International Business Chapter 8

3M, an American firm, manufactures adhesive tape in St. Paul, Minnesota, and ships the tape to South Korea for sale. According to this information, 3M uses _____ to deliver this product. exporting licensing franchising insourcing outsourcing

exporting

It is one of Garrett's job responsibilities to report the amount of foreign direct investment undertaken by the government over a one-year time period. Garrett reports the ________ of FDI. stock bundle flow portfolio ratio

flow

A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of an absolute advantage. stock consolidation. foreign direct investment. product differentiation. market segmentation.

foreign direct investment.

A country that relies on the pragmatic nationalist view would say that international production should be distributed among countries according to the theory of comparative advantage. FDI should be allowed so long as the benefits outweigh the costs. no country should ever permit foreign corporations to undertake FDI. FDI is a benefit to both the source country and the host country. the multinational enterprise (MNE) is an instrument of imperialist domination.

FDI should be allowed so long as the benefits outweigh the costs.

Concrete Forms International needs immediate access to steel in order to produce a new product line. It cannot afford to wait and establish a new operation in a foreign country where steel is prevalent, so it decides to purchase an existing company instead. Why did Concrete Forms decide to make this purchase? A greenfield investment will provide quickest access to the steel forms. FDI flows are similar between developed and developing nations. Mergers and acquisitions are quicker to execute than greenfield investments. The higher percentage of mergers and acquisitions in developing nations compared to developed nations indicate the low valuation of target firms in developing countries. It is easier and less risky for a firm to build up through a greenfield investment rather than through acquisitions.

Mergers and acquisitions are quicker to execute than greenfield investments.

________ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries. Perfect competition Collusion Monopoly Multipoint competition Cartel

Multipoint competition

General Electric (GE) built an operation from scratch in Nigeria. This is an example of a(n) merger. acquisition. strategic alliance. FDI stock. greenfield investment.

greenfield investment

Governments impose quotas to limit FDI. importing. franchising. outsourcing. licensing.

importing

SmartStuff Inc. grants a foreign entity the right to produce and sell the firm's microprocessors in return for a royalty fee on every product sold. SmartStuff Inc.'s approach is called outsourcing. licensing. franchising. exporting. diversifying.

licensing

Internalization theory promotes the idea that licensing gives a firm tight control over manufacturing, marketing, and strategy in a foreign country. licensing may result in a firm giving away valuable technological know-how to a potential foreign competitor. licensing has no major drawbacks as a strategy for exploiting foreign market opportunities. a problem with licensing arises when the firm's competitive advantage is based on its products rather than on the manufacturing capabilities that produce those products. licensing is always more profitable than FDI.

licensing may result in a firm giving away valuable technological know-how to a potential foreign competitor.

ModShoes Inc. decides to move its manufacturing facility from Toledo, Ohio, to Jakarata, Indonesia, because it will have access to lower-cost but still highly skilled labor. This choice reflects the concept of a planned economy. supply-and-demand. location-specific advantages. an oligopoly. a comparative advantage.

location-specific advantages.

JumpIn Products is a market leader in playground equipment, which is typically large, bulky, and very heavy. In order to compete, JumpIn Products sells its entire line at very low prices. Although its products can be produced anywhere, it is considering exporting as a way to grow in overseas markets. The viability of JumpIn Products' exporting strategy could be constrained by transportation costs, particularly of products that can be produced in almost any location and have a high local content requirement. low total landed cost. low value-to-weight ratio. low licensing tariff. high marginal cost.

low value-to-weight ratio.

SmileBright, a dental products manufacturing company, has a market share of 30 percent in India. Three of its competitors together control 55 percent of the market. Whenever SmileBright raises or lowers the prices of its products, the other three companies quickly imitate its action. What is the market structure of this industry in India? fair market monopoly oligopoly perfect competition pure competition

oligopoly

Which political ideology reflects the idea that a multinational enterprise is an instrument of imperialist domination? free market mercantilism pragmatic nationalism radical view planned economy

radical view

Camille told the management team that investing capital in the Swaziland-based manufacturing plant would not only benefit their company in terms of labor costs but would also promote significant economic development in Swaziland. What type of host-country benefit is Camille referring to? resource-transfer effect balance-of-payments effect effects on competition effects on foreign exchange rate technology effect

resource-transfer effect

A firm might justify a preference for licensing over FDI because licensing results in the licensor retaining control over technical know-how. gives the licensor tight control over the operations of the licensee in the foreign nation. allows the firm to take advantage of differences in factor costs across countries. reduces the potential risks of creating a future competitor. results in the licensee bearing the costs and risks

results in the licensee bearing the costs and risks

Which two nations have historically been the largest recipients of inward FDI? Japan and China Italy and Germany Argentina and Brazil the United Kingdom and France the United States and Canada

the United Kingdom and France

According to ________, location-specific advantages are of considerable importance in explaining both the rationale for and the direction of foreign direct investment. the infant industry argument Knickerbocker's theory the eclectic paradigm internalization theory market imperfections theory

the eclectic paradigm

The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time. the net position of FDI flows after comparing inflows and outflows during a period. the outflows of FDI from a country. amount of FDI undertaken over a given time period. the inflows of FDI into a country.

total accumulated value of foreign-owned assets at a given time.

A country that imports more goods than it exports experiences a first-mover advantage. current account surplus. trade deficit. factor endowment. late-mover advantage.

trade deficit