Deck 9: Jumping In: Foreign Market Entry and Ownership Options

Question 1

Why do firms like Nike and Reebok choose contract manufacturing and what negative consequences have they faced?

Answer 1

No Answer

Question 2

US multinationals are acquiring larger shares of Chinese joint ventures, allowing US managers to gain more leverage over

A) key business decisions.
B) how to develop an effective local sales force.
C) strategies to retain key Chinese personnel.
D) how aggressively the local partner lobbies government officials.
E) all of the above.

Answer 2

A

Question 3

SkyTeam alliance binds several airlines in a code-sharing agreement to sell "seamless" tickets from US cities to European destinations. This is an example of a(n) _________

A) marketing alliance.
B) financial alliance.
C) research and development alliance.
D) production alliance.
E) intracorporate alliance.

Answer 3

A

Question 4

One way to minimize conflict between joint-venture partners is to

A) order the partner to follow a specific plan.
B) use one style of management.
C) take a firm stand on the non-negotiable issues.
D) establish a contract that covers every area of the operation.
E) use a delegated arrangement.

Question 5

A firm purchases the right to manage the drinking-water delivery system from the government of a South American country. This is an example of

A) a strategic alliance.
B) an acquired subsidiary.
C) a turn-key operation.
D) privatization.
E) a financial alliance.

Question 6

A government selling off state-owned enterprises or assets to private companies or individuals is called

A) confiscation.
B) expatriation.
C) privatization.
D) government sales.
E) none of these.

Question 7

Which of the following is the major advantage that foreign acquisitions have over a greenfield approach?

A) less expensive.
B) quicker entry into foreign markets.
C) more control operation.
D) foreign units do not operate independently
E) none of these.

Question 8

The purpose of a _________________ would be to conduct joint development of new products, services, or technologies.

A) research and development alliance.
B) financial alliance.
C) marketing alliance.
D) greenfield alliance.
E) production alliance.

Question 9

Strategic alliances

A) have grown significantly in recent years.
B) often allow for close observation of a partner's invisible skills due to the cooperative relationships.
C) are typically narrower in scope than joint ventures.
D) can ease market entry, allow for sharing of risk, and can increase the ability to realize competitive advantages quickly.
E) involve all of these.

Question 10

A firm in the US enters into an agreement with a firm in Chile to share their understanding of customers in South America and utilize their sales network. This is an example of which type of strategic alliance?

A) production.
B) marketing.
C) sales office.
D) research and development.
E) financial.

Question 11

An alliance in which firms agree to manufacture products or deliver services in a shared facility that is either built from scratch or owned by one of the partners is called

A) an acquired subsidiary.
B) a greenfield alliance.
C) a production alliance.
D) a research and development alliance.
E) a financial alliance.

Question 12

Making strategic alliances work effectively requires

A) trust between the parties.
B) a clear set of shared objectives.
C) a diplomatic management style.
D) all of these.
E) none of these.

Question 13

Which of the following statements is not true regarding joint ventures?

A) they are more financially risky than subsidiaries.
B) they leverage a partner's resources and know-how.
C) they risk giving some control or technology to a partner.
D) they still have some ownership risk.
E) all of these are true.

Question 14

Which of the following is a disadvantage of a greenfield subsidiary?

A) it is very expensive to establish.
B) it is time-consuming to set up.
C) it requires considerable international expertise.
D) it is risky due to ownership.
E) all of these.

Question 15

Challenges of joint ventures include

A) protection of key technologies or know-how.
B) cultural and managerial conflicts.
C) developing an effective performance appraisal system.
D) all of these.
E) none of these.

Question 16

When joint-venture partners agree to relinquish management of ongoing operations and establish new management, the company is using a(n)

A) turn-key project.
B) greenfield arrangement.
C) delegated arrangement.
D) license agreement.
E) shared governance.

Question 17

Which of the following statements is not true regarding the greenfield approach?

A) building a greenfield facility takes time.
B) firms are vulnerable to the host governments.
C) construction can be expensive.
D) firms have minimal control.
E) recruiting and training a new workforce can be a challenge.

Question 18

The contractual right to operate a business using the methods, procedures, products, trademarks, and marketing strategies created by another firm is an example of

A) licensing.
B) franchising.
C) contract management.
D) a wholly owned subsidiary.
E) a joint venture.

Question 19

Licensing is likely a good foreign market entry option in areas where

A) foreign investment restrictions are in place.
B) firms have limited resources and want to reduce their financial exposure.
C) high tariffs make importing goods too expensive.
D) a high level of product customization is needed that is best done locally.
E) all of the above.

Question 20

Define turn-key projects and why a company would choose to use this option.

Question 21

Identify three foreign market entry options with ownership and give an advantage and disadvantage of each.

Question 22

Identify three foreign market entry options without ownership and give an advantage and disadvantage of each.

Question 23

How should GE handle China's demands for a transfer of technology in regards to its power turbines?

Question 24

Define intracorporate transfer. Which type of foreign market entry strategy is it?

Question 25

What is the difference between licensing and franchising? What are the strategic advantages and disadvantages associated with each option?

Question 26

Describe the options for strategic alliances other than joint ventures and their strategic advantages.

Question 27

What is the difference between a greenfield and an acquired subsidiary? What are the advantages and disadvantages of each?

Question 28

What is a delegated arrangement? What are its advantages and disadvantages?

Question 29

Compare and contrast the developmental differences of MNCs from emerging countries with MNCs from developed countires. (look at least four differences)

Question 30

Discuss the benefits and challenges of a company beginning the internationalization process with exporting.

Question 31

Describe the six stages of internationalization for businesses.

Question 32

When entering overseas markets, small firms are likley to begin by

A) importing.
B) building plants overseas.
C) creating subsidiaries.
D) exporting.
E) all of the above.

Question 33

This stage of international development usually involves the assembly or manufacture of a significant amount of products overseas.

A) exporting.
B) sales subsidiary.
C) multinational.
D) transnational.
E) international division.

Question 34

Firm X in the US sells their product to Firm Y, an affiliated firm in Germany. This is an example of

A) direct importing.
B) franchising.
C) indirect importing.
D) licensing.
E) intracorporate transfer.

Question 35

Which of the following statements is true about joint ventures?

A) cost and risk-sharing are major reasons for creating joint ventures.
B) joint ventures are partnerships between large multinationals and small local firms.
C) joint ventures are a 50/50 split in ownerships between two firms.
D) multinationals with technology that isimportant to their products typically enter into a joint venture with minority interest.
E) all of these true.

Question 36

Which of the following represents a risk for firms involved in a turn-key project overseas?

A) know-how may be transferred to potential foreign competitors.
B) foreign governments may create obstacle.
C) they are often a limited, short-term way to enter a foreign market.
D) all of these.
E) none of these.

Question 37

Which of the following is not an international entry option that involves ownership?

A) greenfield subsidiary.
B) acquired subsidiary.
C) joint venture.
D) foreign operations.
E) franchising.

Question 38

Multinationals target foreign companies for acquisition because they can have assets that represent valuable competitive advantage.

Question 39

Cost, knowledge, and risk-sharing are major factors when creating joint ventures.

Question 40

Firm D has a number of well-known oil change operations in the U.S. It decides to allow a firm in Mexico to learn its methods and use its name. Firm D is using a franchising approach to foreign market entry.

Question 41

Firm A from the U.S. and Firm B from France decide to hire a separate team of managers to run their joint-venture operation. This is an example of a delegated arrangement.

Question 42

Joint ventures are typically narrower in scope, less stable, and shorter in duration than other types of strategic alliances.

Question 43

An acquired subsidiary is an international market entry option that offers a high degree of control.

Question 44

An advantage of using a greenfield subsidiary is that it is relatively inexpensive.

Question 45

In some countries, joint ventures can provide access to markets that otherwise would be difficult to enter because of foreign ownership restrictions.

Question 46

Joint ventures and strategic alliances are the same thing.

Question 47

Joint ventures are typical of small firms who don't have the resources to go it alone.

Question 48

Emerging MNCs are more adept than MNCs from developed countries in politically unstable environments.

Question 49

Intracorporate transfers account for about one-third of international trade worldwide.

Question 50

Firms always move sequentially through the stages of international development since they need to have the experience of one level to move on to the next.

Question 51

Unlike manufacturing companies, service companies are more likely to go through a gradual series of stages of international development.

Question 52

The role of a multinational's foreign subsidiary is to serve the needs of the national or regional market where it is located.

Question 53

A disadvantage of establishing a wholly owned subsidiary is that proprietary technology cannot be easily protected.

Question 54

A disadvantage of contract manufacturing is that firms have ceded control for product quality and timely delivery.

Question 55

Most turn-key projects involve building expensive large-scale facilities like oil refineries and power plants.

Question 56

A turnkey project is

A) a contract to design and build a facility in a foreign country. The facility can be run by the contractor for a short time or turned over to the contractee.
B) a contract that provides a foreign organization with managerial expertise for either a flat fee or a percentage of sales or profits.
C) a contract to operate a business using the methods, procedures, products, trademarks, and marketing strategies created by another company.
D) all of these.
E) none of these.

Question 57

A firm that provides a foreign organization with specific services, technical help, or managerial expertise for either a flat fee or a percentage of sales or profits is engaging in

A) franchising.
B) licensing.
C) management contract.
D) setting up a sales office.
E) exporting.

Question 58

Which of the following is not true about franchising?

A) it is a relatively inexpensive foreign entry option with limited risk.
B) it is a method of international market entry that requires the firm to give up all control over operating rules.
C) it is a method of international market entry with limited financial risk.
D) it is the contractual right to operate a business using the methods, procedures, products, trademarks, and marketing strategies created by another company.
E) service firms often use franchising.

Question 59

Licensing is a popular mode of entry into foreign markets for all of the following reasons except it:

A) Involves very little out of pocket costs.
B) Allows the firm to take advantage of locational advantages.
C) Offers weak protection of intellectual property
D) Allows a firm to avoid host country restrictions of FDI
E) Helps a firm to avoid high tariffs and NTB in host countries

Question 60

Microsoft ____________________its computers with government
Agencies and schools in over a dozen African countries to build its presence on a continent and lock out competitor Linux from key customers

A) licensed.
B) directly exported.
C) indirectly exported.
D) franchised.
E) manufactured.

Question 61

Licensing

A) involves a licensor and licensee.
B) involves all of these.
C) is a relatively inexpensive foreign entry option.
D) is often used by firms with limited resources.
E) involves selling the right to a firm's brand names, patents, manufacturing technology, or other intellectual property to a foreign firm.

Question 62

Exporting can

A) be a company's first exposure to international business.
B) be a low-cost and rapid method to internationalize.
C) have significant barriers such as tariff and quotas.
D) involve all of these.
E) none of these.

Question 63

Which of the following statements is not true?

A) a company can engage in more than one stage of international development at a time.
B) intracorporate transfers account for about one third of international trade worldwide.
C) exporting is only for companies at the beginning stages of international development.
D) exporting is not just for small firms; many large companies export extensively.
E) all of these.

Question 64

Which of the following is a type of exporting?

A) direct.
B) indirect.
C) intracorporate transfer.
D) all of these.
E) none of these.

Question 65

Which of the following is a form of international operations that involves ownership?

A) foreign subsidiary.
B) exporting.
C) licensing.
D) franchising.
E) turnkey projects.

Question 66

A firm that realizes the need to involve the local market in making strategic decisions and the importance of local understanding is operating at which stage of international development?

A) transnational.
B) sales subsidiary.
C) exporting.
D) multinational.
E) direct sales.

Question 67

Firm C is selling to other countries through Firm D. In other words, Firm D buys parts and components from Firm C and then resells the entire product overseas. This is an example of which type of international development?

A) licensing.
B) direct exporting.
C) indirect exporting.
D) sales office.
E) turnkey.

Question 68

Which of the following statements about stages of international development is not true?

A) firms always move sequentially through the stages of international development since they need to have the experience of one level to move on to the next.
B) some firms skip stages of international development depending on the situation.
C) service firms are more likely to skip the first stages of international development.
D) all of these.
E) none of these.

Question 69

The company offering the business system (including methods, trademarks, products, and so on) is the franchisee.

Question 70

It is easy to take advantage of location economies when using a licensing strategy.

Question 71

A transnational orientation allows for location-specific tailoring of products or services.