Chapter 12

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Internalization advantages are those that make it desirable for a firm to do​ what?

Produce a good itself.

How do the presence of civil​ war, corruption, or unstable governments affect mode of entry into a foreign​ market?

These factors discourage firms from devoting significant resources to a foreign market.

A​ B-O-T project is a variant of which specialized international business entry​ mode?

Turnkey project

Which of the following issues does a licensor address when it establishes​ rights, privileges, and​ constraints?

Type and form of records kept

In addition to governmental​ policies, marketing​ concerns, logistical​ considerations, and distribution​ issues, what else must a firm consider when choosing exporting as its entry​ mode?

Which form of exporting to use

When a company starts a new operation from scratch in a foreign​ market, it is called a​ ________.

greenfield strategy

The sale of goods by a firm in one country to an affiliated firm in another country is known as​ ________.

an intracorporate transfer

One constraint that limits the growth of an international franchise is​ ________.

the level of interest shown by foreign investors

A company​ designs, constructs, and equips a facility. After​ completion, another firm takes over operation. This is called​ a(n) ________ project.

turnkey

In the​ past, only​ India's elite could afford to buy a car. But recent dramatic changes in​ India's economy have produced a growing middle class and rapidly rising incomes.​ Now, to meet the new​ demand, established automakers are importing​ smaller, more-affordable vehicles into India. But they will have to find a way to compete with​ India's Tata​ Motors, which has unveiled the least expensive car ever in this​ market, the Tata Nano. The Nano sells for only​ 100,000 rupees​ (about US​ $2,200). It seats four​ passengers, gets 50 miles per​ gallon, and travels at a top speed of 60 miles per hour. Based on this​ information, Tata most likely believed that as a result of recent changes in​ India's economy, a growing number of Indian consumers​ ________.

would be willing and able to spend​ 100,000 rupees on a car

To reduce risk associated with​ socio-cultural differences in​ markets, firms will likely initially expand into​ ________ markets.

culturally similar

When a company sells to a​ customer, either an​ end-user or a​ distributor, outside of the home​ country, it is engaged in​ ________ exporting.

direct

A person who operates a business under the name of another is called​ a(n) ________.

franchisee

When a firm purchases an existing firm in order to conduct business in a foreign​ market, what is the strategy​ called?

Acquisition strategy

Which of the following is NOT a normal step in successfully increasing international market​ share, revenue, and​ profits?

. Assessing domestic markets

When a business wants to grow slowly and spread its investment over a longer​ period, which foreign direct investment​ (FDI) would it likely​ select?

. Greenfield strategy

Which of the following accurately describes the relationship of product positioning to market​ attractiveness?

A firm specializing in​ low-priced, lower-quality goods will find more market potential in a poorer market. Your answer is correct.C.

Which of the following ventures would be an example of a turnkey​ project?

An airport

When a company hires a firm to act as its entire export​ department, what type of intermediary is being​ used?

An export management company

Which of the following provides a full range of export services such as market​ research, customs​ documentation, and host country​ distribution?

An international trading company

When a business begins to choose foreign markets for​ expansion, what is the first step the business must​ take?

Assess market potential

Which of the following is the first step in foreign market​ selection?

Assessing market potential

Which of the following is an advantage of the greenfield strategy of foreign direct investment​ (FDI)?

Communities often offer economic development incentives to attract this type of facility.

What is it called when firms outsource most or all of their manufacturing to other​ companies?

Contract manufacturing

Which strategy is used by​ firms, both large and​ small, that outsource most or all of their manufacturing needs to other​ companies?

Contract manufacturing

Which of the following is NOT considered an advantage of franchising for the​ franchisor?

Creates dependence on the franchisee

What types of costs are relevant when considering new international​ markets?

Direct and opportunity

When host country customers prefer to deal with a local​ factory, which form of foreign market entry is​ preferred?

Either acquisition or greenfield strategy

Intracorporate transfer is a form of​ what?

Exporting

Which of the foreign market entry strategies is MOST​ complex?

Foreign direct investment

What action is necessary for a licensor to ensure relatively minimal risk when contracting with a​ licensee?

Fully investigate market opportunities as well as the capabilities of the potential licensee

Which of the following is NOT considered an advantage of foreign direct​ investment?

High financial and managerial investments

What type of exporting happens when one firm sells its product to another domestic firm that intends to export the product either in the original form or in a modified​ form?

Indirect

What is the term used to describe when a firm sells its product to a domestic​ customer, which in turn exports the​ product, in either its original form or a modified​ form?

Indirect exporting

which of the following is NOT considered to be an​ intermediary?

Joint venture

When a foreign firm competes against local​ firms, it might experience​ informational, political, and cultural difficulties. What is this​ called?

Liability of foreignness

What is it called when a firm provides managerial​ assistance, technical​ expertise, or specialized services to a second firm for an​ agreed-upon time for monetary​ compensation?

Management contract

Which of the following is an agreement whereby one firm provides managerial​ assistance, technical​ expertise, or specialized services to a second firm for some​ agreed-upon time in return for monetary​ compensation?

Management contract

Which of the following is FALSE about export management companies​ (EMC)?

Most EMCs are very large operations.

Which of the following is an example of a level of transaction​ cost?

Negotiation costs

When expanding into a​ market, a firm must consider what type of​ data?

Objective and subjective

Tangible or intangible resources owned by a firm that grant it a competitive advantage over industry rivals is known as​ what?

Ownership advantage

Which of the following explains the difference between reactive and proactive motivations for​ exporting?

Reactive motivations stem from decreased opportunities in a​ market, whereas proactive motivations stem from opportunities available in a market.

When a franchisee signs a franchise​ contract, they are likely to be required to agree to which of the​ following?

Requirements for financial reporting

What is compensation under a licensing agreement​ called?

Royalties

In the​ past, only​ India's elite could afford to buy a car. But recent dramatic changes in​ India's economy have produced a growing middle class and rapidly rising incomes.​ Now, to meet the new​ demand, established automakers are importing​ smaller, more-affordable vehicles into India. But they will have to find a way to compete with​ India's Tata​ Motors, which has unveiled the least expensive car ever in this​ market, the Tata Nano. The Nano sells for only​ 100,000 rupees​ (about US​ $2,200). It seats four​ passengers, gets 50 miles per​ gallon, and travels at a top speed of 60 miles per hour. An industry analyst examines the features of the Tata Nano and concludes that Tata will never be able to compete in the U.S. or European markets. This conclusion rests on which of the following​ assumptions?

Tata would not adjust its designs if it attempted to sell cars in the U.S. or Europe.

Which of the following is a benefit to using the acquisition strategy of foreign direct investment​ (FDI)?

The acquired firm can continue to generate revenues.

If a licensor wants to gain knowledge about a foreign market using a licensee before entering the market​ itself, how would this affect the licensing​ agreement?

The duration of the contract with the licensee would be​ short-term.

When a franchisee signs a contract with the​ franchisor, how does this benefit the​ franchisee?

The franchisee receives the right to use franchise trademarks.

What is an advantage of franchising when developing a​ licensor-licensee relationship?

The licensor has more control over the licensee.

A sogo shosha

The most important international trading companies in the global marketplace are​ Japan's sogo shosha​, which are an integral part of​ Japan's keiretsu system.

What is typically true of international turnkey​ projects?

The projects are​ complex, large, and long lasting.

A​ Webb-Pomerene association

a group of U.S. firms that operate within the same industry and that are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws.

What should a firm consider in order to determine the level of competition in a foreign​ market?

individual and collective strengths and weaknesses of all firms competing in the target market.

Licensing carries a relatively low financial risk for the​ licensor, if​ ________.

it fully investigates market opportunities

The​ informational, political, and cultural disadvantages that foreign firms face when trying to compete against local firms in the host country market is referred to as​ ________.

liability of foreignness

When participating in global​ licensing, the​ ________ uses the intellectual property to create products for local sale.

licensee

An international franchise agreement benefits the franchisor by​ ________.

obtaining critical information about local market customs

Which of the following is FALSE about a​ Webb-Pomerene association?

​Webb-Pomerene associations have played a major role in international business.


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