Chapter 13

Which of the following modes of entry is suitable for service firms where the risk of losing control over the management skills or technological know-how is not much of a concern, and where the firms' valuable asset is their brand name?

B. Franchising

Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?

B. High costs and risks

Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets?

B. It is a useful strategy to earn great returns from the know-how of a technologically complex process.

Which of the following is true of international firms considering foreign expansion?

C. If the firm's core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology to the joint-venture partner.

Which of the following is an advantage of choosing exporting as a mode of entry into foreign markets?

A. A firm can avoid the cost of establishing manufacturing operations in the host country.

If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, what would be the preferable mode of entry?

A. Greenfield venture

Which of the following countries presents a favorable benefit-cost-risk trade-off scenario for foreign expansion?

B. A country with a free market system

Which of the following is a risk of entering developing nations like India and China on a large scale?

B. Absence of prior foreign entrants

Which of the following is an example of an industry in which cross-licensing agreements are increasingly becoming common?

B. Biotechnology

Which of the following modes of entry into foreign markets can result in a lack of control over quality?

B. Franchising

Which of the following is a reason why a relatively poor country may be an attractive target for inward investment?

A. Rapid economic growth

Which of the following is an example of a first-mover advantage?

A. The ability to create switching costs that tie customers into one's products or services

Which of the following is an advantage of joint ventures as a mode of entry into foreign markets?

A. The foreign firm benefits from a local partner's knowledge of the host country.

Which of the following is an advantage of franchising as a mode of entry into foreign markets?

A. The franchiser is relieved of many of the costs and risks of opening a foreign market on its own.

Why do acquisitions fail sometimes?

A. There is a clash between the cultures of the acquiring and acquired firm.

Which of the following is an advantage of acquisitions as a means of entering foreign markets?

A. They are quick to execute and help firms to rapidly build their presence in the target foreign market.

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country. The firm's core competency is in technological know-how. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology?

A. Wholly owned subsidiary

If a firm is seeking to enter a market via a wholly owned subsidiary where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, a suitable mode of entry is a(n):

A. acquisition.

First-mover disadvantages refer to:

A. disadvantages associated with entering a foreign market before other international businesses.

The probability of survival for an international business increases if it:

A. enters a national market after several other foreign firms have already done so.

In international business, a product that is not widely available in a foreign market and satisfies an unmet need:

A. is likely to have greater value.

Franchising as a mode of entry into foreign markets is employed primarily by:

A. service firms.

Axiom International, an Australian company, wants to expand its operations to China, a country that is politically, culturally, and economically different. The firm needs to select a mode of entry that would give it access to local knowledge, allow sharing of development costs and risks, and also be politically acceptable. Which of the following modes of entry into foreign markets is most suitable for Axiom International?

B. Joint venture

Which of the following is a drawback of licensing as a mode of entry into foreign markets?

B. Licensing does not give a firm tight control over manufacturing, marketing, and strategy.

Why should a high-tech firm avoid selecting licensing as a mode of entry?

B. Risk of losing control over technology

Which of the following types of entry into a foreign market allows a firm to learn about the foreign market while limiting the firm's exposure to that market?

B. Small-scale entry

In which of the following modes of entry into foreign markets does a firm agree to set up an operating plant for a foreign client and hand over the plant when it is fully operational?

B. Turnkey project

When should a firm configure its value chain to maximize value at each stage?

B. When cost pressures are intense

Small-scale entry into a foreign market makes it difficult to build market share because it:

B. is associated with a lack of commitment demonstrated by the foreign firm.

How can a wholly owned subsidiary be established in a foreign market?

C. By acquiring an established firm in the host nation

How can firms avoid incurring high transport costs when exporting bulk products?

C. By manufacturing bulk products regionally

Which of the following describes a turnkey project?

C. Exporting process technology to other countries

Licensing is NOT attractive to which of the following firms?

C. Firms requiring tight control of operations for realizing experience curve and location economies

Which of the following postulates that top managers typically overestimate their ability to create value from an acquisition?

C. Hubris hypothesis

Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries?

C. It allows firms to use the profits generated in one market to improve its competitive position in another market.

Which of the following is a disadvantage of franchising?

C. It is difficult to maintain quality control across foreign franchisees that are distant from the franchiser.

Which of the following factors determines the value that an international business can create in a foreign market?

C. Nature of indigenous competition

What gives a firm tight control for coordinating a globally dispersed value chain?

C. Setting up wholly owned marketing subsidiaries

What triggers the conflict of interest over strategy and goals in joint ventures?

C. Shifts in relative bargaining power of venture partners

In which of the following situations can an international business command higher prices for a particular product in a foreign market?

C. When the product offers greater value to customers in the foreign market

Which of the following entry modes into a foreign market best serves a high-tech firm?

C. Wholly owned subsidiaries

The liability associated with foreign expansion is greater for foreign firms that:

C. enter a national market early.

An early entrant find may find itself at a disadvantage if it:

C. faces a subsequent change in business regulations in the host-country.

Turnkey projects being short-term propositions can be disadvantageous for a firm if a country subsequently proves to be a major market for the output of the process that has been exported. The firm can get around this problem by:

C. taking a minority equity interest in the operation.

Spring, an American firm, recently acquired another company, Tazel Inc., in Indonesia. The high-level managers at Tazel quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because:

C. there is a clash between the cultures of the acquired and the acquiring firm.

Which of the following is a course of action suggested by Christopher Bartlett and Sumantra Ghoshal for companies based in developing nations?

D. Benchmark one's operations and performance against foreign multinationals.

According to Christopher Bartlett and Sumantra Ghoshal, how can local companies differentiate themselves from foreign multinationals?

D. By focusing on market niches

Which of the following is a reason why firms often overpay for the assets of an acquired firm?

D. Interest of more than one party in acquiring a particular firm

Which of the following is a disadvantage of greenfield ventures?

D. It is slower to establish than acquisitions.

Which of the following is the most likely outcome of a foreign firm entering a developed nation on a small scale after other international businesses in the firm's industry?

D. Limited future growth potential

A distinction can be drawn between firms whose core competency is in which of the following?

D. Technological know-how and management know-how

Which of the following is true of the costs and risks associated with doing business in a foreign country?

D. They are lower in economically advanced nations.

The risk of failure of an acquisition can be reduced by:

D. a detailed auditing of operations, financial position, and management culture.

To reduce the risks of failure of an acquisition, managers must:

D. move rapidly after an acquisition to put an integration plan in place.

In international business, an advantage of being a late entrant in a foreign market is the ability to:

D. ride on an early entrant's investments in learning and customer education.

Which of the following is a disadvantage of large-scale entry into a foreign market?

E. Availability of fewer resources to support expansion in other desirable markets

In terms of licensing, which of the following is an intangible property?

E. Patent

Which of the following is a disadvantage of small-scale entry for an international firm considering foreign expansion?

E. The difficulty of building market share and capturing first-mover advantages

The risks associated with learning to do business in a new culture are less if the firm:

E. acquires an established host-country enterprise.

In exporting, problems with local marketing agents can be overcome by:

E. setting up wholly owned subsidiaries in foreign nations to handle local marketing.