Deck 12: Entering Foreign Markets

Question 1

What type of entry allows a firm to learn about a foreign market while limiting the firm's exposure to that market?

A)Minimal-commitment
B)Small-scale
C)Reduced-commitment
D)Minimal-scale
E)exporting

Answer 1

B

Question 2

Which of the following is not a mode to enter foreign markets?

A)Turnkey projects
B)Establish joint ventures with another home country firm
C)Set up a new wholly owned subsidiary in the host country
D)Franchising
E)Licensing

Answer 2

B

Question 3

The market entry mode which may help a firm achieve experience curve and location economics is what?

A)exporting
B)importing
C)joint ventures
D)green field acquisition
E)wholly owned subsidiaries

Answer 3

A

Question 4

Which of the following is not a first-mover advantage?

A)The ability to increase a firm's chances of survival by entering a foreign market before industrial rivals
B)The ability to build sales volume in a country and ride down the experience curve ahead of rivals
C)The ability to create switching costs that tie customers to a company's products or services
D)The ability to pre-empt rivals
E)The ability to capture demand by establishing a strong brand name

Question 5

The choice of what foreign market to enter should, according to the textbook, be driven by an assessment of:

A)relative long-run growth and profit potential.
B)geographic proximity and friendliness of host government.
C)climate and economic stability of host government.
D)friendliness of host government and profit potential.
E)relative long-run profit and the risk of losses

Question 6

Entering a large market such as China before other similar industries will be associated with what?

A)exporting
B)licensing
C)franchising
D)late mover advantages
E)a high level of risk

Question 7

Sonic Jets, an international business, is considering entering a new market in Germany.What does Sonic Jets need to consider?

A)Its scale of entry
B)Its role as a social entity
C)Its home-country employees
D)Its top managements' desire to move to Germany
E)Its product benefits

Question 8

The advantages frequently associated with entering a market early are commonly known as:

A)inaugural advantages.
B)first-mover advantages.
C)initial-entrant premiums.
D)proactive-mover benefits.
E)primary entrant advantages

Question 9

What are the disadvantages associated with entering a market early commonly known as?

A)First-mover disadvantages
B)Inaugural disadvantages
C)Initial-entrant disadvantages
D)Proactive-mover losses
E)Primary entrant advantages

Question 10

Most manufacturing firms begin their global expansion through ______.

A)establishing a joint venture with a host country firm
B)licensing
C)turnkey projects
D)exporting
E)franchising

Question 11

All of the following are pioneering costs except the costs of:

A)business failure.
B)educating consumers.
C)promoting and establishing a product offering.
D)regulatory change
E)learning costs from the mistakes of early entrants.

Question 12

Once attractive markets have been identified, it is important to consider the:

A)timing of entry.
B)competition.
C)costs involved.
D)insurance needed in the event of failure.
E)All of these answers are correct

Question 13

Which of the following are costs that an early entrant has to bear that a later entrant can avoid?

A)Experimental costs
B)Untried costs
C)Introductory costs
D)Pioneering costs
E)Early adoption costs

Question 14

In a recent article, Bartlett and Ghoshal pointed out the ability that businesses based in developing nations have to enter foreign markets and become:

A)global players.
B)top sellers.
C)first-movers.
D)late-entrants.
E)international businesses

Question 15

According to the opening case, before General Electric discovered joint ventures, it entered a foreign market in what way?

A)exporting
B)importing
C)franchising
D)licensing.
E)Greenfield subsidiary

Question 16

According to the text, __________________ tend to change the competitive playing field and unleash a number of changes, some desirable and some undesirable.

A)economies of scale
B)loan commitments
C)significant strategic commitments
D)technological development
E)pioneering costs

Question 17

The ______________ entrant is more likely than the ________________ entrant to be able to capture the first-mover advantages associated with demand pre-emption, scale economies, and switching costs.

A)small scale; large scale
B)small scale; moderate scale
C)large scale; moderate scale
D)there is no relationship between scale of entrant and the ability to capture first-mover advantages
E)large scale; small scale

Question 18

Which of the following are the two distinct advantages of exporting?

A)Getting rid of excess inventory and reducing risk
B)Access to local partner's knowledge; and politically acceptable
C)Ability to earn returns from process technology skills in countries where FDI is restricted; and politically acceptable
D)Access to a local partner's knowledge and it may help a firm achieve experience curve; and location economies
E)It avoids the often-substantial cost of establishing manufacturing operations in the host country; and it may help a firm achieve experience curve and location economies

Question 19

A decision that has a long-term impact and is difficult to reverse a(n):

A)operational pledge.
B)functional assurance.
C)tactical covenant.
D)strategic commitment.
E)core investment

Question 20

_______________ costs arise when the business system in a foreign country is so different from that in a firm's home market that the enterprise has to devote considerable effort, time, and expanse to learning the rules of the game.

A)Pioneering
B)Early entry
C)Introductory costs
D)Inaugural costs
E)Primary entrant

Question 21

The contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel in a(n) _____________ project.

A)beginning to end
B)A to Z
C)front-to-back
D)turnkey
E)business completion

Question 22

Which of the following is not an argument in favour of licensing as a means of foreign market entry?

A)The firm does not have to have capital to open markets overseas
B)A firm wants to participate in a foreign market, but is prohibited from doing so by barriers to investment
C)The firm possesses some intangible property that might have business applications and does not want to develop that technology or those applications itself
D)The firm does not have to bear the development costs and risks associated with opening a foreign market
E)The firm wants to maintain tight control over the marketing

Question 23

Other than licensing, the form of foreign market entry that results in a firm in the host country paying a royalty to the firm that has the rights to a product or service is called _____________.

A)joint venture
B)exporting
C)franchising
D)wholly owned subsidiary
E)merger

Question 24

Turnkey projects are most common in the following industries:

A)chemical, pharmaceutical, petroleum refining, and metal refining.
B)textiles, shoes, leather products, and linens.
C)cars, trucks, construction equipment, and farm implements.
D)lumber, furniture, paper, and pulp.
E)automobile, pulp and paper, metal mining, oilfield production

Question 25

Distinct advantages of _______________ are low development costs and risks.

A)wholly owned subsidiaries and exporting
B)exporting and turnkey projects
C)joint ventures and wholly owned subsidiaries
D)franchising and licensing
E)mergers and acquisitions

Question 26

Creating efficient competitors and lack of long-term market presence are disadvantages of ______________.

A)turnkey projects
B)licensing
C)franchising
D)exporting
E)joint ventures

Question 27

Suppose Apple Computer granted a France company the rights to manufacture keyboards in France in exchange for a royalty fee.This type of arrangement is referred to as a:

A)franchising agreement.
B)turnkey project.
C)licensing agreement.
D)wholly owned subsidiary.
E)joint venture

Question 28

Consider the following scenario: Ballard Manufacturing wants to sell its products overseas, but only if it can act on its own and manufacturer its product in a central location.Based on these objectives, the appropriate foreign entry mode for Ballard is:

A)wholly owned subsidiary.
B)franchising.
C)exporting.
D)licensing.
E)turnkey project

Question 29

Lack of control over quality and the inability to engage in global strategic coordination are distinct disadvantages of ___________.

A)franchising
B)exporting
C)wholly owned subsidiaries
D)turnkey projects
E)joint ventures

Question 30

Turnkey projects are a means of exporting ____________ to other countries.

A)commodities
B)the manufacturing of goods
C)process technology
D)the provision of services
E)the production of automobiles

Question 31

______________ is basically a specialized form of licensing in which the franchiser not only sells intangible property to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business.

A)Franchising
B)Chartering
C)Exporting
D)Leasing
E)Cross-licensing

Question 32

What type of agreements enable firms to hold each other hostage, which reduces the probability that they will behave opportunistically toward each other?

A)Cross-licensing
B)Franchise
C)Joint venture
D)Exporting
E)Mergers

Question 33

Which foreign market entry strategy has the following disadvantages: lack of long-term market presence, may inadvertently create a competitor, risk selling a firm's competitive advantage?

A)Wholly owned subsidiary
B)Turnkey project
C)Exporting
D)Franchising
E)Joint venture

Question 34

All of the following are disadvantages of licensing except:

A)high costs and risks.
B)lack of control over technology.
C)inability to realize location and experience curve economies.
D)inability to engage in global strategic coordination.
E)all of these answers are correct

Question 35

_______ takes advantage of a firm's competency in the area of assembling and running technologically complex projects.

A)Licensing
B)Exporting
C)Turnkey projects
D)Franchising
E)Green field investments

Question 36

Suppose Exxon, a U.S.company, was contracted by a Saudi Arabian company to build an oil refinery in Saudi Arabia, and the contract specified that Mobil would handle every aspect of the construction of the refinery, including the training of the operating personnel.This type of project is referred to as a(n)

A)turnkey project.
B)beginning to end.
C)A to Z.
D)front to back.
E)petro project

Question 37

Under a(n) _____________ agreement, a firm might license some valuable intangible property to a foreign partner, but in addition to a royalty payment, the firm might also request that the foreign partner license some of its valuable know-how to the firm.

A)inter-licensing
B)reciprocal-licensing
C)cross-licensing
D)parity-licensing
E)protected-licensing

Question 38

An arrangement whereby a firm grants the rights to intangible property to another entity for a specified time period in exchange for royalties is a(n) _______________ agreement.

A)franchising
B)turnkey
C)licensing
D)exporting
E)joint venture

Question 39

All of the following are disadvantages of exporting except?

A)It may help a firm achieve experience curve economies
B)High transportation costs can make exporting uneconomical
C)Tariff barriers can make exporting uneconomical
D)Exporting from a firm's home bases may not be appropriate if there are lower-cost locations for manufacturing the product abroad
E)Marketing is the responsibility of local agents

Question 40

Examples of _____________ property include patents, inventions, formulas, processes, designs, copyrights, and trademarks.

A)intangible
B)discernable
C)tangible
D)nondescript
E)proprietary

Question 41

Suppose Boeing decided to build an assembly plant in Iceland and, in an effort to maintain maximum control, decided to operate the plant completely on its own.This is an approach to foreign market entry referred to as:

A)joint venture.
B)turnkey operation.
C)exporting.
D)wholly owned subsidiary.
E)green field venture

Question 42

If a firm's competitive advantage is based on control over proprietary technological know how, which of the following foreign entry modes should be avoided?

A)Exporting and joint ventures
B)Turnkey projects and franchising
C)Wholly owned subsidiaries and franchising
D)Joint ventures and licensing
E)Acquisitions

Question 43

The foundation of franchising arrangements is that the firm's ______________ conveys a message to consumers about the quality of the firm's product.

A)market
B)brand name
C)employees
D)competitors
E)products

Question 44

maintain tight control over its operations.

A)Licensing
B)Franchising
C)Wholly owned subsidiary
D)Turnkey operation
E)Acquisition

Question 45

Many service firms favour a combination of franchising and ______ to control the franchises within a particular country or regions.

A)strategic alliances
B)subsidiaries
C)turnkey project partners
D)licensing agreements
E)joint ventures

Question 46

_______________ is preferred to joint venture arrangements and to using foreign market agents.

A)Franchising
B)Exporting
C)Wholly owned subsidiary
D)Turnkey project
E)Merger

Question 47

Establishing a wholly owned subsidiary in a foreign country can be done:

A)through a turnkey operation or through a licensing agreement.
B)through a joint venture of through acquiring an established firm to promote its products.
C)through setting up a new operation in a foreign country or through acquiring an established firm to promote its products.
D)through licensing agreements or through setting up a new operation in the foreign country.
E)through master franchising agreements

Question 48

If Gateway and Compaq established a jointly owned entity for the purpose of building computers to export to Asia, that would be an example of a ___________________ form of foreign market entry.

A)wholly owned subsidiary
B)joint venture
C)turnkey project
D)franchise
E)merger

Question 49

_______________ has the following advantages: firms benefit from a local partner's knowledge of the host country's competitive conditions, a firm shares development costs with a local partner, and in many countries political considerations necessitate this form of entry.

A)Wholly owned subsidiary
B)Franchising
C)Exporting
D)Joint venture
E)Acquisition

Question 50

The most advantageous entry mode is ______________, if a high-tech firm sets up operations in a foreign country to profit from a core competency in technological know-how.

A)exporting
B)turnkey operation
C)franchising
D)licensing
E)wholly owned subsidiary

Question 51

Which of the following is a disadvantage of joint ventures?

A)It gives a firm the tight control over subsidiaries that it might not need to realize experience curve or location economies.
B)A firm that enters a joint venture risks giving control of its technology to its competitors.
C)The shared ownership arrangement can lead to conflicts and battles for control between the investing firms if their goals and objectives change or if they take different views as to what the strategy should be.
D)When the development costs and/or risks of opening foreign markets are low, a firm might gain by sharing these costs and/or risks with a foreign partner.
E)A firm does not gain any local expertise

Question 52

Protection of technology, the ability to engage in global strategic coordination and the ability to realize location and experience economies are distinct advantages of ______________.

A)franchising
B)wholly owned subsidiary
C)exporting
D)licensing
E)acquisitions

Question 53

In a _____________, the firm owns 100 percent of the stock.

A)joint venture
B)turnkey operation
C)wholly owned subsidiary
D)strategic alliance
E)acquisition

Question 54

Whereas primarily ________________ firms pursue licensing, primarily ____________ firms pursue franchising.

A)manufacturing; service
B)agricultural; manufacturing
C)service; mining
D)mining; service
E)banking; manufacturing

Question 55

Daimler-Benz used ______________ to establish a bigger presence in the North American market.

A)licensing
B)franchising
C)a merger
D)turnkey projects
E)an acquisition

Question 56

The greater the pressures for cost reductions are, the most likely a firm will want to pursue some combination of:

A)licensing and joint venture.
B)exporting and wholly owned subsidiaries.
C)franchising and exporting.
D)joint ventures and wholly owned subsidiaries.
E)exporting and licensing

Question 57

What is the most costly form of foreign market entry?

A)Exporting
B)Licensing
C)Franchising
D)Wholly owned subsidiary
E)Joint venture

Question 58

The most typical joint venture is:

A)80/20, in which there are two partners and one partner holds a substantial majority share.
B)50/50, in which there are two partners and each partner holds an equal share.
C)25/25/25/25, in which there are four partners and each partner hold an equal share.
D)51/49, in which there are two partners and one partner holds a slight majority share.
E)60/40, in which there are two partners and one holds a majority share

Question 59

A _____________ entails establishment of a firm that is jointly owned by two or more otherwise independent firms.

A)licensing agreement
B)wholly owned subsidiary
C)franchise
D)joint venture
E)merger

Question 60

If Pepsi and a Turkish firm established a jointly owned entity for the purpose of bottling soft drinks in Turkey, that would be an example of a:

A)turnkey project.
B)wholly owned subsidiary.
C)joint venture.
D)franchise.
E)merger

Question 61

The need for pre-emption is particularly great in markets that are

A)rapidly globalizing.
B)dynamic.
C)stable.
D)deregulated.
E)fast growing

Question 62

Joint ventures have proven to be very profitable to General Electric.

Question 63

Which of the following is not an advantage of acquisitions?

A)They pre-empt the competition
B)They are quick to execute
C)They allow a firm to rapidly build its presence in a new market
D)They are less risky than green-field ventures
E)They are the least expensive form of expansion

Question 64

Differences in _______ can slow the integration of operations in acquisitions.

A)culture
B)cost structure
C)customer expectations
D)profitability
E)country sizes

Question 65

The Mercer Study concluded that _______ percent of the 150 acquisitions studied ended up eroded or substantially shareholder value.

A)90
B)70
C)50
D)30
E)25

Question 66

Pre-emptive advantages are the advantages frequently associated with entering a market early.

Question 67

When a firm makes an acquisition in a foreign market, it acquires all of the following except:

A)a local brand name.
B)customers.
C)logistics systems.
D)managers' knowledge of the business environment in that nation.
E)the intellectual property

Question 68

Which of the following is not a reason why acquisitions fail?

A)The cultures of the acquiring and acquired firms clash
B)Attempts to realize synergies by integrating the operations of the acquiring firm and host-country government often run into roadblocks and take longer than forecasted.
C)Inadequate pre-acquisition screening
D)Overpayment for assets of the acquired firm
E)Underpayment for assets of the acquired firm

Question 69

If a firm is entering a market where there is already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, it may pay the firm to enter via a(n):

A)acquisition.
B)government subsidy.
C)green-field venture.
D)franchise.
E)joint venture

Question 70

Ravenscraft and Scherer concluded in their study that many good companies were acquired between January 1990 and July 1995, and on average, their profits and market shares _______ following the acquisition.

A)declined
B)skyrocketed
C)doubled
D)remained the same
E)followed the market value

Question 71

Suzi's Sleds, Inc.is considering entering Japan, where there are no other incumbent competitors to acquire.Suzi's would do best in Japan with a(n):

A)franchise.
B)turnkey project.
C)joint venture.
D)green-field venture.
E)acquisition

Question 72

Pioneering costs are costs that an early entrant has to bear that a later entrant can avoid.

Question 73

An advantage of acquisitions is ______________?

A)low cost
B)more risk than green field ventures
C)the ability to pre-empt competitors
D)faster to implement than exporting
E)faster to implement than importing

Question 74

Which of the following statements is true?

A)Green-field ventures are risky.
B)Green-field venture are more risky than acquisitions.
C)There is a possibility of a green-field venture being pre-empted by more aggressive global competitors.
D)Green-field ventures are slow to establish.
E)Green-field ventures are more profitable

Question 75

China prefers that foreign firms enter through a joint venture because

A)the foreign firm's investment will ensure that it is around for the long-run
B)this gives an opportunity for foreign firms to protect their technology and intellectual property
C)corporate taxes are higher on joint ventures
D)foreign firms would be forced to serve the Chinese domestic market
E)foreign firms would invest capital in China

Question 76

Many Canadian companies are leery of forming equity joint ventures with China because of

A)changing regulations
B)issues around currency convertibility
C)lack of skilled labour
D)poor quality raw materials
E)all of the answers are correct

Question 77

Why are wholly owned subsidiaries preferred by firms pursuing global or transnational strategies?

A)They are more challenging
B)They are less costly than other modes
C)They allow the use of profits generated in one market and improve the competitive position in another
D)They allow for easier management and transitions
E)they increase the value of the firm more

Question 78

The choice of what foreign markets to enter should be driven by an assessment of relative long-run growth and profit potential.

Question 79

The big advantage of establishing a(n) _______ in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

A)franchise
B)joint venture
C)turnkey project
D)green-field venture
E)takeover strategy

Question 80

What term refers to the management of the acquired firm being too optimistic about the value than can be created via an acquisition and is thus willing to pay a significant premium over a target firm's market capitalization?

A)The optimistic hypothesis
B)Managerial thinking
C)The hubris hypothesis
D)Managerial potential
E)Managerial optimism