. Non-equity modes require the establishment of independent organizations overseas. d. Equity modes are indicative of relatively larger, harder-to-reverse commitments.

d. Equity modes are indicative of relatively larger, harder-to-reverse commitments.

Which of the following entry modes is considered a non equity method? a. Acquisition b. Joint venture c. Green-field projects d. Exports

d. Exports

Which of the following is an advantage shared by both greenfield operations and acquisitions? a. Low development costs b. Add new capacity to industry c. Fast entry speed d. Protection of know-how

d. Protection of know-how

From an institution-based view, a firm's foreign market entries are affected by institutions. Which of the following is NOT an institution affecting foreign market entries? a. Trade barriers b. Norms and values c. Regulatory risks d. Resource imitability

d. Resource imitability

Which of the following is true of licensing/franchising? a. The licensor/franchisor has the ability to coordinate globally. b. The licensor/franchisor has to bear the full costs and risks associated with foreign expansion. c. The licensing/franchising strategy creates very limited competitors. d. The licensor/franchisor does not have tight control over production and marketing.

d. The licensor/franchisor does not have tight control over production and marketing.

Which of the following is a benefit of large-scale entries? a. There are no losses even if these large-scale "bets" turn out to be wrong. b. They experience no liability of foreignness. c. They have unlimited strategic flexibility in all markets. d. They demonstrate strategic commitment to certain markets.

d. They demonstrate strategic commitment to certain markets.

Imagine that a Japanese toy producer has developed a group of animated characters that look quite different from American-style animated characters. They have used these characters on numerous product lines, including trading cards, games, and clothing. To introduce the products to the American market, the firm produces a TV show starring the characters and launches a massive advertising campaign. The firm has successfully overcome the liability of foreignness by: a. none of these answers b. using tangible resources. c. changing formal institutions. d. changing informal institutions.

d. changing informal institutions.

With regard to foreign market entry, the resource-based view argues that foreign firms need to: a. be aware of the numerous regulatory risks and trade and investment barriers. b. understand the numerous differences in cultures, norms, and values. c. take actions deemed legitimate and appropriate by the various formal and informal institutions governing market entries. d. deploy overwhelming resources and capabilities to offset their liability of foreignness.

d. deploy overwhelming resources and capabilities to offset their liability of foreignness.

Efficiency-seeking firms go to countries that have _____. a. an abundance of natural resources and related transport and communication infrastructure b. a strong demand for their products and services c. world-class innovations (innovative individuals, firms, and universities) d. economies of scale and abundance of low-cost factors

d. economies of scale and abundance of low-cost factors

The distinction between _____ is what defines an MNE from a firm that merely exports or imports. a. licensing and franchising b. small- and large-scale of entry c. direct and indirect exports d. equity and non-equity modes of entry

d. equity and non-equity modes of entry

Americans value the quality, taste, and exoticism of African-grown coffee. Thus, any firm selling coffee from Kenya in the United States will enjoy a: a. liability of foreignness. b. non-equity mode of entry. c. negative country-of-origin effect. d. positive country-of-origin effect.

d. positive country-of-origin effect.

Some people believe that anything made in Asia is poorly made and therefore not worth much money. This bias may have a negative impact on Asian firms when they attempt to sell well-made, quality, valuable products in non-Asian markets. Firms in this situation would be: a. encountering trade barriers. b. none of these answers c. entering into foreign markets. d. suffering from the liability of foreignness.

d. suffering from the liability of foreignness.

In _____, clients pay contractors to design and construct new facilities and train personnel. a. licensing b. co-marketing c. franchising d. turnkey projects

d. turnkey projects

Imagine that a Chinese electronic game manufacturer has decided to go global. It does well with its lower-priced products but cannot break into the market with its high-end game consoles and games. The firm then acquires a well-respected Norwegian high-end game manufacturer, and begins selling high-end products under that brand name. The firm has successfully overcome the liability of foreignness by: a. changing formal institutions. b. changing informal institutions. c. none of these answers d. using tangible resources.

d. using tangible resources.