15

Which of the following is a trend seen in the modern international economy?

A) Firms from both advanced and emerging economies employ FDI.

How does the acquisition of a foreign company most likely benefit a focal firm in the foreign market?

A) The focal firm can extend its market reach through readily available distribution networks.

An Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in Italy and Spain, and firm managers believe that Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility. / / Which of the following questions is most important for Ciao managers to evaluate in their decision regarding the location of the new manufacturing facility?

A) What would be the costs and availability of skilled labor in Canada and Russia?

Which of the following is the most likely motive behind firms in the mining industry wanting to enter new foreign markets?

A) access to natural resources

A firm that pursues foreign direct investment to take advantage of government incentives is demonstrating a(n) ________ motive.

A) efficiency-seeking

Students in Professor Manning's international business class have been assigned the task of explaining the different types of FDI. Professor Manning formed groups among students. The groups are to research their assigned topic and present their information to the class using examples of real-world firms for illustration. Jessica Hanson is the leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the leader of Group C. / / During her presentation, Jessica describes how two automakers joined forces and formed a separate firm by pooling their assets. Which of the following topics was most likely assigned to Group A?

A) equity joint venture

Which of the following industries considers proximity to customers especially important in the decision to enter a foreign market?

A) fashion

A firm that develops the capacity to sell its products by investing in marketing and selling operations is demonstrating ________.

A) forward vertical integration

Firms that anticipate close public scrutiny of their foreign operations often avoid potential difficulties by ________.

A) locating in culturally similar countries

Two catering companies that join to form a new, larger catering company are an example of a(n) ________.

A) merger

The rate of inflation is a(n) ________ factor to be considered while selecting the location for FDI.

A) profit retention

Which of the following is a disadvantage of equity joint ventures?

A) termination difficulties

Which of the following is a key reason that a focal firm would most likely enter a collaborative venture with a foreign firm?

A) the foreign firm can fill an important gap in the focal firm's value chain

An arrangement whereby the firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product or service is termed as ________.

A) vertical integration

The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. / / Which of the following most likely supports a decision to enter the Asian market through a project-based, non-equity collaborative venture with an Asian appliance manufacturer to create an environmentally-friendly dishwasher?

B) Managers of both firms have decided not to seek ownership, rather they have decided to pool in resources.

The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. / / Which of the following should most likely be considered in making the decision to expand ABC operations into the Asian market?

B) What technological and managerial know-how can ABC gain from an Asian expansion?

Which of the following is an example of a market-seeking motive for FDI?

B) a firm follows its key customers abroad

Which of the following is a characteristic of project-based, non-equity ventures?

B) a specific agenda and timeframe

Which of the following is a characteristic of successful international retailers?

B) an entrepreneurial approach to foreign markets and an understanding of the target market

Which of the following is a characteristic of an equity joint venture?

B) facilitates knowledge transfer between partners

Collaborative ventures benefit SMEs by providing them with ________.

B) increased amount of capital

The level of taxes in a country is a part of the ________ factor that is considered when selecting an FDI location.

B) profit retention

The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. / / Which of the following questions would most likely be important for ABC managers to evaluate as they consider expanding into the Asian market?

C) How much control does ABC management want to have over their Asian operations?

An Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in Italy and Spain, and firm managers believe that Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility. / / Which of the following should be considered in the decision regarding where to build a new Ciao plant?

C) How politically stable are the governments of Russia and Canada?

Which of the following best explains why some service industry firms most likely enter foreign markets through FDI?

C) The service offered by the firm requires direct contact with customers.

A(n) ________ is the purchase of an existing company or facility.

C) acquisition

Students in Professor Manning's international business class have been assigned the task of explaining the different types of FDI. Professor Manning formed groups among students. The groups are to research their assigned topic and present their information to the class using examples of real-world firms for illustration. Jessica Hanson is the leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the leader of Group C. / / During his presentation, Manu describes how a large U.S. retailer entered the Mexican market by purchasing the stores and assets of a Mexican retailer. Which of the following topics was most likely assigned to Group B?

C) acquisition

The purchase of an existing company or facility is known as a(n) ________.

C) acquisition

A firm that pursues a collaborative venture to access raw materials is demonstrating a(n) ________ motive.

C) asset-seeking

Which of the following represents an infrastructural factor that firms must consider when selecting an FDI location?

C) availability and quality of local manufacturing

A firm most likely enters the home market of a foreign competitor in order to ________.

C) force the competitor to expend resources to defend its market

A firm that builds a new manufacturing facility in a foreign market is participating in a(n) ________.

C) greenfield investment

Students in Professor Manning's international business class have been assigned the task of explaining the different types of FDI. Professor Manning formed groups among students. The groups are to research their assigned topic and present their information to the class using examples of real-world firms for illustration. Jessica Hanson is the leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the leader of Group C. / / During his presentation, Mario describes how a large Japanese automaker built a factory in Kentucky. Which of the following topics was most likely assigned to Group C?

C) greenfield investment

A firm that owns the activities performed in a single stage of its value chain is demonstrating ________.

C) horizontal integration

An Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in Italy and Spain, and firm managers believe that Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility. / / Which of the following most likely supports the decision by Ciao managers to build a plant in Russia?

D) Land and construction costs are relatively inexpensive in Russia.

The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. / / Which of the following most likely supports a decision to enter the Asian market by building a factory near Tokyo?

D) The CEO of ABC is willing to invest a large amount of capital and other assets to ensure success in Japan.

Which of the following best exemplifies corporate social responsibility?

D) an automotive battery firm offering free technical training to students of a deprived community

A(n) ________ is a project-based, usually nonequity venture initiated by multiple partners to fulfill a large-scale project.

D) consortium

Which of the following terms is used to refer to a focal firm's partial ownership of an existing firm?

D) equity participation

Which of the following represents a human resource factor that firms must consider when selecting an FDI location?

D) involvement of labor unions

A consortium is defined as ________.

D) multiple partners participating on a large-scale project

International portfolio investment is characterized by ________.

D) passive ownership of foreign stocks and bonds

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

FALSE

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

FALSE

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

FALSE

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

FALSE

Equity joint ventures have the simplest management structure.

FALSE

FDI is also known as international portfolio investment.

FALSE

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

FALSE

Foreign direct investment is the least risky entry strategy.

FALSE

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

FALSE

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

FALSE

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

FALSE

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

FALSE

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

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

FALSE

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

FALSE

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

FALSE

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

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

FALSE

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

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

FALSE

A merger is a special type of acquisition.

TRUE

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

TRUE

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

TRUE

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

TRUE

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

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

TRUE

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

TRUE

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

Governments encourage inward FDI because it transfers skill and technologies.

TRUE

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

TRUE

International portfolio investment refers to passive ownership of foreign securities.

TRUE

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

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

TRUE

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

TRUE

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

TRUE

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

TRUE

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

TRUE

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

TRUE