Deck 10: Entering Foreign Markets

Question 1

The preemption of scarce resources is a first mover advantage.

Answer 1

True

Question 2

Industrial parks refer to the clustering of economic activities in certain locations.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

Cultural distance is the difference between two cultures along some identifiable dimensions.

Question 5

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

Question 6

One of the late-mover disadvantages is the establishment of entry barriers by the first-mover.

Question 7

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

Question 8

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

Question 9

Strategic goals and cultural and institutional distances influence the location of foreign entries.

Question 10

Liability of foreignness is the inherent disadvantage firms experience in home countries.

Question 11

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

Question 12

Governments can ban foreigners and foreign firms from owning assets in certain strategic sectors.

Question 13

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

Question 14

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

Question 15

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

Question 16

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.

Question 17

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

Question 18

Location-specific advantages never change and only tend to grow.

Question 19

Non-equity modes do not require the establishment of independent organizations overseas.

Question 20

Late movers face greater technological and market uncertainties.

Question 21

Turnkey projects cannot be established without FDI.

Question 22

Non-equity modes of entry include acquisitions and wholly-owned subsidiaries.

Question 23

With regard to foreign market entry,the resource-based view argues that foreign firms need to:

A) take actions deemed legitimate and appropriate by the various formal and informal institutions governing market entries.
B) be aware of the numerous regulatory risks and trade and investment barriers.
C) deploy overwhelming resources and capabilities to offset their liability of foreignness.
D) understand the numerous differences in cultures, norms, and values.

Question 24

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

Question 25

Companies with market-seeking strategic goals search for _____.

A) abundance of strong market demand and customers willing to pay
B) economies of scale and abundance of low cost factors
C) abundance of innovative individuals, firms, and universities
D) particular foreign locations where the required resources are found

Question 26

Efficiency-seeking firms go to countries that have _____.

A) an abundance of natural resources and related transport and communication infrastructure
B) a strong demand for their products and services
C) world-class innovations (innovative individuals, firms, and universities)
D) economies of scale and abundance of low-cost factors

Question 27

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

Question 28

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

Question 29

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

Question 30

Liability of foreignness is _____.

A) the positive perception of firms and products of the host country
B) the negative perception of firms and products of the home country
C) the inherent disadvantage foreign firms experience in host countries
D) the inherent advantage foreign firms experience in home countries

Question 31

An advantage of joint ventures is the shared costs,risks,and profits.

Question 32

Greenfield operations and acquisitions have complete equity and operational control.

Question 33

_____ refers to the clustering of economic activities in certain locations

A) Joint venture
B) Agglomeration
C) Expropriation
D) Intrafirm trade

Question 34

A disadvantage of licensing is high development costs.

Question 35

An acquisition is an example of a wholly owned subsidiary.

Question 36

Emerging MNEs primarily lack proprietary ownership of technology compared to MNEs from developed economies.

Question 37

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

Question 38

Licensing and franchising are examples of equity modes of entry.

Question 39

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

Question 40

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

Question 41

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) large-scale entry
C) the equity mode of entry
D) the country-of-origin effect

Question 42

Which of the following is a disadvantage of licensing and franchising?

A) Little control over marketing
B) High development costs
C) High risk in overseas expansion
D) Creation of a monopoly

Question 43

Which of the following entry modes is a type of strategic alliance?

A) Licensing
B) Wholly owned subsidiary
C) Acquisition
D) Export

Question 44

_____ refers to the amount of resources committed to entering a foreign market.

A) Scale of entry
B) Mode of entry
C) Institutional distance
D) Benchmarking

Question 45

Which of the following is an advantage shared by both greenfield operations and acquisitions?

A) Protection of know-how
B) Fast entry speed
C) Add new capacity to industry
D) Low development costs

Question 46

A disadvantage of acquisitions is _____.

A) the inability to add new capacity to industry
B) the inability to coordinate globally
C) high development costs
D) the slow entry speed

Question 47

Which of the following is an advantage of R&D contracts?

A) Easy to negotiate and enforce contracts
B) Negligible threat from competitors
C) Continuous improvement of core innovation capabilities
D) Ability to tap into the best, cost-effective locations

Question 48

Which of the following is a benefit of large-scale entries?

A) There are no losses even if these large-scale "bets" turn out to be wrong.
B) They have unlimited strategic flexibility in all markets.
C) They experience no liability of foreignness.
D) They demonstrate strategic commitment to certain markets.

Question 49

Which of the following is a late-mover advantage?

A) Pre-emption of scarce resources
B) Fewer technological and market uncertainties
C) Proprietary and technological leadership
D) Good relationships with key stakeholders such as governments

Question 50

_____ 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) Indirect exports
B) Direct exports
C) Turnkey projects
D) Acquisitions

Question 51

_____ is the difference between two cultures along identifiable dimensions.

A) Cultural cringe
B) Cultural distance
C) Reverse culture shock
D) Culture shock

Question 52

Which of the following conforms to the notion put forward by the school of thought associated with stage models?

A) Firms will enter culturally distant countries during their first stage of internationalization.
B) Considerations of strategic goals are more important than cultural/institutional considerations.
C) Natural resource-seeking firms have compelling reasons to enter culturally and institutionally distant countries.
D) Firms enter culturally distant countries in later stages when they may gain more confidence.

Question 53

Which of the following is a first-mover advantage?

A) Avoidance of clash with a dominant firm at home
B) Opportunity to free ride on second mover investments
C) Resolution of technological and market uncertainty
D) No difficulty in adapting to market changes

Question 54

Which of the following characterizes an MNE from a non-MNE?

A) It enters foreign markets via non-equity modes.
B) It exports or imports with or without FDI.
C) It enjoys OLI advantages.
D) It enters foreign markets through FPI.

Question 55

An advantage of joint ventures is _____.

A) the protection of know-how
B) the access to partners' assets
C) the ease of global coordination
D) the complete equity and operational control

Question 56

The distinction between _____ is what defines an MNE from a firm that merely exports or imports.

A) direct and indirect exports
B) licensing and franchising
C) small- and large-scale of entry
D) equity and non-equity modes of entry

Question 57

Which of the following is true of modes of entry?

A) Non-equity modes require the establishment of independent organizations overseas.
B) Non-equity modes are methods used to enter a market in the home country.
C) Equity modes are indicative of relatively larger, harder-to-reverse commitments.
D) Equity modes do not require the establishment of independent organizations overseas.

Question 58

Which of the following is an advantage of direct exports?

A) No trade barriers
B) Low transportation costs for bulky products
C) Avoid export processes
D) Better control over distribution

Question 59

Which of the following is a non-equity mode of entry?

A) Acquisitions
B) Joint ventures
C) Turnkey projects
D) Green-fields

Question 60

Which of the following is an equity mode of entry?

A) Indirect exports
B) Wholly owned subsidiaries
C) R&D contracts
D) Licensing/franchising

Question 61

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) R&D contract
C) JV
D) WOS

Question 62

What are the two schools of thought that have emerged concerning cultural distances?

Question 63

In _____,clients pay contractors to design and construct new facilities and train personnel.

A) franchising
B) turnkey projects
C) licensing
D) co-marketing

Question 64

A greenfield operation refers to _____.

A) a new corporate entity created and jointly owned by two or more parent companies
B) a wholly owned subsidiary created by building a new factory and offices from scratch
C) a wholly owned subsidiary created by acquisition
D) an outsourcing agreement in R&D between firms

Question 65

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 has the ability to coordinate globally.
D) The licensor/franchisor does not have tight control over production and marketing.

Question 66

Identify the advantages and disadvantages that pertain to first movers.

Question 67

Compare and contrast between the strategies of direct and indirect exports.

Question 68

What are the two sets of considerations that drive the location of foreign entities?

Question 69

In the LLL framework,_____ refers to an emerging MNE's ability to identify and bridge gaps in its market.

A) leverage
B) linkage
C) learning
D) location

Question 70

Co-marketing refers to _____.

A) a project in which clients pay contractors to market and distribute the product/service
B) outsourcing agreements in marketing between firms
C) efforts among a number of firms to jointly market their products and services
D) selling the rights to intellectual property to another firm for a royalty fee

Question 71

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) agglomeration
B) the liability of foreignness
C) benchmarking
D) the country-of-origin effect

Question 72

Explain briefly the meaning of liability of foreignness.Why is it difficult for companies to succeed in foreign markets?

Question 73

The country-of-origin effect refers to _____.

A) the inherent advantages domestic firms experience in their home countries
B) the inherent disadvantages foreign firms experience in home countries
C) the positive or negative perception of firms and products from a certain country
D) only the negative perception of firms and products from a certain country

Question 74

Greenfield operations are similar to acquisitions in that they are both examples of _____.

A) partially owned subsidiaries
B) wholly owned subsidiaries
C) non-equity mode of entry into foreign markets
D) equity mode of entry into foreign markets limited to a contractual agreement

Question 75

How do foreign firms crack new markets against strong local competition?

Question 76

Which of the following is true of indirect exports?

A) They typically provoke protectionism, potentially triggering antidumping actions.
B) They treat foreign demand as an extension of domestic demand.
C) They export through domestically based export intermediaries.
D) They do not enjoy the economies of scale similar to direct exports.

Question 77

What are turnkey projects? What are its advantages and disadvantages compared to other modes of entry?

Question 78

Define a wholly owned subsidiary (WOS).What are the two primary means to set up a WOS?