Chapter 9

A _________________ operation (with respect to wholly owned subsidiaries) is one which is started from scratch. a. joint venture b. strategic alliance c. greenfield d. franchise e. piggyback

c. greenfield

When a multinational company chooses to invest in foreign markets with wholly owned subsidiaries, these subsidiaries may be acquisitions or _______________ operations. a. joint venture b. strategic alliance c. greenfield d. franchise e. piggyback

c. greenfield

In the mode of entry, many companies see liaison office as a low-cost ___________________. a. joint venture b. export management company c. listening post d. contract exporter e. alliance post

c. listening post

Like licensing and franchising, nurturing a future competitor is one of the biggest dangers in ___________________. a. contract manufacturing. b. parallel exporting. c. cooperative exporting. d. using an export management company. e. indirect exporting.

a. contract manufacturing.

When marketers are making the decision to enter an international market or not, the first step is generally to: a. decide on the target budget. b. decide on the target product/market. c. decide on the goals of the target markets. d. decide on the mode of entry. e. decide on the time of entry.

b. decide on the target product/market.

The underlying goal of _________________ in creating a strategic alliance is to sustain the firm's leadership position by learning new skills, getting access to new markets and developing new technologies. a. offense b. defense c. catch-up d. remain e. restructure

b. defense

One of the problems with joint ventures is ________________ between partners. An example would be when one partner wants to stress reduction of political and economic controls on decision-making and the other partner wants to accept technology and capital but precludes foreign authority infringement on sovereignty and ideology. a. conflicting purchasing objectives b. conflicting process objectives c. control objectives d. budget objectives e. staffing objectives

c. control objectives

One of the main advantages of direct exporting over indirect exporting is that the exporter has more: a. leverage. b. risk. c. control over its operations. d. budget. e. leadership.

c. control over its operations.

Companies that plan to engage in exporting have a choice between indirect, _________________, and direct exporting. a. licensing b. parallel c. cooperative d. venture e. summation

c. cooperative

In global market entry, all of the following are entry decisions that must be made by management before entering an international market EXCEPT: a. decide on the time of entry. b. decide on the target product/market. c. decide on the goals of the target markets. d. decide on the mode of entry. e. decide on the target budget.

e. decide on the target budget.

When Colgate-Palmolive sees prospects in countries with purchasing power as a major driver behind market opportunities and Coca-Cola looks at per capita income and the number of minutes that it would take someone to work to be able to afford a Coca-Cola product, they are following which of the following steps of the initial screening process for market entry? a. indicator and data selection. b. analyze parallel strengths and weaknesses of the market. c. determine the importances of country indicators. d. rate the countries in the pool on each indicator. e. compute overall scores for each country.

a. indicator and data selection.

One of the chief disadvantages of a wholly owned subsidiary is that: a. it is often perceived as a threat to cultural or economic sovereignty. b. it is often perceived as generating low profits. c. it is often perceived as having problems in supply lines. d. it is often perceived as being more expensive e. it is often perceived as a threat to the local media for promotion.

a. it is often perceived as a threat to cultural or economic sovereignty.

One of the most popular franchise plans used in international marketing is ____________________ where the franchiser gives the franchise to a local entrepreneur who in turn sells local franchises within a territory. a. sales franchise b. master franchise c. strategic franchise d. cross-country franchise e. border-territory franchise

b. master franchise

Which of the following is a step in the market entry decision process? a. Forecast a corporate budget. b. Conduct a marketing audit. c. Decide on a mode of entry. d. Review transportation strengths. e. Analyze domestic demand.

c. Decide on a mode of entry.

A four-step procedure that can be employed for the initial screening process includes the following EXCEPT: a. select indicators and collect data. b. determine importance of country indicators. c. hire outside consultants to do a marketing audit. d. rate the countries in the pool on each indicator. e. compute overall score for each country.

c. hire outside consultants to do a marketing audit.

Markets can be classified in four types of countries based on their respective market attractiveness. All of the following are part of the classification scheme EXCEPT: a. platform countries. b. emerging countries. c. low-tech countries. d. growth countries. e. maturing and established countries.

c. low-tech countries.

When contrasted with greenfield operations, _________________ provide(s) a rapid means to get access to the local market. a. licensing b. exporting c. contract manufacturing d. acquisitions e. joint ventures

d. acquisitions

In ____________________, the company arranges with a local manufacturer to manufacture parts of the product or even the entire product. The marketing of the product, however, is still the responsibility of the international firm. a. licensing b. franchising c. cooperative exporting d. contract manufacturing e. indirect exporting

d. contract manufacturing

Advantages of wholly owned subsidiaries include all of the following EXCEPT: a. full control. b. control of profits. c. own processes. d. control government relationships. e. can often be set quicker that other forms of investment.

d. control government relationships.

Wholly owned subsidiaries give MNCs _______________ of their operations. a. almost no control b. partial control c. moderate control d. full control e. strategic control onl

d. full control

_____________ has disadvantages. Chief among these are that the company has little or no control over the way their product is marketed in a foreign country, lack of adequate sales support (among other support variables) can lead to poor sales, and bad decisions made by an intermediary can damage the corporate image. a. Licensing b. Parallel exporting c. Cooperative exporting d. Direct exporting e. Indirect exporting

e. Indirect exporting

Briefly, explain the concept of licensing in a foreign market. In addition, cite the benefits and drawbacks of licensing. Be specific in your responses.

Licensing is a contractual transaction where the firm--the licensor--offers some property assets to a foreign company--the licensee--in exchange for royalty fees. Benefits. a. Profitable. b. Not demanding on company resources. c. Gets around import barriers. d. Gains access to markets. e. Lowers exposure to political or economic instabilities. f. Can rapidly amortize R&D expenditures. Caveats. a. Income can be small when compared to exporting. b. The licensee may not be fully committed to the licensor's technology or product. c. Sales and trademarks can be damaged. d. A future competitor can be built. e. Protection can be partially achieved by patenting and careful selection of the licensee.

Explain what is meant by the concept of a liaison office and why some firms prefer to use this technique to enter markets.

Many companies would like to just "get their feet wet" before plunging into the foreign market arena. Opening a liaison office allows this to happen. The liaison office can not only establish a presence but become an intelligence source for the parent company. Many firms wish to evaluate risk and cultural relationships before they make a choice that will commit themselves to resource allocation and increased risk. The liaison office can perform those functions. By assessing the local environment at the local level, the company can make more intelligent decisions at a later date. In addition, this office can begin the slow process of establishing networks that will be essential to later trade relationships.

List the steps in the global market entry decision process. Which of the steps is probably the most important in the overall success of the foreign venture? Justify your answer.

Steps are: (1) decide on the target product/market; (2) decide on the goals of the target markets; (3) decide on the mode of entry; (4) decide on the time of entry; (5) decide on a marketing mix plan; and, (6) decide on a control system to monitor the performance in the entered market. Most research indicates that the first step (deciding on the target product/market) is probably the most important and where many mistakes are made. Students should cover the material in the preliminary screening process to justify their answer. If another answer is chosen, the instructor must judge the validity and quality of the choice and the justification.

Provide an assessment of strategic alliances. What are they used for, what are the characteristics of those that generally succeed, and what are the general types? Be sure to be specific in your answers.

Strategic alliances are described as being a coalition of two or more organizations to achieve strategically significant goals that are mutually beneficial. Cross-Border Alliances that succeed have the following characteristics: a. Alliances between strong and weak partners seldom work. b. Autonomy and flexibility. c. Equal ownership. d. Commitment and support of the top of the parent's organization. 1). Strong managers are a key. e. Alliances that are related (in terms of products, markets, and/or technologies). f. Have similar cultures, asset sizes, and venturing experiencing levels tend to be be more viable. g. Shared vision on the goals and mutual benefits are critical. h. Spell out relationships in contractual form. General types include: a. Defense--companies create alliances for their core businesses to defend their leadership position. b. Catch-up--firms may also shape strategic alliances to catch up (especially when they don't have a leadership position). c. Remain--this might occur for business divisions where the firm has established a leadership position but that only plays a peripheral role in the company's business portfolio. d. Restructure--use the alliance to restructure a business that is not core and in which it has no leadership position.

Briefly explain the concept of joint venture. Additionally, give the benefits and drawbacks of entering into a joint venture.

With a joint venture, the foreign company agrees to share equity and other resources with other partners to establish a new entity in the target country. Benefits. a. The return potential can be substantial. b. More control can be achieved. c. Synergy. Caveats. a. Lack of full control may still be a problem. b. Government restrictions. c. Lack of trust. d. Mutual conflicts.

____________ is a contractual strategy where the firm offers some proprietary assets to a foreign company in exchange for royalty fees. a. Licensing b. Parallel exporting c. Cooperative exporting d. Direct exporting e. Indirect exporting

a. Licensing

All of the following are major external criteria for making a decision as to a mode of entry into a foreign market EXCEPT: a. company leadership. b. market size and growth. c. need for control. d. government regulations. e. local infrastructure.

a. company leadership.

When marketers are making the decision to enter an international market or not, the final step in the decision process is generally to: a. decide on a control system to monitor the performance of the entered market. b. decide on the target product/market. c. decide on the goals of the target markets. d. decide on the mode of entry. e. decide on the time of entry.

a. decide on a control system to monitor the performance of the entered market.

Most companies start their international expansion with _________________. a. exporting b. joint ventures c. licensing d. franchising. e. contract manufacturing.

a. exporting

Companies that enter via wholly owned subsidiaries are sometimes perceived as a threat to the culture and/or economic sovereignty of the____________________. a. host country. b. home country. c. buffer country. d. greenfield country. e. high-tech country.

a. host country.

When Coca-Cola looks at per capita income and the number of minutes that it would take for somebody to work to be able to afford a Coca-Cola product, the company is following which of the following steps of the initial screening process for market entry? a. indicator and data selection. b. analyze parallel strengths and weaknesses of the market. c. determine the importances of country indicators. d. rate the countries in the pool on each indicator. e. compute overall scores for each country.

a. indicator and data selection.

Nurturing a future competitor is the biggest danger in ___________________. a. licensing b. parallel exporting c. cooperative exporting d. direct exporting e. indirect exporting

a. licensing

The Oriental Land Company in Japan owns Tokyo Disneyland. This would be an example of an international _________________ agreement between the Oriental Land Company (owner) and Disneyland (receives royalties). a. licensing b. parallel exporting c. cooperative exporting d. direct exporting e. indirect exporting

a. licensing

Benefits of licensing include: a. not very demanding on company resources. b. always protected against copying or technical theft. c. always a strong partner relationship. d. low profits, therefore, low taxes. e. licensee is always enthusiastic.

a. not very demanding on company resources.

All of the following are illustrations of the four generic reasons for forming strategic alliances EXCEPT: a. offense. b. defense. c. catch-up. d. remain. e. restructure.

a. offense.

There are no magic ingredients to foster the stability of joint ventures, however, all of the following are good guidelines EXCEPT: a. pick a partner with which control can be maintained. b. pick the right partner. c. establish clear objectives from the beginning. d. bridge cultural gaps. e. get top management commitment and respect.

a. pick a partner with which control can be maintained.

Markets can be classified in four types of countries based on their respective market attractiveness. Hong Kong and Singapore would fall into which of the types listed below (where the purpose would be to gather intelligence and establish a network)? a. platform countries. b. emerging countries. c. maturing and established countries. d. growth countries. e. none of the above.

a. platform countries.

Markets can be classified in four types of countries based on their respective market attractiveness. Which of the following of those types can be used to gather intelligence and establish a network? a. platform countries. b. emerging countries. c. maturing and established countries. d. growth countries. e. none of the above.

a. platform countries.

The partnership established by Coca-Cola and Nestle to market ready-to-drink coffees and teas under the Nescafe and Nestea brand names is an example of which of the following: a. strategic alliance. b. contract manufacturing. c. licensing. d. wholly owned subsidiary. e. exporting.

a. strategic alliance.

A major advantage of joint ventures, as compared to lesser forms of resource commitment such as licensing, is: a. the return potential. b. infrastructure enhancement. c. expansion of stockholders. d. division of leadership. e. an increase in ethical standards.

a. the return potential.

_____________ means that the firm enters into an agreement with another firm (local or foreign) where the partner will use its distribution network to sell the exporter's goods. a. Licensing b. Parallel exporting c. Cooperative exporting d. Venture exporting e. Indirect exporting

c. Cooperative exporting

____________ are(is) the prime motivation behind contract manufacturing. a. Advertising cooperation b. Leadership c. Cost savings d. Profit expansion e. Desire to be part of a cartel

c. Cost savings

Wrigley, the U.S. chewing gum manufacturer, has not been interested in most Latin American markets because many of the local governments imposed ownership restrictions. This would be an example of ________________ in markets. a. finding opportunities b. "weeding out" c. cross-fertilization d. demand conflict e. unfairness

b. "weeding out"

_________ are described as a coalition of two or more organizations to achieve strategically significant goals that are mutually beneficial. a. Joint ventures b. Strategic alliances c. Greenfield operations d. Franchises e. Piggyback arrangements

b. Strategic alliances

8. The four-step procedure that can be employed for the initial screening process includes all of the following EXCEPT: a. select indicators and data selection. b. analyze parallel strengths and weaknesses of the market. c. determine the importances of country indicators. d. rate the countries in the pool on each indicator. e. compute the overall scores for each country.

b. analyze parallel strengths and weaknesses of the market.

Markets can be classified in four types of countries based on their respective market attractiveness. Vietnam and the Philippines would fall into which of the types listed below (where the purpose would be to build up an initial presence such as through a liaison office)? a. platform countries. b. emerging countries. c. maturing and established countries. d. growth countries. e. none of the above.

b. emerging countries.

Markets can be classified in four types of countries based on their respective market attractiveness. Which of the following of those types can be used to build up an initial presence (such as through a liaison office)? a. platform countries. b. emerging countries. c. maturing and established countries. d. growth countries. e. none of the above

b. emerging countries.

In the area of exporting, a middleman could be an __________________________. a. export outsourcing company b. export management company c. export production company d. export specialist company e. export manufacturing company

b. export management company

One of the most popular entry modes in the international marketplace for service firms is: a. licensing. b. franchising. c. cooperative exporting. d. direct exporting. e. indirect exporting.

b. franchising.

One way to address hostility to foreign acquisitions in the host country is by ______________ the firm's presence in the foreign market by hiring local managers, sourcing locally, and developing local brands. a. regionalizing b. localizing c. socializing d. acculturating e. emphasizing the self-reference criterion (SRC)

b. localizing

From a transaction-cost analysis perspective, market failure typically happens when transaction-specific assets become _________________ and therefore more high- control situations are needed. a. optional b. valuable c. expendable d. less-valuable e. weaker

b. valuable

Markets can be classified in four types of countries based on their respective market attractiveness. Which of the following countries would most likely be listed as a growth country? a. Hong Kong. b. Vietnam. c. China. d. Taiwan. e. Japan.

c. China.

One method of assessing whether a company should enter a foreign market or not is to use an opportunity matrix. To use such a matrix, the marketer should assess high, moderate, and low opportunities as measured on business and political risk and ___________________ scales or cells. a. demand b. financial constraints c. market opportunities d. market sensitivity e. distance from home market

c. market opportunities

One of the most popular forms of cooperative exporting is _________________. With this method, the company uses the overseas distribution network of another company (local or foreign) for selling its goods in the foreign market. a. parallel exporting. b. venture exporting. c. piggyback exporting. d. make-or-buy exporting. e. foreign export management exporting.

c. piggyback exporting.

When a firm uses a strategic alliance as a vehicle to rejuvenate a business that is not core and in which it has no leadership position, it is probably using a ________________ strategy. a. defend b. catch up c. restructure d. remain e. none of the above

c. restructure

According to the textbook, in franchising, companies can capitalize on a _______________________________. a. cheap business formula. b. expensive business formula. c. winning business formula. d. parallel business formula. e. hybrid business formula.

c. winning business formula.

Which of the following most accurately describes the first step in the market entry decision process? a. Decide on the goals of the target markets. b. Decide on the mode of entry. c. Decide on the time of entry. d. Decide on the target product/market. e. Decide on the marketing mix plan.

d. Decide on the target product/market.

____________ means that the company sets up its own export organization within the company and relies on a middleman based in a foreign market (foreign distributor). a. Licensing b. Parallel exporting c. Cooperative exporting d. Direct exporting e. Indirect exporting

d. Direct exporting

Markets can be classified in four types of countries based on their respective market attractiveness. Which of the following countries would most likely be listed as a maturing/established market? a. China. b. Burma. c. India. d. Taiwan. e. China.

d. Taiwan.

_____________ come about when multinational companies prefer to enter new markets with 100 percent ownership. a. Contract manufacturing agreements b. Parallel exporting agreements c. Cooperative exporting agreements d. Wholly owned subsidiaries e. Joint ventures

d. Wholly owned subsidiaries

In contract manufacturing, because of "nurture-a-future competitor" threat, many companies prefer to make ___________________ or products that involve proprietary design features in-house. a. just-in-time items b. under-value items c. low-value items d. high-value items e. none of the bove

d. high-value items

All of the following are considered benefits of forming joint ventures EXCEPT: a. greater return potential. b. shared profits instead of shared royalties. c. more control over operations. d. increased cost controls. e. synergies.

d. increased cost controls.

To identify market opportunities for a given product or service, the international marketer usually starts off with a large pool of candidate countries. To narrow down this pool, the company will typically do a(n) _______________________. a. internal audit. b. external audit. c. cross-border budget. d. preliminary screen. e. econometric analysis.

d. preliminary screen.

The strategic alliance strategy of ______________ might be enacted when the firm has an established leadership position but that only plays a peripheral role in the company's business portfolio. a. offense b. defense c. catch-up d. remain e. restructure

d. remain

_______________ means that the firm uses a middleman based in its home market to do the exporting. a. Licensing b. Contract manufacturing c. Cooperative exporting d. Venture exporting e. Indirect exporting

e. Indirect exporting

________________ offers several advantages. Chief among these are the firm gets instant foreign market expertise, very little risk is involved, and no major resource commitments are required. a. Licensing b. Parallel exporting c. Cooperative exporting d. Direct exporting e. Indirect exporting

e. Indirect exporting

Markets can be classified in four types of countries based on their respective market attractiveness. Which of the following countries would most likely be listed as an established/maturing market? a. China. b. the Philippines. c. India. d. Vietnam. e. Japan.

e. Japan.

The chief reason that some firms choose acquisitions (or mergers) to enter a foreign market is that they can: a. receive greater tax relief. b. receive greater profits. c. reduce debt. d. increase stock price. e. enter the market more quickly.

e. enter the market more quickly.

With a __________________, the foreign company agrees to share equity and other resources with other partners to establish a new entity in the target country. a. contract manufacturing agreement b. parallel exporting agreement c. cooperative exporting agreement d. export management company e. joint venture

e. joint venture

Lack of trust and mutual conflicts can often turn ______________ into partnerships doomed to failure. a. contract manufacturing agreements b. parallel exporting agreements c. cooperative exporting agreements d. export management companies e. joint ventures

e. joint ventures

Risks of exiting a foreign market may lead to all the following EXCEPT: a. fixed costs of exit. b. disposition of assets. c. short-term opportunities. d. signal to other markets. e. long-term opportunities.

e. long-term opportunities.

The key determinant in the market entry choice decisions is the: a. risk. b. local infrastructure. c. flexibility. d. internal resources and assets. e. market size and growth potential.

e. market size and growth potential.

Decisions to exit or divest a foreign market may have all the following reasons EXCEPT: a. sustained losses. b. volatility. c. premature entry. d. ethical reasons. e. new market.

e. new market.

The goals of a preliminary screen to determine market opportunities are to minimize mistakes of ignoring countries that offer viable opportunities for the product and: a. offending local governments. b. offending local cultures. c. offending local merchants. d. violating local advertising laws. e. not wasting time on countries that offer little or no potential.

e. not wasting time on countries that offer little or no potential.

The ____________________ of a market refers to the country's distribution system, transportation network, and communication system. a. demographic environment b. infrastructure c. logistical d. physical distribution e. physical infrastructure

e. physical infrastructure

Cooperative exporting is also called: a. specialist exporting. b. lean exporting. c. long-range exporting. d. backward exporting. e. piggyback exporting.

e. piggyback exporting.

With respect to joint ventures, the ________________ argument is illustrated by not only shared capital and risk but possible contributions brought in by the local partner in land, raw materials, expertise on the local environment, and access to local distribution networks. a. demand b. parallel management c. consensus management d. domestication e. synergy

e. synergy

A _________________________ perspective argues that the desirable governance structure (high- versus low-control mode) will depend on the comparative transaction costs (the costs of running an operation). a. demand-delivery b. just-in-time management c. management-by-objectives d. quantity-cost allocation e. transaction-cost analysis

e. transaction-cost analysis