International Business Quiz 8

According to ________, location-specific advantages are of considerable importance in explaining both the rationale for and the direction of foreign direct investment.

the eclectic paradigm

One of the main benefits that FDI provides to the home country is

the home country's balance of payments benefits from the inward flow of foreign earnings.

Licensing is a good option to enter a foreign market when

tight control of the foreign operation is not required

A country that imports more goods than it exports experiences a

trade deficit

A country that relies on the pragmatic nationalist view would say that

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?

Mergers and acquisitions are quicker to execute than greenfield investments.

One form of FDI is ________, which involves the establishment of a new operation in a foreign country.

a greenfield investment

The stock of FDI refers to the

amount of FDI undertaken over a given time period

One example of a(n) ________ effect of foreign direct investment is when a foreign MNE employs a number of host-country citizens.

direct

Ownership restraint is a method of

encouraging inward FDI by a host country

TickTock Inc., an American watchmaker, makes custom watches in California, which it then ships to Brazil for sale there. Based on this information, TickTock Inc. is involved in

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.

flow

Burger King licenses its brand name to foreign firms as long as they agree to run their restaurants on exactly the same lines as Burger King restaurants elsewhere in the world. In return, the foreign firms have to pay Burger King a percentage of their profits. This is an example of

franchising

The ________ view argues that international production should be distributed among countries according to the theory of comparative advantage and countries should specialize in the production of goods they can produce most efficiently.

free market

Internalization theory is used to explain why a company prefers FDI over ________ as a way to enter a foreign market.

licensing

Royal Chocolatier, a British manufacturer of chocolates, granted U.S. company American Candy Inc. the right to produce and sell Royal Chocolatier's products in the United States In return, American Candy Inc. has to pay a royalty fee on every unit sold. According to this information, what is being done by Royal Chocolatier?

licensing

________ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.

multipoint competition

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?

oligopoly

Which political ideology reflects the idea that a multinational enterprise is an instrument of imperialist domination?

radical view

A firm might justify a preference for licensing over FDI because licensing

results in the licensee bearing the costs and risks