International Marketing Chapter 13

According to the text, management contracts usually stipulate that a fee of __________ be paid to the firm providing the management expertise.

A. 2 to 5 percent of sales

Most firms begin their involvement in overseas business by:

A. exporting.

Strategic alliances are

A. partnerships between competitors, customers, or suppliers that may take various forms.

When a licensing agreement is made,

A. the licensee receives expertise from another company.

Pooling alliances are driven by the logic of contributing dissimilar resources, while trading alliances are driven by similarity and integration.

false

The existence of two or more partners, which typically have differences in strategies, operating practices, and organizational cultures, is a factor that tends to promote successful management and performance of strategic alliances.

false

When the government of a host country requires companies to have some local participation, foreign firms must engage in strategic alliances with local owners.

false

In 2007, foreign firms investing in the United States spent about ____________ on establishing new firms as they did on acquiring going firms.

D. one-eleventh as much

Partnerships between or among competitors, customers, or suppliers that may take one or more of various forms, both equity and nonequity, are known as:

D. strategic alliances.

A pioneering firm stands the best chance for long term success in market-share leadership and profitability when:

D. there are high entry barriers for competitors, and there is strong patent protection, and when there are substantial investment requirements.

Historically, firms making a foreign direct investment have generally preferred:

D. wholly owned subsidiaries

One way in which contract manufacturing is used is to subcontract assembly work or the production of parts to subsidiaries overseas.

False

A follower will most likely succeed when there are few legal, technological, cultural, or financial barriers to inhibit entry, as long as it has sufficient resources or competencies to overwhelm the pioneer's early advantage.

True

A sales company is established to market goods or services, not to produce them.

True

Direct exporting is an excellent means of getting a feel for international business without committing a great amount of human or financial resources.

True

Entering foreign markets may be described by two levels of involvement, non-equity and equity-based.

True

Licensing refers to a contractual agreement in which the licensor grants access to its patents, trade secrets, or technology for a fee paid by the licensee.

True

Piracy can refer to both high-sea swashbuckling and the illegal appropriation of software, music, video, and other intellectual property.

True

Producing a factory ready to operate is similar to producing a "turnkey project."

True

Some evidence suggests that pioneers gain and maintain a competitive advantage in new markets.

True

Some firms do not grant licenses to other firms because of the fear of having a strong competitor upon the expiration of the license.

True

The Internet has made direct exporting much easier.

True

Turnkey projects export technology, management expertise, and capital equipment.

True

Generally mergers and acquisitions are considered alliances.

false

If a firm decides to become involved in overseas manufacturing, it has two options: (1) wholly owned subsidiary and (2) joint venture.

false

In a 12-country study conducted by Ernst & Young, 65% of U.S. companies were found to be engaged in a strategic alliance.

false

In the year 2007, twice as much FDI invested in the U.S. was spent in acquiring established businesses than in setting up new ones.

false

It is not possible for foreign investors to control a joint venture if the host country's law prevents foreign investors from having more than 49% percent ownership.

false

Most of the foreign direct investment in the United States has been spent establishing new companies.

false

By means of a licensing agreement,

D. one firm grants to another the right to use all of its expertise.

A disadvantage(s) of indirect exporting is:

D. foreign business can be lost if exporter changes supply sources and the firm gains little experience from transactions

__________ permits a firm to set up an export program with a minimum of cash outlay and little special expertise.

D. indirect exporting

Although there are many forms of strategic alliances or competitive alliances, the alliances are often between:

D. investors.

According to the text, licensing agreements usually stipulate that a royalty of __________ be paid to the licensor.

B. 2 to 5 percent of sales

Franchising is a form of:

B. licensing.

Hilton and Delta provide assistance to other international companies. That is an example of:

B. management contract.

Which of the following is a form of piracy?

B. patent infringement.

A pioneering firm stands the best chance for long term success in market-share leadership and profitability when:

B. the firm has sufficient size, resources and competencies.

________ alliances are driven by similarity and integration.

C. Pooling

International firms employ contract manufacturing

C. as means of entering a foreign market without investing in plant facilities and to subcontract assembly work or independent companies overseas.

A company can engage in indirect exporting by using which of the following in its own country?

C. export commission agents

Companies wishing to export must first choose between

C. exporting directly or indirectly.

McDonald's, Kentucky Fried Chicken, and Subway are examples of:

C. franchising.

Foreign direct investment (FDI) includes all of the following except:

C. management contract

An arrangement by which one firm provides management in all or specific areas to another firm is a:

C. management contract.

In many cases, a firm entering international markets becomes a follower because:

C. quicker competition beat it.

A business established for the purpose of marketing goods and services, not producing them, is a:

C. sales company

According to a 12-country study conducted by Ernst & Young, _____ percent of U.S. companies are engaged in some form of strategic alliance

D. 75

Benefits of joint ventures may include:

D. The ability to respond to strong nationalistic sentiment in the host nation, and access to expertise that the company lacks

An arrangement in which one firm contracts with another firm to produce products to its specifications but assumes responsibility for marketing is:

D. contract manufacturing.

Licensing provides income for:

D. fashion designers, computer manufacturers, and magazine publishers.

A disadvantage(s) of indirect exporting is/are that:

D. firms gain little experience from the transaction, commissions have to be paid to agents, and firms are dependent on the agents.

Exporters of a turnkey project may include which of the following?

E. Contractors that specialize in designing and erecting plants in a particular industry and producer of a factory.

Which of the following are reasons that many firms engage in exporting?

E. Exports can allow the firm to serve markets where it has no or limited production facilities and can offset cyclical sales in the firm's domestic market.

Which of the following is true about alliances?

E. Many alliance partners are also competitors and alliances are also often difficult to manage.

The principal ingredient that a franchiser exports is:

E. a brand name, marketing strategy, and a set of proven procedures.

"Foreign direct investment without investment" is a term sometimes applied to:

E. contract manufacturing.

A joint venture may be:

E. corporate entity formed between an international firm and local owners, formed between two or more international firms, or may be an undertaking between two or more firms of a limited-duration project.

A turnkey project includes all of the following except:

E. export commission agents.

According to the text, a management contract is useful for:

E. joint ventures, wholly owned subsidiaries and involves earning money by providing know-how.

A contractual arrangement in which one firm grants access to its patents, trade secrets, or technology to another for a fee is a(n):

E. license.

According to the text, a company that wishes to own a foreign subsidiary outright may:

E. make a greenfield investment or purchase its distributor or even acquire part of a going concern.

A company can engage in indirect exporting by using which of the following companies in its own country?

E. manufacturers' export agents and export merchants

A management contract is used only by manufacturing companies to earn income by providing expertise for a fee.

False

A sales company is part of indirect exporting.

False

Direct exporting is simpler than indirect exporting because it requires neither special expertise nor large cash outlays.

False

Research shows that surviving pioneers hold a smaller average market share when their industries reach maturity than firms that were either fast followers or late entrants in the product category.

False

Sales companies will import in their own name from the parent and will invoice in the currency of the parent company.

False

The licensee generally pays a fix sum when signing a license agreement and then royalties of five to seven percent of sales over the life of the contract.

False

The means of supplying overseas markets-exporting to and production in those markets-depend on non-equity modes of entry.

False

Trading and pooling alliances are typically different in their goals, optimal structures, and managerial challenges.

true

Alliances can allow a partner to acquire a firm's technological or other competencies, thereby raising important competitive concerns

true

Exporting can extend a product's life cycle by exporting to currently unserved markets where the product will be at the introduction stage of the life cycle.

true

Exports can help to offset cyclical sales in a firm's domestic market.

true

Historically, firms engaged in FDI have generally preferred wholly owned subsidiaries.

true

In a joint venture, a management contract is often used as a control mechanism by firms, even if they hold only a minority position in the venture.

true

Lack of control is one of the strongest arguments against a joint venture.

true

Management contracts can enable the global partner to control many aspects of a joint venture even when holding only a minority position.

true

One benefit of exporting is that it can enable a company to serve markets where the company has no or limited production facilities.

true

One type of strategic alliance between competitors is an R&D partnership.

true

One way in which contract manufacturing is used is for a company to contract with a local manufacturer to produce products for the company, according to the company's specifications.

true

Strategic alliances take many forms, including licensing, mergers, joint ventures, and joint research and development partnerships.

true