HW 13

How can firms avoid incurring high transport costs when exporting bulk products?

manufacturing bulk products regionally

Which of the following is an advantage of franchising as a mode of entry into foreign markets?

The franchiser is relieved of many of the costs and risks of opening a foreign market on its own.

Which of the following is an example of a first-mover advantage?

ability to create switching costs that tie customers into one's products or services

Which of the following is a risk of being the first to enter developing nations like India and China on a large scale?

absence of prior foreign entrants

Omega, Inc. is an early entrant for its fitness product in the country of Malnesia. As an early entrant, Omega, Inc. may find itself at a disadvantage if it

faces a subsequent change in business regulations in Malnesia.

Small-scale entry into a foreign market makes it difficult to build market share because it

is associated with a lack of commitment demonstrated by the foreign firm.

Which of the following is true of the costs and risks associated with doing business in a foreign country?

They are lower in economically advanced nations.

Which of the following is an advantage of acquisitions as a means of entering foreign markets?

They are quick to execute and help firms to rapidly build their presence in the target foreign market.

Which of the following is a course of action suggested by Christopher Bartlett and Sumantra Ghoshal for companies based in developing nations?

benchmark one's operations and performance against foreign multinationals

How can a wholly owned subsidiary be established in a foreign market?

by acquiring an established firm in the host nation

Licensing is NOT attractive to which of the following firms?

firms requiring tight control of operations for realizing experience curve and location economies

According to Christopher Bartlett and Sumantra Ghoshal, how can local companies differentiate themselves from foreign multinationals?

focusing on market niches

The value that an international business can create in a foreign market is determined by the

nature of indigenous competition.

In terms of licensing, which of the following is an intangible property?

patent

_____ is an example of an industry in which cross-licensing agreements are increasingly becoming common.

Biotechnology

Which of the following is a disadvantage of greenfield ventures?

It is slower to establish than acquisitions.

Which of the following is a drawback of licensing as a mode of entry into foreign markets?

Licensing does not give a firm tight control over manufacturing, marketing, and strategy.

Which of the following is an advantage of joint ventures as a mode of entry into foreign markets?

The foreign firm benefits from a local partner's knowledge of the host country.

Why do acquisitions fail sometimes?

There is a clash between the cultures of the acquiring and acquired firms.

Which of the following countries presents a favorable benefit-cost-risk trade-off scenario for foreign expansion?

a country with a free market system

Omega, Inc. is considering international expansion and wants to know if it is likely to command a high price for its fitness product. In which of the following situations can Omega, Inc. command higher prices for its fitness product in a foreign market?

the product offers greater value to customers in the foreign market

Spring, an American firm, recently acquired another company, Tazel Inc., in Indonesia. The high-level managers at Tazel quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because

there is a clash between the cultures of the acquired and the acquiring firm.

Nantucket Food Products desires to expand internationally. Director of Sales, Esme Jones, prefers that the company export to foreign markets. Which of the following rationales should Jones use as an advantage of choosing exporting as a mode of entry into foreign markets?

A firm can avoid the cost of establishing manufacturing operations in the host country.

Which of the following is a disadvantage of franchising?

It is difficult to maintain quality control across foreign franchisees that are distant from the franchiser.

Which of the following is true of international firms considering foreign expansion?

If the firm's core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology to the joint-venture partner.

Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries?

It allows firms to use the profits generated in one market to improve its competitive position in another market.

Diacon Products manufactures and sells a wide variety of complex electronic products. Diacon Products wants to enter foreign markets and is deciding on a mode of entry. Vice President of Manufacturing, Brooke Monroe, is making a strong push for a turnkey project. Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets that would help Brooke Monroe make her case?

It is a useful strategy to earn great returns from the know-how of a technologically complex process.

Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets?

It is a useful strategy to earn great returns from the know-how of a technologically complex process.

The risk of failure of an acquisition can be reduced by

a detailed auditing of operations, financial position, and management culture.

The risks associated with learning to do business in a new culture are less if the firm

acquires an established host-country enterprise.

If a firm is seeking to enter a market via a wholly owned subsidiary where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, a suitable mode of entry is a(n)

acquisition.

When Yum Brands (that owns KFC, Taco Bell and Pizza Hut) entered China, it had to spend heavily to establish itself in that market. Which of the following is a disadvantage of Yum Brand's large-scale entry into China?

availability of fewer resources to support expansion in other desirable markets

Which of the following is a disadvantage of large-scale entry into a foreign market?

availability of fewer resources to support expansion in other desirable markets

An advantage of choosing exporting as a mode of entry into foreign markets is that a firm

can avoid the cost of establishing manufacturing operations in the host country.

A firm should configure its value chain to maximize value at each stage when

cost pressures are intense.

Which of the following is a disadvantage of small-scale entry for an international firm considering foreign expansion?

difficulty of building market share and capturing first-mover advantages

First-mover disadvantages refer to

disadvantages associated with entering a foreign market before other international businesses.

The liability associated with foreign expansion is greater for foreign firms that

enter a national market early.

The probability of survival for an international business increases if it

enters a national market after several other foreign firms have already done so.

Which of the following describes a turnkey project?

exporting process technology to other countries

The locally manufactured Nirma was a popular mainstream brand of detergent in India. However, with the entry of a foreign multinational such as Procter & Gamble into the Indian market, Nirma began to lose market share. According to Christopher Bartlett and Sumantra Ghoshal, how can Nirma differentiate itself from foreign multinationals?

focusing on market niches

Which of the following modes of entry into foreign markets can result in a lack of control over quality?

franchising

Which of the following modes of entry is suitable for service firms where the risk of losing control over the management skills or technological know-how is not much of a concern, and where the firms' valuable asset is their brand name?

franchising

If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, what would be the preferable mode of entry?

greenfield venture

The CEO of Jamil Circuits is unhappy with the firm's choice of wholly owned subsidiaries as the mode of foreign entry. He has pointed out a number of disadvantages to this mode. However, the CFO of the company is not sure if all of the disadvantages that the CEO is noting are correct. Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?

high costs and risks

The CFO of At Home Products is unhappy with the firm's choice of wholly owned subsidiaries as the mode of foreign entry. He has pointed out a number of disadvantages to this mode. Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?

high costs and risks

Which of the following postulates that top managers typically overestimate their ability to create value from an acquisition?

hubris hypothesis

Which of the following is a reason why firms often overpay for the assets of an acquired firm?

interest of more than one party in acquiring a particular firm

While personal fitness trackers (such as Fitbit) are widely available in the U.S., they are scarcely available in international markets. Given the increasing awareness of a healthy lifestyle, such products satisfy an unmet need. A product such as Fitbit in international markets

is likely to have greater value.

Axiom International, an Australian company, wants to expand its operations to China, a country that is politically, culturally, and economically different. The firm needs to select a mode of entry that would give it access to local knowledge, allow sharing of development costs and risks, and also be politically acceptable. Which of the following modes of entry into foreign markets is most suitable for Axiom International?

joint venture

Which of the following is the most likely outcome of a foreign firm entering a developed nation on a small scale after other international businesses in the firm's industry?

limited future growth potential

Juggernaut, Inc. makes large-size commercial appliances such as freezers and refrigerators. These items are bulky and the firms incur high transportation costs to distribute its products. Juggernaut, Inc. wants to enter foreign markets via exports. How can Juggernaut, Inc. avoid incurring high transport costs when exporting its bulk products?

manufacturing bulk products regionally

To reduce the risks of failure of an acquisition, managers must

move rapidly after an acquisition to put an integration plan in place.

Omega, Inc., a maker of personal fitness trackers (like Fitbit) was the first mover into the country of Malnesia. As the first mover in a new product area, Omega, Inc. had to spend a lot of money educating the population of Malnesia about fitness and tracking one's fitness. In addition, they also had to spend money in developing a distribution channel. The costs that Omega, Inc. incurred in Malnesia as the first mover are called

pioneering costs.

Which of the following is a reason why a relatively poor country may be an attractive target for inward investment?

rapid economic growth

In international business, an advantage of being a late entrant in a foreign market is the ability to

ride on an early entrant's investments in learning and customer education.

Why should a high-tech firm avoid selecting licensing as a mode of entry?

risk of losing control over technology

Franchising as a mode of entry into foreign markets is employed primarily by

service firms.

What gives a firm tight control for coordinating a globally dispersed value chain?

setting up wholly owned marketing subsidiaries

In exporting, problems with local marketing agents can be overcome by

setting up wholly owned subsidiaries in foreign nations to handle local marketing.

Kitchen Guru decided to export its products to foreign markets by hiring local marketing agents in each country. Over the years, Kitchen Guru ran into various problems with these local marketing agents that affected both sales and profitability. Kitchen Guru can overcome its problems with local marketing agents by

setting up wholly owned subsidiaries in foreign nations to handle local marketing.

What triggers the conflict of interest over strategy and goals in joint ventures?

shifts in relative bargaining power of venture partners

Which of the following entry modes into a foreign market best serves a high-tech firm?

wholly owned subsidiaries

Omega, Inc., a U.S.-based maker of personal fitness trackers, is not sure about the attractiveness of entering the country of Mattica. Mattica had recently emerged as a democracy after nearly 100 years of dictatorship. Which of the following types of entry into Mattica would allow Omega, Inc. to learn about the foreign market while limiting the firm's exposure to that market?

small-scale entry

Brooke Monroe, the Vice President of Manufacturing for Diacon Products has made a strong argument for the company to enter foreign markets via turnkey projects. However, the company's Chief Financial Officer, Nandu Kishore argues that turnkey projects being short-term propositions could be disadvantageous for the firm if a country subsequently proves to be a major market for the output of the process that has been exported. Brooke Monroe could counter this objection by arguing that Diacon Products can get around this problem by

taking a minority equity interest in the operation.

Turnkey projects, being short-term propositions, can be disadvantageous for a firm if a country subsequently proves to be a major market for the output of the process that has been exported. The firm can get around this problem by

taking a minority equity interest in the operation.

A distinction can be drawn between firms whose core competency is in which of the following?

technological know-how and management know-how

In which of the following situations can an international business command higher prices for a particular product in a foreign market?

the product offers greater value to customers in the foreign market

In which of the following modes of entry into foreign markets does a firm agree to set up an operating plant for a foreign client and hand over the plant when it is fully operational?

turnkey project

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country. The firm's core competency is in technological know-how. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology?

wholly owned subsidiary