Deck 10: Entering Foreign Markets

Question 1

Flarring Corp.is a well-known company that manufactures spare parts for automobiles.The company,based in Boston,expanded by entering the market of Nerodo.Even after 12 years of marketing in Nerodo,the company is on the verge of failure.In this case,which of the following factors could lead to the failure of Flarring Corp.in Nerodo?

A) Decreased liability of foreignness
B) Formal rules that are favorable to local firms
C) Decreased competition from the local firms
D) Products that are hard to imitate

Answer 1

B

Question 2

One advantage to engaging in a Joint Venture is sharing costs and risks with a local partner that limits risk exposure.

Answer 2

True

Question 3

In the context of entering into foreign business,firms with a strategic goal to seek market should select economies of scale and abundance of low-cost factors.

Answer 3

False

Question 4

Which of the following is a formal barrier to trade when foreign firms enter new markets?

A) Differences in values
B) Differences in norms
C) Currency risk
D) Cultural differences

Question 5

Which of the following is an informal barrier to trade when foreign firms enter new markets?

A) Differences in norms
B) Political differences
C) Economic differences
D) Existence of multiple currencies

Question 6

The pioneering status of first movers gives them the guarantee of success.

Question 7

To overcome cultural and institutional differences,it is more important to consider strategic goals such as market and efficiency rather than culture and institutions.

Question 8

A greenfield operation limits the equity and management control of and MNE,which gives joint ventures a comparative advantage.

Question 9

When foreign firms enter new markets,they are often discriminated against the local firms.

Question 10

According to the stage model,firms will enter culturally different countries during their first stage of internationalization and will then gain more confidence to enter culturally similar countries in later stages.

Question 11

A joint venture is defined as a subsidiary located in a foreign country that is entirely owned by the parent multinational.

Question 12

A Spanish firm specializing in textiles will be more successful if they first enter foreign markets with vastly different cultural norms than Spain.

Question 13

A liability of foreignness refers to the inherent disadvantage that foreign firms experience in host countries because of their nonnative status.

Question 14

Which of the following is a way that a foreign firm may be effected by the liability of foreignness?

A) Experiencing both formal and informal discrimination
B) Heightened competitive advantage
C) Adoption of VIRO
D) Having first-mover advantage

Question 15

To be successful in internationalization,managers need to understand the rules of the game,both formal and informal,governing competition in foreign markets.

Question 16

In the context of entering into foreign business,location advantages are the most important consideration.

Question 17

From a resource-based view,managers need to match entries with strategic goals to be successful in foreign markets.

Question 18

Last movers will build precious relationships with key stakeholders such as customers and governments.

Question 19

Ink Struck Inc.,a publishing company,wants to expand its market worldwide.In this case,which of the following will be a challenge faced by Ink Struck Inc.in host countries?

A) Decreased legal differences
B) Decreased competition for its products in the host country
C) Loss of control over the operations
D) Overcoming liability of foreignness due to its nonnative status

Question 20

An MNE is defined by entering foreign markets via equity modes through FDI.A firm that merely exports/imports with no FDI is usually not regarded as an MNE.

Question 21

_____ is defined as a project in which clients pay contractors to design and construct new facilities and train personnel.

A) An acquisition
B) A joint venture
C) A greenfield project
D) A turnkey project

Question 22

Citigroup was one of the first firms to enter Afghanistan,earning a good deal of goodwill from the Afghan government.This is an example of:

A) Late-mover advantage through free riding on first-mover investments
B) First-mover advantage through relationship building
C) First-mover advantage through preemptive investments?
D) Late-mover advantage through prior market adaptation

Question 23

Which of the following is true of a multinational enterprise (MNE)?

A) A firm that enters into a contractual agreement with a foreign firm
B) A firm that enters foreign market via foreign direct investment (FDI)
C) A firm that merely exports/imports products to host countries
D) A firm that enters foreign market by non-equity mode

Question 24

_____ is a non-equity mode of entry into a foreign market.

A) Acquisition
B) Turnkey project
C) Joint venture
D) Wholly owned subsidiary

Question 25

Pro-creations Corp.,a tool manufacturing company,has decided to expand its business internationally.Consequently,the company has paid a contractor to construct a manufacturing facility and an office.When the project is complete and ready for operation,the contractor will hand over the facility to Pro-creations Corp.to pursue its business.This mode of entry into international market is an example of _____.

A) a franchise
B) a greenfield project
C) a joint venture
D) a turnkey project

Question 26

Which of the following is a difference between first movers and late movers?

A) First movers take advantage of the inflexibility of late movers,whereas late movers may be locked into a given set of fixed assets.
B) First movers face greater technological and market uncertainties,whereas late movers take advantage of the solutions of the first movers.
C) First movers may be able to free ride on the huge pioneering investments of late movers,whereas late movers have to make preemptive investments.
D) First movers attract more late entrants,whereas late movers erect entry barriers for further entrants.

Question 27

A chip company operating in Pakistan,a majority Muslim country,recently got into a public relations nightmare when the public discovered that the firm was using a pork based product in their chips.Many Muslim people do not eat pork.Which of the following aspects of the liability of foreignness is this an example of?

A) Regulatory risks
B) Difference of informal institutions
C) Economic differences
D) Existence of multiple currencies

Question 28

KG Steel Co.is exporting steel bars at prices that are below what it costs to manufacture them,with the intent to raise prices after eliminating local rivals.This practice is known as:

A) Extortion
B) Market seeking
C) Dumping
D) Plunking

Question 29

Rues and West Bros.,a technological giant,is a company motivated with the drive to find new and affordable technologies.It is selecting a location so that it can operate with its motive,as well as enjoy the benefits of the location.In this scenario,Rues and West Bros.should select locations:

A) that possess abundance of innovative individuals,firms,and universities.
B) that feature a combination of scale economies and low-cost factors.
C) that has an abundance of strong market demand.
D) that possess natural resources and related infrastructure.

Question 30

Which of the following statements is true of late movers?

A) They face greater technological and market uncertainties.
B) They drive some non-dominant firms abroad to avoid clashing with dominant firms in home market.
C) They may be able to free ride on the huge pioneering investments of first movers.
D) They may erect significant entry barriers for further entry by other firms.

Question 31

Which of the following modes of entry call for the establishment of independent organizations overseas?

A) An equity mode
B) An export mode
C) A franchising mode
D) A licensing mode

Question 32

Being a first mover in a market is advantageous for a firm because:

A) it may have an opportunity to free ride on late-mover investments.
B) it may gain advantage through proprietary technology.
C) it would attract more firms to join their business network.
D) it would face minimal technological and market uncertainties.

Question 33

If a firm decides to engage in crude oil and petroleum business abroad,which of the following countries will provide location-specific advantage to the firm?

A) Russia
B) Liberia
C) Switzerland
D) Greenland

Question 34

Which of the following is a strategy to overcome cultural distance while engaging in international business?

A) Entering culturally distant countries with confidence
B) Choosing countries with colony-colonizer links
C) Entering in countries without much physical distance
D) Entering a culturally different country as a late mover

Question 35

Which of the following is true of location-specific advantages?

A) They are independent of cultural distance of the countries involved in a business.
B) They continually grow irrespective of any changes in the formal institution.
C) They decline when companies overcrowd or when taxes are raised.
D) They can be enjoyed only as a late mover.

Question 36

In the context of entry timing,_____ is defined as the benefit that accrues to firms that are late entrants in the market and that early entrants do not enjoy.

A) late-mover advantage
B) first-mover advantage
C) location-specific advantage
D) cultural advantage

Question 37

Which of the following statements is true of scale of entry?

A) Small-scale entries experience higher liability of foreignness.
B) Large-scale entries demonstrate a strategic commitment to certain markets.
C) Small-scale entries face the difficulty of limited strategic flexibility elsewhere.
D) Large-scale entries will face difficulty capturing first-mover advantages.

Question 38

Dubai attracts numerous foreign entrants to engage in international business.It is an ideal stopping point for air traffic between Europe and Asia,and between Africa and Asia.Which of the following advantages has Dubai honed to attract foreign business?

A) Late-mover advantage
B) Location-specific advantage
C) Export advantage
D) Cultural advantage

Question 39

_____ is the location-specific advantage that arises from the clustering of economic activities in certain locations.

A) Agglomeration
B) First-mover advantage
C) Late-mover advantage
D) Innovation

Question 40

Palova Skin care,a famous cosmetic brand,is successfully engaging in international business with several countries.Contrary to the successes in foreign market,the recent attempts to expand its business in its neighboring country,Arkadas,has been unsuccessful,owing to its strict rules for women and perception of beauty.In this scenario,which of the following is most likely the reason for Palova's failure in Arkadas?

A) Lack of natural resources
B) Physical distance
C) Cultural distance
D) Lack of purchasing power

Question 41

A software company in China has decided to become a multinational enterprise (MNE).The company desires to completely own its subsidiary and requires a fast entry mode.In addition,the company wants to enter into business immediately without requiring to add a new capacity.In this scenario,which of the following modes of entry will be most appropriate for the company?

A) Greenfield operation
B) Acquisition
C) Licensing
D) Build-operate-transfer agreement

Question 42

Which of the following statements is true of greenfield operations?

A) They suffer from a slow entry speed of at least one to several years.
B) They face difficulty in achieving effective equity and management control.
C) They are cost effective and free from risk.
D) They do not add any new capacity to an industry.

Question 43

Explain cultural distance and institutional distance.How can these distances be overcome?

Question 44

What is a location-specific advantage? Explain its significance with examples.Align location advantages with strategic goals.

Question 45

Discuss the institution-based view and resource-based view that determines success of firms.

Question 46

Laelle Corp.,a popular cosmetic brand in France,has decided to expand its business to Australia.The company enters into an agreement with a local firm in Australia by which the two companies share 50 percent equity.This mode of entry is an example of _____.

A) a turnkey project
B) a joint venture
C) licensing
D) co-marketing

Question 47

_____ is a type of wholly owned subsidiary.

A) A research and development (R&D)contract
B) A greenfield project
C) Co-marketing
D) Franchising

Question 48

Prime Vera is a company that sells electrical baking appliances in over 12 countries.It collaborates with Silibakes Inc.and sells silicon baking cups with its new range of electric oven.This mode of entry is an example of _____.

A) a turnkey project
B) franchising
C) co-marketing
D) a joint venture

Question 49

Analyze first-mover disadvantages.

Question 50

In the context of modes of entry,_____ refers to efforts among a number of firms to jointly market their products and services.

A) franchising
B) licensing
C) co-marketing
D) a joint venture

Question 51

Which of the following statements is true of research and development (R&D)contracts?

A) They make innovations at relatively high cost.
B) They are difficult to negotiate and enforce.
C) Quality of a research is easy to assess.
D) Firms build their core R&D capabilities in the long run.

Question 52

A greenfield operation refers to:

A) efforts among a number of firms to jointly market their products.
B) building new factories and offices from scratch.
C) a new entity jointly created and owned by two or more parent companies.
D) exports and contractual agreements of smaller commitments to overseas markets.

Question 53

If generating returns from foreign markets is the goal,and returns are not being generated,which of the following strategies may be necessary?

A) Changing strategic goals
B) Withdrawing from those foreign markets
C) Engaging in a price war
D) Ignoring the liability of foreignness

Question 54

Explain equity and non-equity modes of entry.