Deck 11: Foreign Direct Investment and Collaborative Ventures

Question 1

Joint ventures are a primary entry strategy that focal firms use to enter a foreign market with participating firms.

Answer 1

False

Question 2

When Home Depot entered the Mexican market by purchasing Home Mart, a domestic store chain, the firm was making a Greenfield investment.

Answer 2

False

Question 3

Mergers occur more often between companies of different sizes because a large company can rapidly absorb the costs of a smaller company, which lacks economies of scale.

Answer 3

False

Question 4

One of the key advantages to an equity joint venture is that minority ownership provides some equality when it comes to control over operations.

Question 5

Cross-licensing agreements are a type of project-based venture in which each partner agrees to distribute the products and services of the other firm for a specific percentage of profits.

Question 6

Successful collaborative ventures may involve conflict and tension between partners rather than unity and complacency.

Question 7

IKEA met with initial success in Japan by its willingness to suit local preferences and sell higher-quality furnishings than it did in its other markets.

Question 8

International collaborative ventures are best characterized by which of the following?

A) pooling of resources from firms of one nation to enter a foreign market
B) agreement by firms to share resources and technology across borders
C) formation of cross-border partnerships to enter foreign markets
D) establishment of a physical presence in a foreign market

Question 9

All of the following are characteristics of foreign direct investment except ________.

A) involves substantial risk
B) simplifies foreign market entry
C) necessitates significant resources
D) implies local presence and operations

Question 10

Which of the following is often a motive of firms in the mining industry to enter new foreign markets?

A) access natural resources
B) skilled pools of labor
C) increase refining capacity
D) low minimum wages

Question 11

Which of the following is an asset-seeking motive to achieve better access to markets?

A) share suppliers
B) attain knowledge
C) access raw materials
D) follow key customers

Question 12

Which of the following most likely explains why manufacturing firms often establish facilities in Mexico, China, and Eastern Europe?

A) skilled workforce
B) few trade barriers
C) natural resources
D) inexpensive labor

Question 13

A firm that pursues a collaborative venture to take advantage of government incentives is demonstrating which type of motive?

A) efficiency-seeking
B) resource-seeking
C) asset-seeking
D) market-seeking

Question 14

Governments encourage inward FDI through incentives for all of the following reasons except ________.

A) increase tax revenue
B) transfer skills and technologies
C) meet customer demands
D) provide local jobs and capital

Question 15

When a company erects green buildings to house its new call center in Chennai, it is practicing ________.

A) sustainability
B) local responsibility
C) modern architecture
D) ecology

Question 16

Which of the following best explains why some service industry firms most likely enter foreign markets through FDI?

A) The firm's service cannot be duplicated by a foreign based franchisor.
B) The service of the firm requires tough intellectual property laws.
C) The service offered by the firm requires personal interfacing with customers.
D) The firm's service is not successful domestically, so globalization is required.

Question 17

Which of the following best exemplifies corporate social responsibility?

A) a computer firm charging a fee for the recycling of old computers
B) an automobile manufacturer selling low fuel economy cars and trucks
C) a telecommunications firm charging high rates to low income customers
D) an automotive battery firm offering to recycle car batteries free of charge

Question 18

Which of the following leading MNEs has the most foreign subsidiaries and affiliates?

A) BP
B) General Electric
C) UBS
D) Toyota

Question 19

Which of the following MNEs operates in the greatest number of host countries?

A) UBS
B) Axa
C) Generali
D) Citigroup

Question 20

Which of the following nations is becoming one of the top destinations for FDI?

A) Bangladesh
B) Mexico
C) Jamaica
D) India

Question 21

All of the following are governmental factors that firms must consider when selecting an FDI location except ________.

A) market proximity
B) transparency
C) bureaucracy
D) political stability

Question 22

The level of taxes in a country represents which of the following types of factors to be considered when selecting an FDI location?

A) political factor
B) profit retention factor
C) market factor
D) infrastructural factor

Question 23

Mergers are more common between which of the following?

A) foreign competitors
B) manufacturing firms
C) MNEs and SMEs
D) companies of similar size

Question 24

All of the following are most likely potential benefits of mergers except ________.

A) sharing of resources between participating firms
B) integration of two unique corporate cultures
C) increased efficiency and economies of scale
D) wider range of available products and services

Question 25

All of the following are typical reasons firms enter equity joint ventures except ________.

A) a focal firm desires immediate access to customers in a foreign market
B) a local partner lacks the necessary capital to take advantage of an opportunity
C) a local firm wants an advantage when expanding its business abroad
D) a foreign firm wants assistance navigating the host country's government and culture

Question 26

Which of the following is one of the first questions managers should consider before entering a collaborative venture?

A) Should our firm agree to a formal contract arrangement with a business partner?
B) How will our firm measure success at the end of the contractual time frame?
C) Can our firm be successful in this foreign market without a business partner?
D) What kind of technical and managerial support is needed by the foreign partner?

Question 27

Which of the following is a key reason that a focal firm would most likely enter a collaborative venture with a foreign firm?

A) when the foreign firm can fill an important gap in the focal firm's value chain
B) if the foreign firm develops a product or service for a niche market
C) when the focal firm needs to raise additional capital for research and development
D) if the focal firm agrees to a long-term legal contract that is mutually beneficial

Question 28

Successful international retailers most likely have which of the following?

A) bilingual managers and salespeople and a sophisticated marketing campaign
B) a highly developed business plan and an understanding of the target market
C) solid capital assets and a minimal cost of foreign and domestic operations
D) a structured organizational system and the support of local governments

Question 29

ABC Appliance
The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market.

-Which of the following should most likely be considered in making the decision to expand ABC operations into the Asian market?

A) How will domestic competitors of ABC react to an international expansion?
B) What organizational and financial resources can ABC commit to an Asian expansion?
C) How many managers will need to relocate to Asia to oversee the Asian project?
D) How will ABC utilize the Internet to achieve success in the Asian market?

Question 30

ABC Appliance
The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market.

-Which of the following most likely supports a decision to enter the Asian market by building a factory near Tokyo?

A) Executives at ABC want the firm to have the flexibility to reconfigure operations at the Japanese plant.
B) The Japanese yen has been fluctuating over the last year and analysts do not anticipate it settling down.
C) ABC managers want to delegate responsibility of much of the Japanese plant to local intermediaries.
D) The ABC CEO is willing to invest a large amount of capital and other assets to ensure success in Japan.

Question 31

ABC Appliance
The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market.

-Which of the following most likely supports a decision to enter the Asian market through a project-based non-equity collaborative venture with an Asian appliance manufacturer to create an environmentally friendly dishwasher?

A) Asian firms have offered to pool their resources with ABC to create a new entity.
B) Managers are uncertain of the long-term strategic importance of the Asian market.
C) ABC managers have the financial resources to quickly build a new Asian plant.
D) The Asian government has offered incentives to ABC if the firm builds a plant.

Question 32

Ciao Manufacturing Location
The Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in the Italy and Spain, and firm managers believe that the Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility.

-Which of the following questions is most important for Ciao managers to evaluate in their decision regarding the location of the new manufacturing facility?

A) What would be the costs and availability of skilled labor in Canada and Russia?
B) What other industries manufacture products in Canada and Russia?
C) How much time will it take to train managers in Canada and Russia?
D) How will marketing need to be modified in Canada and Russia?

Question 33

In a short essay, discuss three reasons that firms often seek new market opportunities.

Question 34

What are three efficiency-related motives that focal firms might have for internationalizing through FDI? Explain your answer in a short essay.

Question 35

In a short essay, choose one MNE and describe some of its socially responsible activities.

Question 36

In a short essay, explain the difference between vertical FDI and horizontal FDI. To illustrate your explanation, provide examples of firms that successfully utilize each type of FDI.

Question 37

In a short essay, discuss the four key differences between project-based collaborations and equity joint ventures.

Question 38

In a short essay, discuss strategies that managers can employ in order to increase the chances of a successful collaborative venture.

Question 39

In a short essay, describe the four primary barriers faced by retailers attempting to duplicate domestic success in international markets. Illustrate your answer with mistakes made by U.S. retailers in foreign markets.

Question 40

In a short essay, explain why one of the primary motives for a firm's international expansion-to compete with key rivals in their own markets-may also be one of the biggest challenges for retailers pursuing new international markets.

Question 41

In a short essay, explain why it is crucial for service sector companies to use FDI. Use retailing as an example and describe the steps typically taken by retailers who have successfully expanded into international markets. Provide examples when needed for illustration.