Chapter 15

McDonald's is an example of a firm that uses _____. A. wholly owned subsidiaries B. a franchising strategy C. turnkey contracts D. a licensing strategy

B

The valuable asset of firms, whose competitive advantage is based on management know-how, is their _____. A. top management staff B. USP C. advertisements D. brand name

D

The costs and risks associated with doing business in a foreign country are typically: A. low in an economically advanced nation. B. low in the countries of the European Union. C. high in an economically advanced nation. D. high in a politically stable democratic nation.

A

The most typical joint venture is a _____ venture. A. 50/50 B. 60/40 C. 75/25 D. 10/90

A

A _____ entails establishing a firm that is owned together by two or more otherwise independent firms. A. joint venture B. licensing agreement C. franchisee D. turnkey contract

A

A _____ is more likely to capture first-mover advantages associated with demand preemption, scale economies, and switching costs. A. large-scale entrant B. joint venture C. small-scale entrant D. turnkey contract

A

A large-scale entrant is more likely than a small-scale entrant to be able to capture first-mover advantages associated with _____. A. scale economies B. diseconomies of scale C. pioneering costs D. diseconomies of scope

A

A(n) _____ is a way to bring together complementary skills and assets that neither company could easily develop on its own. A. alliance B. turnkey contract C. wholly owned subsidiary D. licensing agreement

A

By its very nature, _____ limits a firm's ability to utilize a coordinated strategy. A. licensing B. turnkey contracting C. franchising D. exporting

A

Early entrants to a market that are able to create switching costs that tie the customer to the product are capitalizing on: A. first-mover advantages. B. pioneering costs. C. economies of scale. D. late-mover advantages.

A

Firms entering markets where there are no incumbent competitors to be acquired should choose _____. A. greenfield investments B. joint ventures C. acquisitions D. takeovers

A

Firms pursuing global standardization or transnational strategies tend to prefer _____ arrangements. A. wholly owned subsidiary B. franchising C. joint-venture D. licensing

A

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

If a firm's core competency is based on control over proprietary technological know-how, _____ and _____ arrangements should be avoided if possible to minimize the risk of losing control over that technology. A. licensing; joint-venture B. wholly owned subsidiary; exporting C. turnkey contracts; exporting D. exporting; joint-venture

A

In many countries, political considerations make _____ the only feasible entry mode. A. joint ventures B. franchises C. licensing agreements D. wholly owned subsidiaries

A

Managing an alliance successfully requires building interpersonal relationships between the firms' managers. This is sometimes referred to as ____. A. relational capital B. relational assets C. operational assets D. venture capital

A

Many American firms that sold oil-refining technology to firms in the Gulf now find themselves competing with these firms in the world oil market. This is an example of: A. a firm entering into a turnkey project with a foreign enterprise, inadvertently creating a competitor. B. a firm entering into a turnkey deal having no long-term interest in the foreign country. C. a country subsequently proving to be a major market for the output of the process that has been exported. D. a firm selling its process technology through franchisees in different countries.

A

Most service firms have found that _____ with local partners work best for controlling subsidiaries. A. joint ventures B. licensing agreements C. greenfield investments D. turnkey projects

A

What is the primary advantage of licensing? A. It helps a firm avoid the development costs associated with opening a foreign market. B. It gives a firm the tight control over manufacturing, marketing, and strategy. C. It helps a firm achieve experience curve and location economies. D. It increases a firm's ability to utilize a coordinated strategy.

A

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

Which of the following is one of the reasons why acquisitions fail? A. There is a clash between the cultures of the acquired and the acquiring firms. B. The acquired firm often overpays for the assets of the acquiring firm. C. The synergies of the two firms happens quickly and neither acquired nor acquiring firm are prepared for full integration. D. Despite adequate pre-acquisition screening, the entities encounter unexpected governmental involvement.

A

Which of the following is true of exporting? A. It avoids the often substantial costs of establishing manufacturing operations in the host country. B. It is the best choice if lower-cost manufacturing locations are available abroad. C. Low transportation costs may make exporting uneconomical. D. Tariff barriers may make exporting the most attractive option.

A

_____ is pursued primarily by manufacturing firms and _____ is employed primarily by service firms. A. Licensing; franchising B. Franchising; licensing C. Franchising; exporting D. Exporting; licensing

A

Cross-licensing agreements are increasingly common in the _____ industries. A. transportation B. high-technology C. construction D. consumer durables

B

A wholly owned subsidiary is appropriate when the firm wants: A. to share the cost and risk of developing a foreign market. B. 100 percent of the profits generated in a foreign market. C. a plant that is ready to operate. D. to test a market.

B

An advantage of exporting products to another country is that it: A. minimizes exchange rate risks. B. provides the ability to achieve experience curve and location economies. C. faces less trade barriers. D. gives firms access to local knowledge.

B

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. turnkey B. licensing C. greenfield D. acquisition

B

Firms engaging in a _____ 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 project B. joint venture C. greenfield investment D. licensing arrangement

B

How can a firm protect its proprietary information in a joint venture arrangement? A. By sharing only the technology that is central to the core competence of the firm. B. Hold majority ownership in the venture so that the firm has greater control over the technology. C. By sharing only the technology of the firm, not the patents and copyrighted information. D. Hold minority ownership in the venture so that the firm does not have to give over control of the technology.

B

In a ____, the firm owns 100 percent of the stock. A. joint venture B. wholly owned subsidiary C. turnkey project D. franchising agreement

B

Turnkey projects are most common in which of the following industries? A. Fresh fruit, grain, and meat products B. Chemical, pharmaceutical, and metal refining C. Consumer durables, computer peripherals, and automotive parts D. Apparel, shoes, and leather products

B

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

Which of the following is a first-mover advantage? A. Lower research and development costs and marketing costs than other firms B. Ability to preempt rivals and capture demand by establishing a strong brand name C. Ability to capitalize on the work done by other firms D. Creation of innovative products at lower costs than other firms

B

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 and achieves experience curve and location economies. D. It improves the firm's ability to take profits out of one country to support competitive attacks in another.

B

Which of the following is true of establishing greenfield venture in a foreign country? A. Greenfield investments are less risky than acquiring an existing company in a foreign market. B. An inherent degree of uncertainty is associated with a greenfield venture because of future revenue and profit prospects. C. Greenfield investments virtually eliminate the possibility of a more aggressive global competitor entering the market via acquisitions. D. Greenfield investments are quick to establish.

B

Which of the following is true of licensing? A. Licensing is used when a firm possesses some tangible property but does not want to pursue a potential application itself. B. The firm does not have to bear the development costs and risks associated with opening a foreign market. C. It is also an attractive option when a firm is interested in pursuing a foreign market and is ready to commit substantial resources to a foreign market. D. It is an attractive option for firms that have the capital to open overseas markets.

B

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 firm's ability to learn about a foreign market thereby also limiting the firm's exposure to that market.

B

_____ allow a firm to rapidly build its presence in the target foreign market. A. Joint ventures B. Acquisitions C. Subsidiaries D. Turnkey contracts

B

_____ are the advantages associated with entering a market early. A. Pioneering advantages B. First-mover advantages C. Core competencies D. Late-mover advantages

B

_____ can be used to formalize arrangements to swap skills and technology in a strategic alliance. A. Modularization B. Cross-licensing agreements C. Structured transfer agreements D. Contractual safeguards

B

_____ is advantageous because it avoids the cost of establishing manufacturing operations in the host country and because it may help a firm achieve experience curve and location economies. A. Licensing B. Exporting C. Franchising D. A turnkey contract

B

_____ refer to cooperative agreements between potential or actual competitors. A. Greenfield investments B. Strategic alliances C. Takeovers D. Licensing agreements

B

An advantage of _____ with a local partner is the knowledge of the local environment that the local partner contributes to the venture. A. turnkey contracts B. licensing contracts C. joint ventures D. wholly owned subsidiary contracts

C

An advantage of forming a strategic alliance is that it helps firms: A. protect their procedures and technologies. B. reduce the level of conflicts that occur within an organization. C. share the risks of developing new products or processes. D. increase the cultural similarities between employees.

C

Costs that an early entrant has to bear that a later entrant can avoid are known as _____. A. first-mover costs B. late-mover disadvantages C. pioneering costs D. licensing fees

C

If a high-tech firm sets up operations in a foreign country to profit from a core competency in technological know-how, which of the following entry strategy is best? A. joint ventures B. licensing C. wholly owned subsidiaries D. turnkey contacts

C

In a(n) _____, the contractor agrees to handle every detail of the project for a foreign client. A. joint venture B. exporting agreement C. turnkey project D. licensing agreement

C

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

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

Switching costs: A. drive early entrants out of the market. B. make it easy for later entrants to win business. C. make it difficult for later entrants to win business. D. give later entrants a cost advantage over early entrants.

C

The costs of promoting and establishing a product offering when a firm enters a foreign market prior to its rivals are known as _____. A. switching costs B. market development costs C. pioneering costs D. promotional development costs

C

The main advantage of _____ is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants. A. an acquisition B. strategic alliances C. greenfield investment D. franchising

C

When technological know-how constitutes a firm's core competence, which entry mode is the optimal choice? A. Foreign franchises controlled by joint ventures B. Licensing agreements C. Wholly owned subsidiaries D. Turnkey contracts

C

Which of the following is a distinct advantage of exporting? A. It avoids the threat of tariff barriers by the host-country government. B. Firms benefit from a local partner's knowledge of the host country's competitive conditions. C. It avoids the often substantial costs of establishing manufacturing operations in the host country. D. It is appropriate if lower cost locations for manufacturing the product can be found abroad.

C

Which of the following is an advantage of establishing a joint venture? A. Joint ventures with local partners do not face any risk of being subject to nationalization or other forms of adverse government interference. B. Joint ventures give a firm a tight control over subsidiaries that it might need to realize experience curve or location economies. C. When the development costs and/or risks of opening a foreign market are high, a firm might gain by sharing these costs and or risks with a local partner. D. The firm is deprived of the knowledge of the host country's competitive conditions, culture, language, etc.

C

Which of the following is true of strategic alliances? A. Strategic alliances can make entry into a foreign market difficult. B. Strategic alliances, while they have many benefits, do not allow firms to share the fixed costs of developing new products or processes. C. Strategic alliances allow firms to bring together complementary skills and assets that neither company could easily develop on its own. D. Strategic alliances, while beneficial to firms, make the establishment of technological standards for an industry difficult.

C

Which of the following is true of wholly owned subsidiaries? A. It is the least expensive method of serving a foreign market from a capital investment standpoint. B. It the most feasible entry mode due to the political considerations. C. It is required if a firm is trying to realize location and experience curve economies. D. It is particularly useful where FDI is limited by host-government regulations.

C

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

Which of the following statements is true of turnkey projects? A. Turnkey projects are most common in industries which use simple, inexpensive production technologies. B. A turnkey strategy can be more risky than conventional FDI. C. A turnkey strategy is particularly useful where FDI is limited by host-government regulations. D. Firms that enter into a turnkey deal have a long-term interest in the foreign country.

C

_____ agreements enable firms to hold each other "hostage," thereby reducing the risk they will behave in an opportunistic manner toward each other. A. Turnkey B. Franchising C. Cross-license D. Integrated license

C

_____ refers to the building of interpersonal relationships between the firms' managers in a strategic alliance. A. Alliance partnerships B. Joint management C. Relational capital D. Team building

C

A disadvantage of _____ is that the firm that enters into such an arrangement will have no long-term interest in the foreign country. A. wholly owned subsidiaries B. exporting C. licensing D. turnkey projects

D

A firm can establish a wholly owned subsidiary in a country by building a subsidiary from the ground up, called the _____. A. joint venture B. turnkey strategy C. licensing agreement D. greenfield strategy

D

According to the _____, top managers typically overestimate their ability to create value from an acquisition. A. misvaluation theory B. performance extrapolation hypothesis C. market timing theory D. hubris hypothesis

D

Firms entering a market via a _____ must bear all the costs and risks associated with the venture. A. licensing contract B. joint venture C. turnkey contract D. wholly owned subsidiary

D

For a company whose core competency is management know-how, which entry mode would be optimal? A. Turnkey contracts B. Licensing agreements C. Strategic alliances D. Foreign franchises controlled by joint ventures

D

If a firm is trying to enter a market where there are already well-established companies, and where global competitors are also interested in establishing a presence, the firm should choose a(n) _____. A. franchise B. greenfield investment C. joint venture D. acquisition

D

If a service firm wants to build a global presence quickly and at a relatively low cost and risk, it must employ _____. A. chartering B. exporting C. a turnkey strategy D. franchising

D

In ____, the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel. A. exporting B. licensing C. franchising D. turnkey projects

D

Large strategic commitments: A. have many benefits and little to no risks. B. increase strategic flexibility. C. have many risks and little to no benefits. D. limit strategic flexibility.

D

There are several disadvantages of franchising as an entry mode. Which of the following is one of them? A. There is little incentive for the franchisee to build a profitable operation as quickly as possible. B. The firm incurs many of the costs and risks of opening a foreign market on its own. C. Franchising may inhibit the firm's ability to use the profits obtained to open additional businesses in the same country. D. Franchising may inhibit the firm's ability to take profits out of one country to support competitive attacks in another.

D

To increase the potential for a successful acquisition, a firm should: A. always bid low to allow for partial failure. B. try to acquire a firm with a very different corporate culture so there is no forced "overlap." C. screen the foreign enterprise to be acquired. D. rush to beat out other competitors

D

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. A. integrated licensing B. chartering C. franchising D. cross-licensing

D

What is Bartlett and Ghoshal's perspective on how firms from developing countries should approach international expansion? A. They suggest joint ventures to improve the firm's presence in the country while also growing the business opportunities for companies in the developing country. B. They suggest that franchising should be used in order to minimize risk and allow for the maximum expansion in the quickest amount of time. C. They suggest turnkey operations that allow for a rapid startup. D. They suggest that companies should use the entry of foreign multinationals as an opportunity to learn from these competitors by benchmarking their operations and performance against them.

D

Which of the following is true of acquisitions? A. It is a time-consuming process and takes a lot of time to execute. B. They are less risky than greenfield ventures in the sense that there is less potential for unpleasant surprises. C. They give the firm a much greater ability to build the kind of subsidiary company that it wants. D. In many cases, firms make acquisitions to preempt their competitors.

D

Which of the following statements is true of strategic alliances? A. The fixed costs and associated risks of developing new products or processes are borne by the alliance partner. B. They are a way to bring together complementary skills and assets that both companies develop. C. They limit the entry of firms into foreign markets. D. Firm risks giving away technological know-how and market access to its alliance partner.

D