Bus187 reading ch 8 & 15

Select all that apply Which of the following are positive contributions that FDI can provide to a host country? (Check all that apply.)

A current account surplus Increased supply of capital Greater economic growth

Select all that apply What are the three factors that can lead to the success of a strategic alliance?

Alliance management Alliance structure Partner selection

Select all that apply Identify the three costs of FDI to a home country.

Balance of payments negatively affected if FDI is a substitute for direct exports Balance of payments negatively affected if purpose of FDI is to develop a low-cost production location Balance of payments negatively affected initially from the capital outflow to fund F

What is the term used for when one company enters markets before its competitors?

Early entry

What is a benefit of inward FDI for a host country?

Employment effect

True or False: The most typical joint venture is a 60/40 venture, in which one party holds a 60 percent ownership stake and the other holds a 40 percent ownership stake.

False Reason: A 50/50 joint venture is the most common type.

True or false: As the pressure to reduce costs increases, the best entry modes are franchising and joint ventures.

False Reason: As the pressure to reduce costs increases, the best entry modes are wholly owned subsidiaries and exporting.

What entry mode's major advantage is that a firm has more control over the kind of subsidiary it wants in a foreign market?

Greenfield venture

Select all that apply What are the two methods for establishing a wholly owned subsidiary?

Greenfield venture Acquisition of an established firm

Select all that apply Choose the three benefits of FDI to a home country.

MNE learns skills from exposure to foreign market Inward flow of foreign earnings Foreign subsidiary creates demand for home-country exports

Select all that apply What are the four advantages associated with a strategic alliance?

May facilitate entry into a foreign market Helps a firm establish technological standards that will benefit the firm Allow firms to share the fixed costs of developing new products Brings together complementary skills that neither company could easily develop on their own

Select all that apply What are the three basic decisions firms must make when looking at foreign expansion?

On what scale to enter markets When to enter markets Which markets to enter

Select all that apply What are three examples of intangible property that might be covered by a licensing agreement? (Check all that apply.)

Patents Copyrights Designs

Select all that apply The attractiveness of a country as a potential market should be assessed by balancing what three items associated with doing business in that country?

Risks Benefits Costs

Select all that apply Which three of these statements accurately describe franchising?

The franchiser typically receives a royalty payment. It is similar to a license but with a longer time commitment The franchisee commits to abiding by strict rules on how it does business

Which statement is true of acquisitions?

They help preempt competitors.

True or False: One advantage of a strategic alliance is that it can help the firm develop technological standards for the industry that will, in turn, benefit the firm.

True Reason: Establishing the technological standard for an industry gives a firm an advantage over the competition.

Nelson Warm Air Corp. entered into a short-term agreement with Hudson Heating as they developed systems to install in all rental units, such as apartments and town homes, throughout France. This short-term agreement is an example of ______.

a strategic alliance

Firms that are pursuing a global standardization strategy tend to prefer establishing this strategy through ______.

a wholly owned subsidiary

As a way to enter the foreign market, Camille's company is considering purchasing a business in their target market rather than trying to build a subsidiary from scratch. They are considering a(n) ______ strategy.

acquisition

Bob's Bicycle Company is planning to enter into foreign markets where there are already well-established incumbent enterprises and global competitors are also interested in establishing a presence. Based on these circumstances, Bob's Bicycle Company should enter the foreign markets via ______.

acquisition

When a company decides that it will take too long to establish a sizable presence in a country by using a greenfield venture, it might instead benefit the firm to enter the country by using a(n) ______.

acquisition

A country's ______ account tracks the country's payments to and receipts from other countries.

balance-of-payments

Select all that apply What are three advantages of acquisitions?

beat out the competition fast to execute less risk than greenfield venture

A key cost of FDI for the home country is when the balance of payments are adversely affected by the initial ______ outflow that is necessary to finance FDI.

capital

Exporting, licensing, and establishing a joint venture are types of ______ companies can use.

entry modes

Not having to establish manufacturing operations overseas and being able to work to achieve experience curve and location economies are advantages of ______.

exporting

Which entry mode is used by many small and medium-sized enterprises to gain access to various country markets ?

exporting Reason: Basically, exporting is a low-level commitment and low-level involvement for the firm in the global marketplace. Second, exporting may help a firm achieve experience curve and location economies.

Fast food restaurants like McDonald's and Pizza Hut which have sold their trademark to thousands of operations around the world are good examples of ______.

franchising

The main criticism of a strategic alliance is that it ______.

gives the competition a low-cost way to access new technology and markets

Starting a subsidiary in a foreign country from "scratch" where nothing is established is called a(n) ______.

greenfield venture

The management team decided it would be more productive to build the foreign subsidiary from scratch than to try to change the culture that existed in the companies available to acquire. The team is planning a ______.

greenfield venture

Strategic alliances tend to fail at a ________(low or high?) rate.

high

Select all that apply Killian's company has developed proprietary technology that it wants to maintain control over when entering a foreign market. Because of this, Killian's company would NOT want to consider which two types of entry into the foreign market? (Check all that apply)

joint venture licensing

Select all that apply What are the six modes companies use to enter foreign markets?

joint ventures exporting franchising wholly-owned subsidiaries turnkey projects licensing

Matt's company spent billions of dollars to acquire the financial investment operations of a company in Sweden. This would be an example of a ______ scale entry.

large

Stephen's US based company entered the European market long after its competitors had established themselves. This is known as ______ entry.

late

Stanley invented a new way to make a book out of photos taken with a smart phone. He made an arrangement with Shutterfly which granted the company the right to use his idea in exchange for a 10% royalty fee each time his concept was sold. This is an example of a ______ agreement.

licensing

A host country cost of FDI could be the ______ of sovereignty and autonomy. (Choose gain or loss.)

loss

The Kendrick Corporation has ______ transportation costs and is facing ______ trade barriers. This company should choose exporting over FDI.

low; low

One potential benefit to consumers related to offshore production is ______.

lower prices for goods

FDI that is pursued to serve the home market is called ______ production.

offshore

Nora's company is considering going into a foreign market. They have determined which markets to go into and the timing for going into them. What other basic entry decision do they need to make?

on what scale should they go in

Select all that apply Turnkey projects would be commonly associated with which three industries? (check all that apply)

pharmaceutical chemical metal-refining

When a company makes a commitment to enter a market on a large scale, this implies a ______ entry.

rapid

The entry mode that may allow competitors to access markets and technology at a low cost is a ______.

strategic alliance

Which form of market entry refers to a cooperative agreement between potential or actual competitors?

strategic alliance

Select all that apply FDI theory suggests that exporting is preferable to licensing and FDI as long as what two conditions exist?

transportation costs are low trade barriers are low

Bruce works as a contractor and agrees to oversee every aspect of a new plant a US company is building in Norway. Next week he enters the final phase of the project as he organizes the training of all company personnel. This is an example of a(n) ______ project.

turnkey

The potential for risk is higher when considering a foreign market with a politically ______ nation.

unstable

The best way for a company to profit from technological know-how that it wants to maintain control over when entering a foreign market, is to enter the market through a(n) ______.

wholly owned subsidiary

When Kent's US-based firm acquired an established European investment firm, it used that firm to promote its financial products. Kent's company owns 100% of the stock of the European firm making it a ______.

wholly owned subsidiary