Chapter 12
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.
