Global Economics10

Which of the following is an advantage of R&D contracts? a. Ability to tap into the best, cost-effective locations b. Continuous improvement of core innovation capabilities c. Negligible threat from competitors d. Easy to negotiate and enforce contracts

Ability to tap into the best, cost-effective locations

_____ refers to the clustering of economic activities in certain locations. a. Agglomeration b. Joint venture c. Intrafirm trade d. Expropriation

Agglomeration

The following are examples of location-specific advantages: a. All of these b. Industry demand that creates a skilled labor force. c. Knowledge spillovers among closely located firms. d. Industry demand that facilitates a pool of specialized suppliers and buyers.

All of these

What are the possible benefits of being a late mover? a. First mover's difficulty to adapt to market changes b. Opportunity to free ride on first-mover investments c. Resolution of technological and market uncertainty d. All of these answers

All of these answers

Which of the following is a first-mover advantage? a. Provide an opportunity for a free ride. b. Difficulty adapting to market changes. c. Avoid clashing with dominant firms in their home market. d. Resolve technological and market uncertainty.

Avoid clashing with dominant firms in their home market.

Which of the following is a first-mover advantage? a. Resolution of technological and market uncertainty b. Avoidance of clash with a dominant firm at home c. No difficulty in adapting to market changes d. Opportunity to free ride on second mover investments

Avoidance of clash with a dominant firm at home

A(n) _____ is a non-equity mode of entry used to build a longer-term presence by building and then operating a facility for a period of time before transferring operations to a domestic agency or firm. a. BOT agreement b. WOS c. JV d. R&D contract

BOT agreement

Which of the following is an advantage of direct exports? a. No trade barriersade barriers b. Better control over distribution c. Low transportation costs for bulky products d. Avoid export processes

Better control over distribution

_____ is the difference between two cultures along identifiable dimensions. a. Culture shock b. Cultural distance c. Reverse culture shock d. Cultural cringe

Cultural distance

_____ are the most basic non-equity mode of entry, capitalizing on economies of scale in production concentrated in the home country and providing better control over distribution. a. Acquisitions b. Direct exports c. Turnkey projects d. Indirect exports

Direct exports

Which of the following is an example of a first mover gaining a competitive advantage? a. A popular Jamaican reggae band goes on tour in the European Union. b. Due to its lucrative offer, a Chinese state-owned energy company wins the first contract to mine the vast coalfields in Zimbabwe. c. A British chain of fish-and-chip shops starts selling franchises throughout the Pacific Northwest of the United States. d. A Canadian man develops a new brand of pet food, which he decides to market internationally through the Internet.

Due to its lucrative offer, a Chinese state-owned energy company wins the first contract to mine the vast coalfields in Zimbabwe.

Which of type of entry mode is a wholly owned subsidiary? a. Equity mode b. Strategic alliance c. Non equity d. Direct export

Equity mode

Which of the following entry modes is considered a non equity method? a. Green-field projects b. Exports c. Joint venture d. Acquisition

Exports

Which of the following is a late-mover advantage? a. Pre-emption of scarce resources b. Proprietary and technological leadership c. Good relationships with key stakeholders such as governments d. Fewer technological and market uncertainties

Fewer technological and market uncertainties

Which of the following conforms to the notion put forward by the school of thought associated with stage models? a. Natural resource-seeking firms have compelling reasons to enter culturally and institutionally distant countries. b. Firms enter culturally distant countries in later stages when they may gain more confidence. c. Considerations of strategic goals are more important than cultural/institutional considerations. d. Firms will enter culturally distant countries during their first stage of internationalization.

Firms enter culturally distant countries in later stages when they may gain more confidence.

Which of the following entry mode(s) are considered equity methods? a. Joint ventures b. Greenfield and joint ventures c. Exports d. Greenfield

Greenfield and joint ventures

Which of the following characterizes an MNE from a non-MNE? a. It enjoys OLI advantages. b. It enters foreign markets via non-equity modes. c. It enters foreign markets through FPI. d. It exports or imports with or without FDI.

It enjoys OLI advantages.

Which of the following entry modes is a type of strategic alliance? a. Wholly owned subsidiary b. Export c. Acquisition d. Licensing

Licensing

Which of the following is a disadvantage of licensing and franchising? a. High risk in overseas expansion b. High development costs c. Little control over marketing d. Creation of a monopoly

Little control over marketing

The Triad region includes: a. North America, Europe, and Asia, and Australia. b. Asia, North America, and South America. c. North America, Asia, and Europe. d. Europe, Africa, Asia, and Australia.

North America, Asia, and Europe.

Which of the following is an advantage shared by both greenfield operations and acquisitions? a. Protection of know-how b. Low development costs c. Fast entry speed d. Add new capacity to industry

Protection of know-how

From an institution-based view, a firm's foreign market entries are affected by institutions. Which of the following is NOT an institution affecting foreign market entries? a. Norms and values b. Regulatory risks c. Trade barriers d. Resource imitability

Resource imitability

____ refers to the amount of resources committed to entering a foreign market. a. Scale of entry b. Institutional distance c. Mode of entry d. Benchmarking

Scale of entry

Which of the following is true of licensing/franchising? a. The licensor/franchisor has to bear the full costs and risks associated with foreign expansion. b. The licensing/franchising strategy creates very limited competitors. c. The licensor/franchisor does not have tight control over production and marketing. d. The licensor/franchisor has the ability to coordinate globally.

The licensor/franchisor does not have tight control over production and marketing.

Which of the following is a benefit of large-scale entries? a. They have unlimited strategic flexibility in all markets. b. There are no losses even if these large-scale "bets" turn out to be wrong. c. They experience no liability of foreignness. d. They demonstrate strategic commitment to certain markets.

They demonstrate strategic commitment to certain markets.

Which of the following is true of indirect exports? a. They treat foreign demand as an extension of domestic demand. b. They export through domestically based export intermediaries. c. They do not enjoy the economies of scale similar to direct exports. d. They typically provoke protectionism, potentially triggering antidumping actions.

They export through domestically based export intermediaries.

Which of the following is a non-equity mode of entry? a. Turnkey projects b. Green-fields c. Acquisitions d. Joint ventures

Turnkey projects

Which of the following is an equity mode of entry? a. R&D contracts b. Licensing/franchising c. Indirect exports d. Wholly owned subsidiaries

Wholly owned subsidiaries

Assume that a firm is looking to expand into a foreign market, but it needs an opportunity that has low development costs and little risk. Its best choice would be: a. a wholly owned subsidiary. b. exporting. c. a partially owned subsidiary. d. a contractual agreement.

a contractual agreement.

A greenfield operation refers to _____. a. a wholly owned subsidiary created by building a new factory and offices from scratch b. an outsourcing agreement in R&D between firms c. a new corporate entity created and jointly owned by two or more parent companies d. a wholly owned subsidiary created by acquisition

a wholly owned subsidiary created by building a new factory and offices from scratch

Assume that a major technology company is looking to expand into a foreign market but it can't risk losing its core innovations by sharing them with anyone outside the corporation. Its best choice would be: a. a partially owned subsidiary. b. a wholly owned subsidiary. c. a contractual agreement. d. exporting.

a wholly owned subsidiary.

Companies with market-seeking strategic goals search for _____. a. economies of scale and abundance of low cost factors b. abundance of strong market demand and customers willing to pay c. abundance of innovative individuals, firms, and universities d. particular foreign locations where the required resources are found

abundance of strong market demand and customers willing to pay

Disneyland Tokyo became very popular because it played up its American image. This is an example of: a. liability of foreignness. b. asset of foreignness. c. regional geographic diversification. d. cyberspace foreign entry.

asset of foreignness.

Imagine that a Japanese toy producer has developed a group of animated characters that look quite different from American-style animated characters. They have used these characters on numerous product lines, including trading cards, games, and clothing. To introduce the products to the American market, the firm produces a TV show starring the characters and launches a massive advertising campaign. The firm has successfully overcome the liability of foreignness by: a. changing formal institutions. b. none of these answers c. using tangible resources. d. changing informal institutions.

changing informal institutions.

With regard to foreign market entry, the resource-based view argues that foreign firms need to: a. be aware of the numerous regulatory risks and trade and investment barriers. b. deploy overwhelming resources and capabilities to offset their liability of foreignness. c. take actions deemed legitimate and appropriate by the various formal and informal institutions governing market entries. d. understand the numerous differences in cultures, norms, and values.

deploy overwhelming resources and capabilities to offset their liability of foreignness.

Efficiency-seeking firms go to countries that have _____. a. world-class innovations (innovative individuals, firms, and universities) b. an abundance of natural resources and related transport and communication infrastructure c. a strong demand for their products and services d. economies of scale and abundance of low-cost factors

economies of scale and abundance of low-cost factors

Co-marketing refers to _____. a. efforts among a number of firms to jointly market their products and services b. outsourcing agreements in marketing between firms c. a project in which clients pay contractors to market and distribute the product/service d. selling the rights to intellectual property to another firm for a royalty fee

efforts among a number of firms to jointly market their products and services

The distinction between _____ is what defines an MNE from a firm that merely exports or imports. a. equity and non-equity modes of entry b. licensing and franchising c. direct and indirect exports d. small- and large-scale of entry

equity and non-equity modes of entry

A build-operate-transfer (BOT) agreement is an equity mode of entry. a. true b. false

false

A disadvantage of licensing is high development costs. a. true b. false

false

A firm that exports or imports, with or without FDI, is regarded as an MNE. a. true b. false

false

According to the stage model, firms will enter culturally distant countries for their first internationalization. a. true b. false

false

Equity modes tend to reflect relatively smaller commitments to overseas markets, whereas non-equity modes are indicative of relatively larger, harder-to-reverse commitments. a. true b. false

false

Greenfield operations are a type of wholly owned subsidiary that does not require any FDI. a. true b. false

false

Indirect exports are the most basic mode of entry, capitalizing on economies of scale in production concentrated in the home country. a. true b. false

false

Industrial parks refer to the clustering of economic activities in certain locations. a. true b. false

false

Innovation-seeking firms often single out the most efficient locations featuring a combination of scale of economies and low cost factors. a. true b. false

false

Late movers face greater technological and market uncertainties. a. true b. false

false

Liability of foreignness is the inherent disadvantage firms experience in home countries. a. true b. false

false

Licensing and franchising are examples of equity modes of entry. a. true b. false

false

Location-specific advantages never change and only tend to grow. a. true b. false

false

Non-equity modes of entry include acquisitions and wholly-owned subsidiaries. a. true b. false

false

One of the advantages of being a first-mover is the opportunity to free ride on late-mover investments. a. true b. false

false

The existence of multiple currencies and the resultant currency risks can be viewed as informal trade and investment barriers. a. true b. false

false

The non-equity mode of indirect exports has better control over distribution than direct exports. a. true b. false

false

The resource-based view suggests that firms need to take actions deemed legitimate and appropriate by the various formal and informal institutions governing market entries. a. true b. false

false

Turnkey projects cannot be established without FDI. a. true b. false

false

A disadvantage of acquisitions is _____. a. the inability to add new capacity to industry b. high development costs c. the inability to coordinate globally d. the slow entry speed

high development costs

In the LLL framework, _____ refers to an emerging MNE's ability to identify and bridge gaps in its market. a. location b. learning c. linkage d. leverage

linkage

Some emerging economy MNEs are using the LLL framework to the challenge the conventional wisdom on international growth. The LLL framework includes: a. leverage. b. linkage and leverage. c. linkage. d. location.

linkage and leverage.

Miami is an ideal city for both North American firms looking to expand their business to Central and South America and for Latin American companies to expand their business to North America. This is an example of a(n): a. timing advantage. b. regulation advantage. c. efficiency advantage. d. location-specific advantage.

location-specific advantage.

Imagine that an Australian manufacturing firm would like to open a new plant in Europe. The new plant will house both a research-and-development center and a major production line. In evaluating the best location for the plant, the firm rejects moving to Germany, which is known for its world-class engineers but also for the higher salaries commanded by its union-protected workers, in favor of Bosnia-Herzogovina, where labor is less expensive. The firm has placed a priority on: a. matching innovation-seeking goals with location. b. matching market-seeking goals with location. c. matching natural resource-seeking goals with location. d. matching efficiency-seeking goals with location.

matching efficiency-seeking goals with location.

Imagine that a French manufacturer of high-end fashion apparel and accessories decides to expand into foreign markets by buying a chain of highly successful high-end fashion retailers in the United Arab Emirates. This is an example of: a. matching efficiency-seeking goals with location. b. matching innovation-seeking goals with location. c. matching market-seeking goals with location. d. matching natural resource-seeking goals with location.

matching market-seeking goals with location.

Americans value the quality, taste, and exoticism of African-grown coffee. Thus, any firm selling coffee from Kenya in the United States will enjoy a: a. positive country-of-origin effect. b. negative country-of-origin effect. c. nonequity mode of entry. d. liability of foreignness.

positive country-of-origin effect.

Some people believe that anything made in Asia is poorly made and therefore not worth much money. This bias may have a negative impact on Asian firms when they attempt to sell well-made, quality, valuable products in non-Asian markets. Firms in this situation would be: a. encountering trade barriers. b. suffering from the liability of foreignness. c. entering into foreign markets. d. none of these answers

suffering from the liability of foreignness.

An advantage of joint ventures is _____. a. the complete equity and operational control b. the ease of global coordination c. the protection of know-how d. the access to partners' assets

the access to partners' assets

A recent survey revealed that more than nine out of ten people prefer a watch made by firms in Switzerland to one made in India or U.S.A or any other country. This is an example of _____. a. the liability of foreignness b. the country-of-origin effect c. agglomeration d. benchmarking

the country-of-origin effect

Liability of foreignness is _____. a. the inherent disadvantage foreign firms experience in host countries b. the positive perception of firms and products of the host country c. the negative perception of firms and products of the home country d. the inherent advantage foreign firms experience in home countries

the inherent disadvantage foreign firms experience in host countries

The country-of-origin effect refers to _____. a. the inherent advantages domestic firms experience in their home countries b. the positive or negative perception of firms and products from a certain country c. only the negative perception of firms and products from a certain country d. the inherent disadvantages foreign firms experience in home countries

the positive or negative perception of firms and products from a certain country

Natural resource-seeking firms have compelling reasons to enter culturally and institutionally distant countries. This is a counter example of _____. a. the stage model b. the equity mode of entry c. large-scale entry d. the country-of-origin effect

the stage model

Agglomeration explains why certain cities and regions can attract businesses even in the absence of obvious geographic advantages. a. true b. false

true

An acquisition is an example of a wholly owned subsidiary. a. true b. false

true

An advantage of joint ventures is the shared costs, risks, and profits. a. true b. false

true

Co-marketing has the ability to reach more customers but with limited control and coordination. a. true b. false

true

Cultural distance is the difference between two cultures along some identifiable dimensions. a. true b. false

true

Emerging MNEs primarily lack proprietary ownership of technology compared to MNEs from developed economies. a. true b. false

true

Governments can ban foreigners and foreign firms from owning assets in certain strategic sectors. a. true b. false

true

Greenfield operations and acquisitions have complete equity and operational control. a. true b. false

true

Market-seeking firms go to countries that have a strong demand for their products and services. a. true b. false

true

Non-equity modes do not require the establishment of independent organizations overseas. a. true b. false

true

One of the late-mover disadvantages is the establishment of entry barriers by the first-mover. a. true b. false

true

Strategic goals and cultural and institutional distances influence the location of foreign entries. a. true b. false

true

The "leverage" in the LLL framework focuses on an MNE's deep understanding of its customer needs and wants. a. true b. false

true

The preemption of scarce resources is a first mover advantage. a. true b. false

true

The resource-based view argues that foreign firms need to deploy overwhelming resources and capabilities to offset their liability of foreignness. a. true b. false

true

The scale of entry refers to the amount of resources committed to entering a foreign market. a. true b. false

true

In _____, clients pay contractors to design and construct new facilities and train personnel. a. franchising b. co-marketing c. licensing d. turnkey projects

turnkey projects

Imagine that a major Italian automobile manufacturer has decided to move into the Asian market by setting up a JV with a South Korean automobile manufacturer. The Italian firm is: a. using an equity mode of entry. b. using a nonequity mode of entry. c. using a mode of entry. d. must not be an MNE.

using an equity mode of entry.

Imagine that a Chinese electronic game manufacturer has decided to go global. It does well with its lower-priced products but cannot break into the market with its high-end game consoles and games. The firm then acquires a well-respected Norwegian high-end game manufacturer, and begins selling high-end products under that brand name. The firm has successfully overcome the liability of foreignness by: a. changing informal institutions. b. using tangible resources. c. changing formal institutions. d. none of these answers

using tangible resources.

Greenfield operations are similar to acquisitions in that they are both examples of _____. a. wholly owned subsidiaries b. partially owned subsidiaries c. non-equity mode of entry into foreign markets d. equity mode of entry into foreign markets limited to a contractual agreement

wholly owned subsidiaries