Deck 6: Entry Strategies

Question 1

For international companies, exports, joint ventures and wholly owned subsidiaries are the common modes of entry into foreign markets

Answer 1

True

Question 2

The decision to choose a particular type of entry into a foreign market is dependent on the company's core competencies and its risk threshold.

Answer 2

True

Question 3

In selecting a particular type of entry into a foreign market, some of the external factors that might enter into the decision process are market size, political stability, and regulations.

Answer 3

True

Question 4

Exports are goods and services produced by a company in one country and sold in the same country.

Question 5

Exporting is a complex and difficult entry mode.

Question 6

The disadvantage of exporting includes higher transportation costs and logistical difficulties.

Question 7

A commercial invoice is a receipt for delivery of goods.

Question 8

Certificate of origin is similar to a bill of lading and is requested by an importer.

Question 9

Contracts and agreements in exporting are drawn to protect the identity of the shipper.

Question 10

Collaborative arrangements include licensing, franchising, and joint ventures.

Question 11

Under a licensing arrangement, a firm grants rights to some process or other intangible property to another company for a specified period of time in exchange for a fee.

Question 12

One disadvantage of licensing arrangements is the high investments it requires to enter the foreign market.

Question 13

Joint ventures are direct investments in which two or more companies share ownership.

Question 14

One of the keys to successful joint venture arrangements is the selection of the foreign partner.

Question 15

The main advantage of joint ventures is sharing in the profits among the partners.

Question 16

The most complex and high risk investment is owning a wholly owned subsidiary.

Question 17

Greenfield investments are when a company builds its foreign operation from bottom up.

Question 18

Wholly owned subsidiaries are the least risky form of entry mode.

Question 19

Control of operations is one reason why companies prefer to have wholly owned subsidiaries.

Question 20

Foreign governments prefer international companies to fully own their operations.

Question 21

Exporting is an easy entry strategy and is used by

A) Small companies
B) Medium-size and large companies
C) Multinational companies
D) Small, medium, and large companies

Question 22

Advantages of exporting are

A) Low investments
B) Minimal marketing effort
C) Easy to implement
D) All of the above

Question 23

Disadvantages of exporting are

A) Higher transportation costs
B) Require tedious and cumbersome home country government approvals
C) Require additional plant and facilities
D) Require learning a new language

Question 24

Shipper's export declaration is a document that contains

A) Name of the capital of the host country
B) Name of the capital of the home country
C) Transportation details
D) The name of the dispatcher of the transportation company

Question 25

In licensing and franchising arrangements the following assets are transferred

A) Capital
B) Material
C) Brand name
D) Office equipment

Question 26

Advantages of licensing are

A) It is a quick way to enter foreign markets with minimal effort on the part of licensor
B) Requires very little paperwork and does not require government approvals
C) Lessens travel time and costs
D) There is no need for transportation and logistical support

Question 27

Disadvantages of licensing are

A) They require large investments
B) Lack of control of the foreign operations
C) They require additional personnel
D) They require additional marketing efforts

Question 28

Joint venture arrangements are popular because

A) They require very little investments
B) The parent company does not need to add any more personnel
C) Risks are shared in joint venture arrangements
D) They are easy to set up

Question 29

The disadvantages of joint ventures are

A) The lack of control over operations as well as over intellectual property
B) The host government discourages joint ventures
C) It takes more time to understand the local market
D) Forces expatriate staff to learn the local language

Question 30

A wholly owned subsidiary could be established by

A) Investing in stocks of the local company
B) Acquiring a local company
C) Through licensing arrangements
D) Through government negotiations

Question 31

The key advantages of wholly owned subsidiaries are

A) Full control of its operations
B) It is easy to obtain host government approval
C) Reduces financial risk
D) Require minimal additional staff

Question 32

The disadvantages of wholly owned subsidiaries are

A) The investment requirements are very high
B) Limits market expansion opportunities
C) Likely to loose ownership of intellectual property
D) Lacks control of foreign operations

Question 33

International companies establish wholly owned subsidiaries because

A) It is easy to organize
B) Does not require too much of government approvals
C) Is a good way to circumvent host country regulations
D) It offers maximum profit potential

Question 34

Wholly owned subsidiaries are best suited for

A) Small companies
B) Medium-size companies
C) For large companies
D) For publicly held companies

Question 35

In comparing the various entry strategies, it appears that

A) Exports are easy to set up
B) Joint ventures reduce the risk of the parent company
C) Wholly owned subsidiaries provide maximum control of operations
D) All of the above

Question 36

When and why would you use export as an entry mode?

Question 37

What are some of the disadvantages of exporting?

Question 38

Discuss the advantages and disadvantages of licensing/franchising agreements.

Question 39

Why and when do international companies use joint ventures?

Question 40

What is the biggest advantage of using Greenfield investments in international business?

Question 41

Compare the four entry modes. Does any one appear to have an advantage over the others?