Chapter 10

_____ is the location-specific advantage that arises from the clustering of economic activities in certain locations. a. Agglomeration b. First-mover advantage c. Late-mover advantage d. Innovation

a. Agglomeration

Which of the following modes of entry call for the establishment of independent organizations overseas? a. An equity mode b. An export mode c. A franchising mode d. A licensing mode

a. An equity mode

Flarring Corp. is a well-known company that manufactures spare parts for automobiles. The company, based in Boston, expanded by entering the market of Nerodo. Even after 12 years of marketing in Nerodo, the company is on the verge of failure. In this case, which of the following factors could lead to the failure of Flarring Corp. in Nerodo? a. Decreased liability of foreignness b. Formal rules that are favorable to local firms c. Decreased competition from the local firms d. Products that are hard to imitate

b. Formal rules that are favorable to local firms

Laelle Corp., a popular cosmetic brand in France, has decided to expand its business to Australia. The company enters into an agreement with a local firm in Australia by which the two companies share 50 percent equity. This mode of entry is an example of _____. a. a turnkey project b. a joint venture c. licensing d. co-marketing

b. a joint venture

A greenfield operation refers to: a. efforts among a number of firms to jointly market their products. b. building new factories and offices from scratch. c. a new entity jointly created and owned by two or more parent companies. d. exports and contractual agreements of smaller commitments to overseas markets.

b. building new factories and offices from scratch.

Which of the following is an informal barrier to trade when foreign firms enter new markets? a. Differences in norms b. Political differences c. Economic differences d. Existence of multiple currencies

a. Differences in norms

Which of the following is a way that a foreign firm may be effected by the liability of foreignness? a. Experiencing both formal and informal discrimination b. Heightened competitive advantage c. Adoption of VIRO d. Having first-mover advantage

a. Experiencing both formal and informal discrimination

If a firm decides to engage in crude oil and petroleum business abroad, which of the following countries will provide location-specific advantage to the firm? a. Russia b. Liberia c. Switzerland d. Greenland

a. Russia

Which of the following statements is true of greenfield operations? a. They suffer from a slow entry speed of at least one to several years. b. They face difficulty in achieving effective equity and management control. c. They are cost effective and free from risk. d. They do not add any new capacity to an industry.

a. They suffer from a slow entry speed of at least one to several years.

Rues and West Bros., a technological giant, is a company motivated with the drive to find new and affordable technologies. It is selecting a location so that it can operate with its motive, as well as enjoy the benefits of the location. In this scenario, Rues and West Bros. should select locations a. that possess abundance of innovative individuals, firms, and universities. b. that feature a combination of scale economies and low-cost factors. c. that has an abundance of strong market demand. d. that possess natural resources and related infrastructure.

a. that possess abundance of innovative individuals, firms, and universities.

Which of the following is true of a multinational enterprise (MNE)? a. A firm that enters into a contractual agreement with a foreign firm b. A firm that enters foreign market via foreign direct investment (FDI) c. A firm that merely exports/imports products to host countries d. A firm that enters foreign market by non-equity mode

b. A firm that enters foreign market via foreign direct investment (FDI)

_____ is a type of wholly owned subsidiary. a. A research and development (R&D) contract b. A greenfield project c. Co-marketing d. Franchising

b. A greenfield project

A software company in China has decided to become a multinational enterprise (MNE). The company desires to completely own its subsidiary and requires a fast entry mode. In addition, the company wants to enter into business immediately without requiring to add a new capacity. In this scenario, which of the following modes of entry will be most appropriate for the company? a. Greenfield operation b. Acquisition c. Licensing d. Build-operate-transfer agreement

b. Acquisition

Which of the following is a strategy to overcome cultural distance while engaging in international business? a. Entering culturally distant countries with confidence b. Choosing countries with colony-colonizer links c. Entering in countries without much physical distance d. Entering a culturally different country as a late mover

b. Choosing countries with colony-colonizer links

A chip company operating in Pakistan, a majority Muslim country, recently got into a public relations nightmare when the public discovered that the firm was using a pork based product in their chips. Many Muslim people do not eat pork. Which of the following aspects of the liability of foreignness is this an example of? a. Regulatory risks b. Difference of informal institutions c. Economic differences d. Existence of multiple currencies

b. Difference of informal institutions

Which of the following is a difference between first movers and late movers? a. First movers take advantage of the inflexibility of late movers, whereas late movers may be locked into a given set of fixed assets. b. First movers face greater technological and market uncertainties, whereas late movers take advantage of the solutions of the first movers. c. First movers may be able to free ride on the huge pioneering investments of late movers, whereas late movers have to make preemptive investments. d. First movers attract more late entrants, whereas late movers erect entry barriers for further entrants.

b. First movers face greater technological and market uncertainties, whereas late movers take advantage of the solutions of the first movers.

Citigroup was one of the first firms to enter Afghanistan, earning a good deal of goodwill from the Afghan government. This is an example of: a. Late-mover advantage through free riding on first-mover investments b. First-mover advantage through relationship building c. First-mover advantage through preemptive investments? d. Late-mover advantage through prior market adaptation

b. First-mover advantage through relationship building

Which of the following statements is true of scale of entry? a. Small-scale entries experience higher liability of foreignness. b. Large-scale entries demonstrate a strategic commitment to certain markets. c. Small-scale entries face the difficulty of limited strategic flexibility elsewhere. d. Large-scale entries will face difficulty capturing first-mover advantages.

b. Large-scale entries demonstrate a strategic commitment to certain markets.

Dubai attracts numerous foreign entrants to engage in international business. It is an ideal stopping point for air traffic between Europe and Asia, and between Africa and Asia. Which of the following advantages has Dubai honed to attract foreign business? a. Late-mover advantage b. Location-specific advantage c. Export advantage d. Cultural advantage

b. Location-specific advantage

Which of the following statements is true of research and development (R&D) contracts? a. They make innovations at relatively high cost. b. They are difficult to negotiate and enforce. c. Quality of a research is easy to assess. d. Firms build their core R&D capabilities in the long run.

b. They are difficult to negotiate and enforce.

_____ is a non-equity mode of entry into a foreign market. a. Acquisition b. Turnkey project c. Joint venture d. Wholly owned subsidiary

b. Turnkey project

If generating returns from foreign markets is the goal, and returns are not being generated, which of the following strategies may be necessary? a. Changing strategic goals b. Withdrawing from those foreign markets c. Engaging in a price war d. Ignoring the liability of foreignness

b. Withdrawing from those foreign markets

In the context of entry timing, _____ is defined as the benefit that accrues to firms that are late entrants in the market and that early entrants do not enjoy. a. late-mover advantage b. first-mover advantage c. location-specific advantage d. cultural advantage

b. first-mover advantage

Being a first mover in a market is advantageous for a firm because: a. it may have an opportunity to free ride on late-mover investments. b. it may gain advantage through proprietary technology. c. it would attract more firms to join their business network. d. it would face minimal technological and market uncertainties.

b. it may gain advantage through proprietary technology.

Palova Skin care, a famous cosmetic brand, is successfully engaging in international business with several countries. Contrary to the successes in foreign market, the recent attempts to expand its business in its neighboring country, Arkadas, has been unsuccessful, owing to its strict rules for women and perception of beauty. In this scenario, which of the following is most likely the reason for Palovas failure in Arkadas? a. Lack of natural resources b. Physical distance c. Cultural distance d. Lack of purchasing power

c. Cultural distance

Which of the following is a formal barrier to trade when foreign firms enter new markets? a. Differences in values b. Differences in norms c. Currency risk d. Cultural differences

c. Currency risk

KG Steel Co. is exporting steel bars at prices that are below what it costs to manufacture them, with the intent to raise prices after eliminating local rivals. This practice is known as: a. Extortion b. Market seeking c. Dumping d. Plunking

c. Dumping

Which of the following is true of location-specific advantages? a. They are independent of cultural distance of the countries involved in a business. b. They continually grow irrespective of any changes in the formal institution. c. They decline when companies overcrowd or when taxes are raised. d. They can be enjoyed only as a late mover.

c. They decline when companies overcrowd or when taxes are raised.

Which of the following statements is true of late movers? a. They face greater technological and market uncertainties. b. They drive some non-dominant firms abroad to avoid clashing with dominant firms in home market. c. They may be able to free ride on the huge pioneering investments of first movers. d. They may erect significant entry barriers for further entry by other firms.

c. They may be able to free ride on the huge pioneering investments of first movers.

In the context of modes of entry, _____ refers to efforts among a number of firms to jointly market their products and services. a. franchising b. licensing c. co-marketing d. a joint venture

c. co-marketing

Prime Vera is a company that sells electrical baking appliances in over 12 countries. It collaborates with Silibakes Inc. and sells silicon baking cups with its new range of electric oven. This mode of entry is an example of _____. a. a turnkey project b. franchising c. co-marketing d. a joint venture

c. co-marketing

_____ is defined as a project in which clients pay contractors to design and construct new facilities and train personnel. a. An acquisition b. A joint venture c. A greenfield project d. A turnkey project

d. A turnkey project

Ink Struck Inc., a publishing company, wants to expand its market worldwide. In this case, which of the following will be a challenge faced by Ink Struck Inc. in host countries? a. Decreased legal differences b. Decreased competition for its products in the host country c. Loss of control over the operations d. Overcoming liability of foreignness due to its nonnative status

d. Overcoming liability of foreignness due to its nonnative status

Pro-creations Corp., a tool manufacturing company, has decided to expand its business internationally. Consequently, the company has paid a contractor to construct a manufacturing facility and an office. When the project is complete and ready for operation, the contractor will hand over the facility to Pro-creations Corp. to pursue its business. This mode of entry into international market is an example of _____. a. a franchise b. a greenfield project c. a joint venture d. a turnkey project

d. a turnkey project