t/f

1) Global sourcing and exporting can be classified as equity or ownership-based international business activities.

false

10) Global integration is a plan of action that accounts for competition on a country-by-country basis.

false

10) Large MNEs use exporting as a manner of initial internationalization, but once they build large manufacturing facilities abroad, the firm no longer exports many products due to the high costs involved.

false

10) With increasing output, the per-unit cost of production increases.

false

11) Due to the competition involved in global industries, marketing strategies are determined by the unique needs and regulations of each nation.

false

11) International expansion invariably results in a decrease in a firm's economies of scale.

false

11) The Internet provides the means to export pure services.

false

12) When determining a product's potential in numerous foreign markets, it is usually best to assume that buyers have identical needs and purchasing habits across the markets.

false

13) Indirect exporting is exporting that is accomplished by contracting with intermediaries located in the foreign market.

false

13) Using individual managers in each European country is more efficient that using the same base of managers all over Europe.

false

14) A company can be compelled to be locally responsive in individual countries to provide uniform services to global customers.

false

15) Born-global companies seldom venture into countries outside their comfort zone.

false

16) Tariff and other trade barriers for exports and FDI are identical.

false

16) The bill of lading is the "birth certificate" of the goods being shipped and indicates the country where they originate.

false

16) When using a home replication strategy, firms delegate autonomy to managers in each foreign unit, allowing them to operate independently and pursue local responsiveness.

false

17) National governments require exporters to obtain a license to protect the exported goods against damage, loss, pilferage, and delay.

false

18) Global strategy is an approach to internationalization in which headquarters delegates considerable autonomy to each country manager, allowing him or her to operate independently and pursue local responsiveness.

false

19) Exporting, FDI, and sourcing all have identical screening criteria.

false

19) In a multidomestic strategy, there is maximum pressure on headquarters staff because there is little incentive for decision making by individual managers.

false

19) International portfolio investment refers to a firm's direct control of foreign operations and is an equity-based method of foreign market entry.

false

2) A form of collaboration between two firms to form a new, jointly owned enterprise is defined as a joint venture.

false

2) Assessing the firm's product's market demand should be done before analyzing its readiness to internationalize.

false

2) Efficiency refers to emphasizing consensus-based decision making and problem solving, in which managers readily share their knowledge.

false

20) FDI is also known as international portfolio investment.

false

20) In international trade transactions, an open account is considered as a more secure method of payment than a letter of credit.

false

20) The "BRIC" countries show the least potential as target markets in the near future.

false

21) An open account is a contract between the banks of a buyer and a seller that ensures payment from the buyer to the seller upon receipt of an export shipment.

false

21) Converging buyer characteristics, growing acceptance of global brands, and increased diffusion of uniform technology make it difficult to pursue a global strategy.

false

21) Indexing and ranking is the only way to choose markets that offer the best profits.

false

22) FDI is the least taxing entry strategy that a firm can choose.

false

23) Factoring occurs when an independent company coordinates an export order in the seller's country and makes payment for the goods in the currency of that country.

false

23) Market intensity is defined as the size and growth rate of the country's middle class.

false

23) The challenges faced due to FDI are the same all over the world.

false

24) A centralized approach means substantial autonomy and decision-making authority are delegated to the firm's subsidiaries around the world.

false

24) Market consumption capacity is the proportion of a country's population concentrated in cities.

false

25) Export Development Corporation is an example of a government assistance program in India.

false

25) Headquarters of a firm is the primary contributor to decisions about local market research.

false

26) Host-country governments often pressure MNEs to undertake acquisition over greenfield investments.

false

26) Industry market potential is identical to company sales potential.

false

27) Home Depot made a greenfield investment when it entered the Mexican market by purchasing Home Mart, a domestic store chain

false

28) A greenfield investment is a direct investment to purchase an existing company or facility.

false

28) An export department structure requires considerable resource commitment.

false

28) The ability to formulate and implement marketing plans and the extent of geographic coverage provided in the target market are evaluation criteria for an export intermediary's managerial commitment.

false

3) Foreign direct investment is the least risky entry strategy.

false

3) Licensing and franchising are typical examples of home-based international exchange activities.

false

3) Screening countries to identify attractive target markets is the first step toward internationalization.

false

30) Compensation deal is a type of countertrade in which goods are directly exchanged without the transfer of any money.

false

30) Estimates of company sales potential provide managers with the information necessary to select the most appropriate business partners.

false

30) One of the advantages of a global matrix structure is that it provides better management of subsidiaries or products, or operations in many foreign markets.

false

30) Vertical integration is an arrangement in which the firm owns, or seeks to own, the activities performed in a single stage of its value chain.

false

31) A new legal entity is created during the formation of a project-based, nonequity venture.

false

32) One of the key advantages to an equity joint venture is that the management structure is very simple which allows for easy adjustments and modifications.

false

34) Equity joint ventures have the simplest management structure.

false

35) Project-based, nonequity ventures are difficult to set up.

false

4) A SWOT analysis is used to estimate company sales potential for each target market.

false

4) Visionary leadership is more complex and important in domestic firms than global firms because corporate headquarters is where major decisions are made.

false

5) Avoiding trade barriers is classified as a market-seeking motive for FDI.

false

5) Organizational culture refers to managerial routines, behaviors, and mechanisms that allow the firm to function as intended.

false

6) CORE is a diagnostic tool mainly used by managers to choose qualified business partners.

false

6) Companies that proactively build a global organizational culture subscribe to subjective ethical and moral standards.

false

6) Reva Inc. is a U.S.-based automobile manufacturing company that sets up manufacturing bases in India. Its suppliers followed them to India. This is an example of a proactive move.

false

7) Assessing organizational readiness and product readiness occurs only in the initial stage of the process to determine a firm's international readiness.

false

8) CORE, a diagnostic tool, is the sole property of the U.S. Department of Commerce.

false

8) The pre-internationalization stage of internationalization is followed by the committed involvement stage.

false

8) The strategic purpose behind firms competing with rivals in their own market is to force them to expend resources and thus, defend the firm's own market.

false

9) A multidomestic industry is one in which competition takes place on a regional or worldwide basis.

false

9) As long as a firm is confident of its product being sold, it does not need to analyze who initiates the purchase.

false

1) FDI is the most advanced and complex foreign market entry strategy.

true

1) Firms that want to become globally competitive must seek simultaneously three strategic objectives—efficiency, flexibility, and learning.

true

1) Global market opportunities depend on timing and location, and they often enhance a firm's performance.

true

10) Products or services that are well-received at a firm's home country are more likely to be accepted in foreign countries as well.

true

11) Natural disasters in foreign countries is one of the reasons for the emergence of potential target markets for selling products and services

true

12) Compared to other entry strategies, exporting minimizes risk and maximizes flexibility.

true

12) Compared to small firms, large companies usually can access capital at lower cost.

true

12) Sourcing inputs from large-scale, centralized suppliers allows firms to obtain economies of scale, more consistent quality, lower costs, and generally more efficient operations.

true

13) A company can be compelled to globally integrate its activities to seek cost reduction through scale economies.

true

13) An efficient method of gathering information about a target market is to introduce a product at an industry trade fair.

true

14) Countries appropriate for firms intending to use FDI as an entry strategy should exhibit a potential for long-term growth with limited political risk.

true

14) Exporting and importing collectively refer to international trade.

true

14) In the fashion industry, customer needs change rapidly and managers often locate factories or assembly operations near important customers.

true

15) Governments encourage inward FDI because it transfers skill and technologies.

true

15) The exporter usually first issues a quotation or pro forma invoice upon request by potential customers.

true

15) The home replication strategy is often employed as a means of extending a product's life cycle in a foreign market and to replicate home-market success.

true

16) With a high percentage of college-educated citizens, countries such as China and India have become a source for international firms seeking knowledge workers.

true

17) By establishing a physical presence inside a country or an economic bloc, the foreign company obtains the same advantages as local firms.

true

17) Trade as a percentage of GDP is used to measure a country's market receptivity.

true

17) When using a multidomestic strategy, products and services are carefully adapted to suit the unique needs of each country.

true

18) Firms that engage in FDI avoid problematic trade barriers because the physical presence of a foreign firm earns it the same privileges as a local firm

true

18) Incoterms are universally accepted terms of sale that specify how the buyer and the seller share the cost of freight and insurance in an international transaction and at which point the buyer takes title to the goods.

true

18) Screening countries to identify target markets is the most time-consuming step for most firms.

true

19) Cash in advance is the most secure method of getting paid in international business

true

2) Countertrade refers to an international business transaction in which full or partial payments are made in kind rather than cash.

true

20) With a global strategy, headquarters seeks substantial control over its country operations in order to minimize redundancy and achieve maximum efficiency, learning, and integration worldwide

true

21) International portfolio investment refers to passive ownership of foreign securities.

true

22) Because of the risk involved in an open account, exporters use this approach only with customers of long-standing or excellent credit, or with a subsidiary owned by the exporter.

true

22) By standardizing international operations as much as possible yet being adaptable to the needs of local markets, a firm is utilizing a transitional strategy of globalization.

true

22) Ongoing globalization has reduced the cost and risk of entering foreign markets.

true

23) Organizational structure describes the reporting relationships inside the firm that specify the links between people, functions, and processes.

true

24) The complexity of the tax system is one of the factors to be considered in selecting FDI locations.

true

24) When large MNEs access equity financing by selling corporate bonds or shares in stock markets, it is considered as intracorporate financing.

true

25) According to the indexing and ranking method for choosing the most promising target market, the researcher assigns scores to countries based on their overall market attractiveness.

true

25) Many international firms are investing in local communities and establishing global standards of fair treatment for workers in an effort to be socially responsible.

true

26) Decisions about local products that will be sold in only one country are typically the joint responsibility of corporate and country-level managers, with the latter taking the lead role

true

26) The risks and need for financing associated with international sales can be alleviated through the use of distribution channel intermediaries.

true

27) In order to facilitate shared decision-making between headquarters and country managers, corporate representatives should often visit subsidiary locations.

true

27) Tapping into supplier networks is one of the methods of estimating industry market potential.

true

27) Trade fairs are not only excellent sites to meet potential intermediaries, they also provide the means to become familiar with key players in the local industry and to generally learn about the target market.

true

28) By monitoring key industry-specific indicators, a manager can estimate industry market potential.

true

29) A merger is a special type of acquisition.

true

29) Countertrade is an elaborate and international form of the bartering system, and it accounts for one-third of all global trade.

true

29) Focal firms that intend to sell their trademark and copyrights typically work with foreign licensing partners instead of franchisors.

true

29) Geographic area structure is an organizational design in which management and control are decentralized to the level of individual geographic regions.

true

3) During the recent global financial crisis, efficiency and flexibility became particularly important to the success of multinational firms.

true

31) While estimating company sales potential, managers may make multiple estimates based on best-case, worst-case, and most-likely case scenarios.

true

33) Cross-licensing agreements are a type of project-based, nonequity venture in which the partners agree to allow access to licensed intellectual property developed by the other on preferential terms.

true

36) The failure rate of collaborative ventures is higher in developing economies than in advanced economies.

true

37) While franchising facilitates rapid internationalization, compared to FDI, it affords the firm less control over its foreign operations.

true

4) Exporting, licensing, and franchising require a relatively low level of managerial commitment and dedicated resources.

true

4) New markets, new resources, and improved efficiency are the three main motives for firms to enter foreign markets through FDI.

true

48) Stability of currency must be considered before selecting the location for FDI.

true

5) Firms that internationalize their operations in order to reap the profits of a high-growth market are exhibiting a proactive business strategy.

true

5) When assessing the firm's readiness to internationalize, managers peer into their organization to determine the degree to which it has the resources necessary to successfully engage in international business.

true

6) The existence of a substantial mark motivates many firms to produce offerings at or near customer locations.

true

7) Firms often follow their key customers abroad to preempt other vendors from serving them.

true

7) Push factors include unfavorable trends in the domestic market that compel firms to explore opportunities beyond national borders.

true

7) Strategic global teams identify or implement initiatives that enhance the long-term direction of the firm in its global industry.

true

8) Global IT infrastructure and tools such as intranets, the Internet, and electronic data interchange ensure that distant parts of the global network share knowledge and learn from each other.

true

9) Companies opt for FDI to obtain advantages associated with locating at the hub of knowledge development and innovation in a given industry.

true

9) When government agencies cite statistics on trade deficits, trade surpluses, and the volume of merchandise trade for individual countries, these data generally refer to firms' collective exporting and importing activities.

true