BUS187 - CH.13 (Multiple)

_____ with a foreign firm are believed to reduce the risks associated with licensing technological know-how.

Cross-licensing agreements

_____, a mode of entry into foreign markets, enable firms to hold each other hostage, which reduces the probability that they will behave opportunistically toward each other.

Cross-licensing agreements

A joint venture in which both parties hold equal ownership stakes is known as a(n) _____.

50/50 joint venture

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

A country with a free market system

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

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

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

A foreign firm shares the costs and risks of development with its local partner.

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

Availability of fewer resources to support expansion in other desirable markets

If a firm is considering entering a country where there are no incumbent competitors to be acquired, then which of the following modes of entry into foreign markets is most suitable?

Greenfield venture

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

High costs and risks

Which of the following is a disadvantage of exporting as a mode of entry into foreign markets?

High transport costs can make exporting uneconomical, particularly for bulk products.

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

Hubris hypothesis

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

Interest of more than one party in acquiring a particular firm

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

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

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

Poor quality standards of a foreign franchisee can cause a decline in the franchising firm's worldwide reputation.

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

Rapid economic growth

Which of the following is true of significant strategic commitments to foreign expansion made by an international firm?

Significant strategic commitments are neither unambiguously good nor bad.

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?

Small-scale entry

Which of the following is the reason why small-scale entry into a foreign market makes it difficult to build market share?

Small-scale entry is associated with a lack of commitment demonstrated by the foreign firm.

Which of the following can be used to overcome quality control problems associated with franchising as a mode of entry into foreign markets?

Subsidiaries

A _____, a mode of entry into foreign markets, entails establishing a firm that is collectively owned by two or more otherwise independent firms.

joint venture

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

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

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

The ability to build sales volume in the foreign country

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

The ability to capture demand by establishing a strong brand name

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

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

Which of the following is true of the basic entry decisions a firm must make before a firm contemplates foreign expansion?

The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country.

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

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

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(n) _____ is a suitable mode of entry.

acquisition

In the context of modes of entry into foreign markets, turnkey projects are a means of:

exporting process technology to other countries.

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

is likely to have greater value.

Which of the following is true of foreign expansion?

All the nations in the world do not all hold the same profit potential for a firm contemplating foreign expansion.

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

Benchmark one's operations and performance against foreign multinationals.

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

Biotechnology

Which of the following is a way in which the risk of failure of an acquisition can be reduced?

By a detailed auditing of operations, financial position, and management culture

Which of the following is a way in which a wholly owned subsidiary may be established in a foreign market?

By acquiring an established firm in the host nation

Which of the following is true of market entry by an international firm considering foreign expansion?

Entering a large developing nation before most other international businesses on a large scale is associated with high levels of risk.

Which of the following modes of entry into foreign markets has the ability to realize location and experience curve economies?

Exporting

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

Foreign firms must bear the full capital costs and risks of setting up overseas operations.

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

Franchising

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?

Franchising

Which of the following is true of basic entry decisions for an international firm into a foreign market?

Greater value of a product in a foreign market translates into an ability to charge higher prices and/or to build sales volume more rapidly.

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

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.

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

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

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

It can be less risky than conventional FDI.

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

It enables firms to preempt their competitors.

Which of the following is an advantage of an acquisition as a means of entry into foreign markets?

It gives firms access to valuable intangible assets along with a set of tangible assets.

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

It helps a firm achieve experience curve and location economies.

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

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

Which of the following is a disadvantage of greenfield ventures as a mode of entry into foreign markets?

It is slower to establish than acquisitions.

Axiom International wants to expand its operations to a country that is politically, culturally, and economically different from its home country. The firm needs to select a mode of entry which 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?

Joint venture

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

Joint ventures can lead to conflicts and battles for control between the investing firms.

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

Joint ventures do not give a firm tight control over subsidiaries that it might need to realize experience curve or location economies.

Which of the following is true of the scale of entry into a foreign market for an international firm considering foreign expansion?

Large-scale entrants are more likely to capture first-mover advantages.

Which of the following modes of entry into foreign markets have the advantage of being characterized by low development costs and risks?

Licensing

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

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

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?

Limited future growth potential

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

Nature of indigenous competition

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

Patent

In terms of an international firm considering foreign expansion, _____ include the costs of promoting and establishing a product offering, and educating customers.

Pioneering costs

_____ arise when the business system in a foreign country is so different from that in a firm's home market that the enterprise has to devote considerable effort, time, and expense to learning the rules of the game.

Pioneering costs

_____ refer to costs that an early entrant in a foreign market has to bear that a later entrant can avoid.

Pioneering costs

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

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

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

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

Which of following is true of franchising as a mode of entry into foreign markets?

The franchiser insists that the franchisee agree to abide by strict rules as to how it does business.

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

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

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

The licensee puts up most of the capital necessary to get the overseas operation operational.

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

The licensor does not have to bear the development costs and risks associated with opening a foreign market.

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

The licensor receives a royalty fee from the licensee.

Which of the following is a disadvantage of exporting as a mode of entry into foreign markets?

The local agents may not market the firm's products as well as the firm would if it managed its marketing itself.

Which of the following is true of the factors regarding the selection of a foreign market?

The long-run economic benefits of foreign expansion are a function of factors such as the likely future wealth of consumers.

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

The risk of losing control over a firm's technological competence is reduced.

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

The value that an international business can create in a foreign market depends on the suitability of its product offering to that market and the nature of indigenous competition.

Which of the following is a reason why acquisitions, a mode of entering foreign markets, fail?

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

Which of the following is a disadvantage of greenfield ventures as a mode of entering foreign markets?

There is a possibility of being preempted by aggressive global competitors who enter via acquisitions.

Which of the following is true of strategic commitments for an international firm considering foreign expansion?

They are difficult to reverse.

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

When a firm makes an acquisition, it buys a set of assets that are producing a known revenue.

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

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

Which of the following is the first basic entry decision that a firm contemplating foreign expansion must make?

Which foreign markets to enter

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

Wholly owned subsidiaries

Which of the following modes of entry into foreign markets has the distinct advantages of protection of technology, the ability to engage in global strategic coordination, and the ability to realize location and experience curve economies?

Wholly owned subsidiaries

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country to profit from its technological know-how which is its core competency. 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?

Wholly owned subsidiary

Which of the following is generally the most costly form of serving a foreign market from a capital investment standpoint?

Wholly owned subsidiary

Under a(n) _____ agreement, a firm might license some valuable intangible property to a foreign partner, but in addition to a royalty payment, the firm might also request that the foreign partner license some of its valuable know-how to the firm.

cross-licensing

First-mover disadvantages refer to:

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

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

enter a national market early.

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

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

In international business, the benefits frequently associated with entering a foreign market early are known as _____.

first-mover advantages

An advantage of a(n) _____ as a mode of entry into foreign markets is that it is much easier to build an organization culture from scratch than it is to change the culture of an acquired unit.

greenfield venture

An advantage of a(n) _____, a mode of entry into foreign markets, is that it provides a firm with much greater ability to build the kind of subsidiary company that it wants.

greenfield venture

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, then a _____ is the preferable mode of entry.

greenfield venture

The management of an acquiring firm is often too optimistic about the value that can be created via an acquisition and is thus willing to pay a significant premium over a target firm's market capitalization. This is known as the _____ and is the reason why acquisitions fail.

hubris hypothesis

A firm that expects rapid imitation of its core technology by competitors should:

license its technology to foreign firms.

In a(n) _____,a mode of entry into foreign markets, a firm grants the rights to intangible property to another firm for a specified period, and in return, receives a royalty fee.

licensing agreement

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

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

Franchising, a mode of entry into foreign markets, is employed primarily by _____ firms.

service

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

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

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:

taking a minority equity interest in the operation.

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

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

A drawback of a(n) _____, a mode of entry into foreign markets, is that the firm that uses this strategy will have no long-term interest in a foreign country.

turnkey deal

In a _____, a mode of entry into foreign markets, a firm agrees to set up an operating plant for a foreign client and hand over the plant when it is fully operational.

turnkey project

Establishing a _____ gives international firms a 100 percent share in the profits generated in a foreign market.

wholly owned subsidiary