MGT 215 Chapter 15: Entry Modes

Which of the following is not an advantage of a small-scale entry? a.A small-scale entrant is more likely to be able to capture first-mover advantages associated with demand preemption, scale economies, and switching costs. b.Small-scale entry is a way to gather information about a foreign market before deciding how best to enter. c.By giving the firm time to collect information, small-scale entry reduces the risks associated with a subsequent large-scale entry. d.Small-scale entry allows a firm to learn about a foreign market while limiting the firm's exposure to that market.

a. A small-scale entrant is more likely to be able to capture first-mover advantages associated with demand preemption, scale economies, and switching costs.

Which of the following is a distinct advantage of exporting? a.It avoids the often substantial costs of establishing manufacturing operations in the host country. b.Benefits from a local partner's knowledge of the host country's competitive conditions. c.Avoids the threat of tariff barriers by the host-country government. d.Appropriate if lower cost locations for manufacturing the product can be found abroad.

a. It avoids the often substantial costs of establishing manufacturing operations in the host country.

If a firm can realize location economies by moving production elsewhere, it should avoid: a.exporting. b.turnkey contracts. c.licensing. d.wholly owned subsidiaries.

a. exporting.

Firms may prefer acquisitions to greenfield investments for all of the following reasons except: a.they allow companies to completely sidestep government regulations on investment. b.they are quick to execute. c.they enable the firm to preempt competitors. d.managers believe acquisitions are less risky.

a. they allow companies to completely sidestep government regulations on investment

When an exporting firm finds that its local agent is also carrying competitors' products, the firm may switch to a _____ to handle local marketing, sales, and service. a. wholly owned subsidiary b. franchising arrangement c. turnkey operation d. licensing agreement

a. wholly owned subsidiary

Which of the following is an advantage of franchising? a.A firm takes profits out of one country to support competitive attacks in another. b.A firm is relieved of many of the costs and risks of opening a foreign market on its own. c.It guarantees consistent product quality. d.It achieves experience curve and location economies.

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

Which of the following is a disadvantage of licensing? a.It does not help firms that lack capital to develop operations overseas. b.It does not give a firm the tight control over strategy that is required for realizing experience curve and location economies. c.It cannot be used when a firm possesses some intangible property that might have business applications. d.The firm has to bear the development costs and risks associated with opening a foreign market.

b. It does not give a firm the tight control over strategy that is required for realizing experience curve and location economies.

Which of the following statements about small-scale entry is true? a.The commitment associated with a small-scale entry makes it possible for the small-scale entrant to capture first-mover advantages. b.Small-scale entry is a way to gather information about a foreign market before deciding whether to enter on a significant scale. c.By giving a firm time to collect information, small-scale entry increases the risks associated with a subsequent large-scale entry. d.Small-scale entry limits a firms ability to learn about a foreign market thereby also limiting the firm's exposure to that market.

b. Small-scale entry is a way to gather information about a foreign market before deciding whether to enter on a significant scale.

Firms engaging in _____ with a local company can benefit from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems. a.turnkey projects b.joint ventures c.greenfield investments d.licensing arrangements

b. joint ventures

Which of the following statements about franchising is true? a.It guarantees consistent product quality. b.It tends to involve more short-term commitments than licensing. c.It is a specialized form of licensing. d.It is employed primarily by manufacturing firms.

c. It is a specialized form of licensing.

When local agents carry the products of competing firms and have divided loyalties, _____ is not appropriate. a.franchising b.licensing c.exporting d.greenfield investment

c. exporting

Patents, inventions, formulas, processes, designs, copyrights, and trademarks are all forms of a.licensing agreements. b.franchising agreements. c.intangible property. d.tangible property.

c. intangible property.

A turnkey strategy: a.is always riskier than conventional FDI. b.is never used in a country with unstable political and economic environments. c.is useful where FDI is limited by host-government regulations. d.is a strong indicator of a firm's long-term interest in a foreign country.

c. is useful where FDI is limited by host-government regulations.

An arrangement whereby a firm grants the right of intangible property to another entity for a specified time period in exchange for royalties is a(n) _____ agreement. a.wholly owned subsidiary b.turnkey c.licensing d.exporting

c. licensing

Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in: a.politically unstable developing nations that operate with a mixed or command economy. b.nations where there is a dramatic upsurge in either inflation rates or private-sector debt. c.politically stable developed and developing nations that have free market systems. d.developing nations where speculative financial bubbles have led to excess borrowing.

c. politically stable developed and developing nations that have free market systems.

All of the following are examples of pioneering costs except the costs of: a.business failure. b.educating consumers. c.promoting and establishing a product offering. d.learning from the mistakes of early entrants.

d. learning from the mistakes of early entrants.

Which of the following is not an advantage associated with entering a foreign market before other international businesses? Selected name. a. Ability to preempt rivals and capture demand by establishing a strong brand name. b. Ability to ride down the experience curve ahead of rivals. c. Ability to create switching costs. d. Ability to avoid pioneering costs.

d. Ability to avoid pioneering costs.