Deck 13: Entering Foreign Markets

Question 1

According to Christopher Bartlett and Sumantra Ghoshal,firms from developing countries cannot succeed in foreign markets in the presence of other established global competitors.

Answer 1

False

Question 2

Licensing,a mode of entry into a foreign market,gives an international firm tight control over manufacturing,marketing,and strategy that is required for realizing experience curve and location economies.

Answer 2

False

Question 3

A drawback of exporting is that tariff barriers can make it uneconomical as a mode of entry into a foreign market.

Answer 3

True

Question 4

Franchising,a mode of entry into a foreign market,helps firms exert greater quality control over franchises in foreign locations.

Question 5

If an international business can offer a product that has been widely available in that market,the value of that product to consumers is likely to be much greater than if the international business offers a product that has not been widely available in that market.

Question 6

The most typical joint venture is a 50/50 venture,in which there are two parties,each of which holds a 50 percent ownership stake and contributes a team of managers to share operating control.

Question 7

An international firm that enters into a turnkey deal has a long-term interest in the foreign country.

Question 8

Under a cross-licensing agreement,a firm can either request a royalty payment or license some valuable intangible property to a foreign partner.

Question 9

For an international firm,entering a foreign market before other international businesses does not have any drawbacks.

Question 10

The attractiveness of a country as a potential market for an international business depends solely on the size of its consumer market.

Question 11

In terms of the various modes of entry into a foreign market,franchising is employed primarily by service firms,whereas licensing is pursued primarily by manufacturing firms.

Question 12

Exporting,as a mode of entry into foreign markets,does not help a firm achieve experience curve and location economies.

Question 13

A firm contemplating expansion should choose a foreign market based on an assessment of the nation's long-run profit potential.

Question 14

In international business,an early entrant to a foreign market may be at a disadvantage relative to a later entrant,if regulations change in a way that diminishes the value of an early entrant's investments.

Question 15

In a typical international licensing deal,a licensor puts up most of the capital necessary to get an overseas operation going.

Question 16

A risk-averse international firm that enters a foreign market on a small scale will increase its potential losses.

Question 17

In international business,a strategic commitment has a short-term impact and is easily reversible.

Question 18

The probability of survival decreases if an international business enters a national market after several other foreign firms have already done so.

Question 19

First-mover advantages refer to the advantages frequently associated with entering a market early.

Question 20

Large-scale entry allows an international firm to learn about a foreign market while limiting the firm's exposure to that market.

Question 21

Establishing a wholly owned subsidiary gives an international firm a 100 percent share in the profits generated in a foreign market.

Question 22

In terms of the entry modes into a foreign market,a joint venture does not give an international firm the tight control over subsidiaries that might be required to realize experience curve or location economies.

Question 23

When a firm's competitive advantage is based on technological competence,a joint venture is the preferred mode of entry into a foreign market because it reduces the risk of losing control over that competence.

Question 24

Which of the following is a reason why a relatively poor country may be an attractive target for inward investment?

A) Rapid economic growth
B) Political instability
C) Currency depreciation
D) High cost of living
E) Less developed infrastructure

Question 25

Which of the following is true of foreign expansion?

A) The timing and scale of entry for foreign expansion are minor details in comparison with the choice of foreign market.
B) The long-run economic benefits of doing business in a country are a function of the country's population size.
C) All the nations in the world do not all hold the same profit potential for a firm contemplating foreign expansion.
D) The costs and risks associated with foreign expansion are higher in economically advanced nations.
E) Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in politically unstable nations.

Question 26

An advantage of establishing a greenfield venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

Question 27

According to David Ravenscraft and Mike Scherer's study,many acquisitions destroy rather than create value.

Question 28

An international firm that perceives its technological advantage to be transitory and susceptive to rapid imitation might want to license its technology to foreign firms.

Question 29

One of the advantages of acquisitions is that they are quick to execute.

Question 30

In international business,joint ventures with local partners face a significantly higher risk of being subject to nationalization.

Question 31

An advantage of a wholly owned subsidiary is that it may be required if a firm is trying to realize location and experience curve economies.

Question 32

The greater the pressures for cost reductions are,the more likely an international firm will want to pursue some combination of exporting and wholly owned subsidiaries.

Question 33

Which of the following is true of the basic entry decisions a firm must make before a firm contemplates foreign expansion?

A) The long-run economic benefits of doing business in a country are solely a function of the number of consumers in the market.
B) The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country.
C) The costs and risks associated with doing business in a foreign country are typically higher in economically advanced and politically stable democratic nations.
D) The benefit-cost-risk trade-off is likely to be most favorable in politically unstable countries.
E) All the nation-states in the world hold the same profit potential for a firm contemplating foreign expansion.

Question 34

If an international firm's core competence is based on proprietary technology,entering a joint venture might risk losing control of that technology to the joint-venture partner.

Question 35

When an international firm makes an acquisition in a foreign market,it acquires valuable intangible as well as tangible assets.

Question 36

Establishing a wholly owned subsidiary is generally the cheapest method of serving a foreign market from a capital investment standpoint.

Question 37

In a joint venture,a firm benefits from a local partner's knowledge of the host country's competitive conditions,culture,language,political systems,and business systems.

Question 38

An advantage of licensing and franchising is the low development costs and risks.

Question 39

Which of the following is true of the factors regarding the selection of a foreign market?

A) All nation states in the world hold the same profit potential for a firm contemplating foreign expansion.
B) The long-run economic benefits of foreign expansion are a function of factors such as the likely future wealth of consumers.
C) Less populous nations have a higher potential for economic growth.
D) Politically unstable nations by virtue of their higher potential for growth are the best foreign markets.
E) The attractiveness of a country as a potential market for an international business depends only on its geographical location.

Question 40

Which of the following is the first basic entry decision that a firm contemplating foreign expansion must make?

A) When to enter a foreign market
B) On what scale to enter a foreign market
C) Which foreign markets to enter
D) Whether to enter a market before other firms and claim first-mover advantages
E) Whether to enter into licensing agreements or use the franchising model

Question 41

Which of the following is an example of a first-mover advantage?

A) The ability to create switching costs that tie customers into one's products or services
B) The avoidance of pioneering costs that a later entrant into the foreign market has to bear
C) The increased probability of surviving in a foreign market
D) The opportunity to observe and learn from the mistakes of other entrants
E) The ability to let later entrants ride ahead on the experience curve

Question 42

Which of the following is a disadvantage of large-scale entry into a foreign market?

A) Decrease in a firm's exposure to the foreign market
B) Difficulty attracting customers and distributors for the product
C) Inability to build rapid market-share irrespective of the scale of entry
D) Limited product acceptance due to the avoidance of potential losses
E) Availability of fewer resources to support expansion in other desirable markets

Question 43

Which of the following is an example of a first-mover advantage?

A) The ability to capture demand by establishing a strong brand name
B) The avoidance of pioneering costs that a later entrant has to bear
C) The increased probability of surviving in a foreign market
D) The opportunity to observe and learn from the mistakes of later entrants
E) The ability to let later entrants ride ahead on the experience curve

Question 44

Which of the following countries presents a favorable benefit-cost-risk trade-off scenario for foreign expansion?

A) A country ridden by private-sector debt
B) A country with a free market system
C) A country experiencing a dramatic upsurge in inflation rates
D) A country that is heavily populated
E) A country that is less developed and politically unstable

Question 45

Which of the following is true of the scale of entry into a foreign market for an international firm considering foreign expansion?

A) Small-scale entrants are more likely to capture first-mover advantages.
B) Small-scale entry does not allow a firm to learn about a foreign market.
C) Large-scale entrants are more likely to capture first-mover advantages.
D) Large-scale entrants are more likely to avoid pioneering costs.
E) Small-scale entrants are more prone to risks than large-scale entrants.

Question 46

The liability associated with foreign expansion is greater for foreign firms that:

A) choose to ride on an early entrant's investments.
B) use countertrade agreements.
C) enter a national market early.
D) ride down the experience curve behind their rivals.
E) avoid pioneering costs.

Question 47

Which of the following is true of strategic commitments for an international firm considering foreign expansion?

A) They have a short-term impact.
B) They are frequently subject to change.
C) They fail to have a significant influence on business decisions.
D) They are difficult to reverse.
E) They are made on a day-to-day basis by employees at various levels in an organization.

Question 48

In international business,the benefits frequently associated with entering a foreign market early are known as _____.

A) pioneering costs
B) first-mover advantages
C) absolute advantages
D) bandwagon effects
E) factor endowments

Question 49

Which of the following factors determine the value that an international business can create in a foreign market?

A) Population density in the foreign market
B) Political stability of the foreign market
C) Nature of indigenous competition
D) Per capita income in the foreign market
E) Type of political system in the foreign market

Question 50

_____ 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 expense to learning the rules of the game.

A) Sunk costs
B) Variable costs
C) Pioneering costs
D) Opportunity costs
E) Standard costs

Question 51

Which of the following is an example of a first-mover advantage?

A) The ability to build sales volume in the foreign country
B) The avoidance of pioneering costs that a later entrant has to bear
C) The increased probability of surviving in a foreign market
D) The opportunity to observe and learn from the mistakes of late entrants in the foreign market
E) The ability to allow later entrants to the foreign market ride ahead on the experience curve

Question 52

Which of the following is true of the value that an international business can create in a foreign market?

A) If the international business offers the same type of product that indigenous competitors are offering, then the value of that product is likely to be greater.
B) If the international business can offer a product that satisfies an unmet need, the value of that product to consumers is likely to be lower.
C) Greater value of an international business translates into an inability to charge higher prices and/or to build sales volume more rapidly.
D) The value that an international business can create in a foreign market depends on the suitability of its product offering to that market and the nature of indigenous competition.
E) An international firm should not rank countries in terms of their attractiveness and long-run profit potential because these factors are always changing.

Question 53

Which of the following is true of basic entry decisions for an international firm into a foreign market?

A) Greater value of a product in a foreign market translates into an ability to charge higher prices and/or to build sales volume more rapidly.
B) An international firm should not rank countries in terms of their attractiveness because the parameter can change frequently.
C) If an international business can offer a product that has not been widely available in a foreign market and that satisfies an unmet need, the value of that product to consumers is likely to be much lesser.
D) The costs and risks associated with doing business in a foreign country are typically lower in less developed nations.
E) Other things being equal, the benefit-cost-risk trade-off is likely to be unfavorable in politically stable nations that have free market systems.

Question 54

In which of the following situations can an international business command higher prices for a particular product in a foreign market?

A) When the product is widely available in the foreign market
B) When sales volumes is relatively low in the foreign market
C) When the product offers greater value to customers in the foreign market
D) When the product is more suitable to other foreign markets
E) When domestic competitors are selling alternatives at reduced prices

Question 55

_____ refer to costs that an early entrant in a foreign market has to bear that a later entrant can avoid.

A) Sunk costs
B) Standard costs
C) Variable costs
D) Pioneering costs
E) Opportunity costs

Question 56

First-mover disadvantages refer to:

A) disadvantages associated with entering a foreign market before other international businesses.
B) costs that a late entrant to a foreign market has to bear.
C) a direct restriction on the quantity of a good that can be imported into a country.
D) imperfections in the operation of the market mechanism.
E) disadvantages experienced by being a late entrant in a foreign market.

Question 57

In terms of an international firm considering foreign expansion,_____ include the costs of promoting and establishing a product offering,and educating customers.

A) Sunk costs
B) Pioneering costs
C) Opportunity costs
D) Intangible costs
E) Standard costs

Question 58

In international business,a product that is not widely available in a foreign market and satisfies an unmet need:

A) is likely to have greater value.
B) will have to be priced relatively low.
C) will see a decrease in sales volume.
D) is not suited to that particular market.
E) will fail to make a profit.

Question 59

The probability of survival for an international business increases if it:

A) enters a national market after several other foreign firms have already done so.
B) avoids the use of countertrade agreements.
C) enters a national market early.
D) enters a foreign market via turnkey projects.
E) avoids engaging in joint ventures.

Question 60

In international business,an advantage of being a late entrant in a foreign market is the ability to:

A) create switching costs that tie customers into products or services.
B) capture demand by establishing a strong brand name.
C) build sales volume and ride down the experience curve before early entrants.
D) ride on an early entrant's investments in learning and customer education.
E) create a cost advantage over first-movers.

Question 61

Which of the following is the reason why small-scale entry into a foreign market makes it difficult to build market share?

A) Small-scale entry necessitates rapid entry into a foreign market.
B) Small-scale entry is associated with a lack of commitment demonstrated by the foreign firm.
C) Small-scale entry leads to escalating strategic commitments.
D) Small-scale entry requires that extra time be spent in analyzing a foreign market.
E) Small-scale entry leads to increased exposure to a foreign market.

Question 62

In the context of modes of entry into foreign markets,turnkey projects are a means of:

A) granting rights to intangible property to other firms.
B) establishing firms that are jointly owned by two or more otherwise independent firms.
C) exporting process technology to other countries.
D) setting up wholly owned subsidiaries in foreign nations.
E) selling products produced in one country to residents of other countries.

Question 63

Which of the following is true of significant strategic commitments to foreign expansion made by an international firm?

A) Significant strategic commitments of a foreign firm have little or no influence on the nature of competition in a market.
B) The large-scale entry of a foreign firm does not give other foreign institutions considering entry into the market a reason to pause.
C) The large-scale entry of a foreign firm gives customers reasons for believing that the foreign firm will not remain in the market for the long run.
D) Significant strategic commitments are associated with higher strategic flexibility of the international firm.
E) Significant strategic commitments are neither unambiguously good nor bad.

Question 64

In exporting,problems with local marketing agents can be overcome by:

A) selling intangible property to a franchisee and insisting on rules to conduct the business.
B) changing agents frequently.
C) engaging in turnkey projects and exporting process technology to foreign firms.
D) entering into cross-licensing agreements with foreign firms.
E) setting up wholly owned subsidiaries in foreign nations to handle local marketing.

Question 65

Which of the following is a disadvantage of small-scale entry for an international firm considering foreign expansion?

A) The possibility of escalating commitment leading to major financial losses
B) The limited availability of resources for use in other markets
C) The lack of flexibility associated with strategic commitments
D) The increase in economic exposure due to minimal time spent in evaluating a foreign market
E) The difficulty of building market share and capturing first-mover advantages

Question 66

Which of the following is a disadvantage of exporting as a mode of entry into foreign markets?

A) The exporting firm incurs the costs of establishing manufacturing operations in the host country.
B) The firm is unable to realize curve economies through exporting.
C) High transport costs can make exporting uneconomical, particularly for bulk products.
D) The firm cannot use countertrading options when exporting.
E) A firm may not realize substantial scale economies from its global sales volume via exporting.

Question 67

A drawback of a(n)_____,a mode of entry into foreign markets,is that the firm that uses this strategy will have no long-term interest in a foreign country.

A) joint venture
B) greenfield venture
C) acquisition
D) turnkey deal
E) franchising agreement

Question 68

Which of the following types of entry into a foreign market allows a firm to learn about the foreign market while limiting the firm's exposure to that market?

A) Early entry
B) Small-scale entry
C) Large-scale entry
D) Late entry
E) Rapid entry

Question 69

Turnkey projects being short-term propositions can be disadvantageous for a firm if a country subsequently proves to be a major market for the output of the process that has been exported.The firm can get around this problem by:

A) selling competitive advantage to competitors.
B) competing with the local firm in the global market.
C) taking a minority equity interest in the operation.
D) withholding vital process technology from the local firm.
E) establishing a joint venture with a local firm.

Question 70

Which of the following is true of licensing as a mode of entry into foreign markets?

A) A licensor grants the rights to tangible property to a licensee.
B) A licensing agreement grants rights to intangible property to a licensee for an unspecified period.
C) The licensor receives a royalty fee from the licensee.
D) The licensor puts up all of the capital necessary to start a business.
E) The licensor maintains control over its technological know-how.

Question 71

Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets?

A) It helps create competition which in turn increases the quality of production.
B) It can be less risky than conventional FDI.
C) It is an ideal way to establish a long-term presence in a foreign country.
D) It helps protect the competitive advantage of process technology.
E) The firm that enters into a turnkey project with a foreign enterprise avoids giving rise to potential competitors.

Question 72

Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets?

A) It is an ideal way to gain entry into a country where FDI is not limited by government regulations.
B) It is a useful strategy to earn great returns from the know-how of a technologically complex process.
C) It is an ideal way to establish a firm's long-term presence in a foreign country.
D) It helps protect a firm's competitive advantage.
E) The firm that enters into a turnkey project with a foreign enterprise avoids giving rise to potential competitors.

Question 73

Which of the following is true of market entry by an international firm considering foreign expansion?

A) Politically unstable nations, by virtue of their higher potential for growth, are the best foreign markets.
B) The value an international business can create in a foreign market does not depend on the nature of indigenous competition.
C) The avoidance of pioneering costs that a later entrant has to bear is a first-mover advantage.
D) Strategic commitments have minor influence on business decisions.
E) Entering a large developing nation before most other international businesses on a large scale is associated with high levels of risk.

Question 74

Which of the following is a disadvantage of exporting as a mode of entry into foreign markets?

A) The firm incurs the costs of establishing manufacturing operations in the host country.
B) The firm is unable to realize experience curve economies through exporting.
C) The local agents may not market the firm's products as well as the firm would if it managed its marketing itself.
D) The firm cannot use countertrading options when exporting.
E) The firm may not realize substantial scale economies from its global sales volume via exporting.

Question 75

In a _____,a mode of entry into foreign markets,a firm agrees to set up an operating plant for a foreign client and hand over the plant when it is fully operational.

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

Question 76

Which of the following is an advantage of exporting as a mode of entry into foreign markets?

A) It helps a firm achieve experience curve and location economies.
B) A firm does not have to bear the development costs and risks associated with opening a foreign market.
C) A firm has the ability to engage in global strategic coordination.
D) It helps the firm earn returns from process technology skills in countries where FDI is restricted.
E) It can provide the firm access to the local partner's knowledge.

Question 77

Which of the following is the most likely outcome of a foreign firm entering a developed nation on a small scale after other international businesses in the firm's industry?

A) Capturing first-mover advantages
B) Higher pioneering costs
C) Rapid increase in market share
D) Limited future growth potential
E) Increase in sales volume

Question 78

Which of the following is an advantage of exporting as a mode of entry into foreign markets?

A) A firm can avoid the cost of establishing manufacturing operations in the host country.
B) A firm does not have to bear the development costs and risks associated with opening a foreign market.
C) A firm can earn returns from process technology skills in countries where FDI is restricted.
D) A firm has access to local partner's knowledge.
E) A firm has the ability to engage in global strategic coordination.

Question 79

In a(n)_____,a mode of entry into foreign markets,a firm grants the rights to intangible property to another firm for a specified period,and in return,receives a royalty fee.

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

Question 80

Which of the following is a course of action suggested by Christopher Bartlett and Sumantra Ghoshal for companies based in developing nations?

A) Build up financial resources to match those of the largest global competitors.
B) Enter foreign markets at a similar time and scale as multinational companies.
C) Enter markets rapidly and exit at an equally rapid pace to avoid heavy losses.
D) Benchmark one's operations and performance against foreign multinationals.
E) Do not focus on market niches that multinational companies ignore.