Deck 6: Entering Foreign Markets

Question 1

Entry strategies may change over time.

Answer 1

True

Question 2

Currency risks can be reduced by speculation and hedging.

Answer 2

True

Question 3

The Liability of Foreignness is the inherent disadvantage foreign firms experience in host countries because of their nonnative status.

Answer 3

True

Question 4

In regards to industry-based considerations, the higher the entry barriers, the more intensely firms will attempt to compete abroad.

Question 5

MNEs that enter foreign markets through foreign direct investment do not have OLI advantages.

Question 6

The bargaining power of suppliers may prompt backward vertical integration.

Question 7

An underlying reason for firms to NOT go abroad is the size of the domestic market.

Question 8

International agreements have established whose "rules of the game" e-commerce follow.

Question 9

Turnkey projects reduce the competitiveness of foreign clients and increase their dependence when selling state of the art technology.

Question 10

One of the drawbacks of large-scale entries is limited strategic flexibility.

Question 11

Acquisition adds no new capacity.

Question 12

Under the Stage Model school of thought firms will enter culturally similar countries during their first stage of internationalization.

Question 13

The bargaining power of buyers may lead to forward vertical integration.

Question 14

The market potential of substitute products may encourage firms to bring them abroad.

Question 15

Backward vertical integration refers to vertical integration that has not been updated.

Question 16

For small volume of exports, direct export is not optimal.

Question 17

An underlying reason for firms to NOT go abroad is the size of the firm.

Question 18

Indirect exports avoids exporting through domestically based intermediaries.

Question 19

MNEs are firms that are truly global.

Question 20

Some foreignness is never an asset.

Question 21

Institutional Distance involves all of the following except that which is:
a. Regulatory.
b. Normative.
c. Cognitive.
d. Cultural.
e. B and C above.

Question 22

Non-equity modes of entry typically involve:
a. Exports and contractual agreements.
b. Larger, harder-to-reverse commitments.
c. Establishing independent organizations overseas.
d. Joint ventures JVs).
e. Wholly owned subsidiaries.

Question 23

Which of the following exemplify trade barriers?
a. Tariffs.
b. Local content requirements.
c. Restrictions on certain entry modes.
d. A and C above.
e. All of the above.

Question 24

Which of the following are not regulatory risks?
a. An obsolescing bargain.
b. Deals that have been struck by MNEs and host governments.
c. Nationalization.
d. Recent trends among host governments regarding their relationships with MNEs.
e. B and C above.

Question 25

The differences in formal and informal institutions that govern the rules of the game in different countries include _______ differences.
a. Regulatory
b. Language
c. Cultural
d. All of the above
e. None of the above

Question 26

Large-scale entries do which of the following?
a. Benefit from a strategic commitment.
b. Assure local customers and suppliers.
c. Deter potential entrants.
d. A and B above.
e. All of the above.

Question 27

Selling the rights to intellectual property for a royalty fee is involved in:
a. Licensing/franchising.
b. Turnkey projects.
c. R&D contracts.
d. Comarketing.
e. All of the above.

Question 28

The strategic goal of __________ involves going after countries that offer the highest price.
a. Natural resources-seeking
b. Market-seeking
c. Efficiency-seeking
d. Innovation-seeking
e. Profit-seeking

Question 29

The lower the value of firm-specific resources and capabilities such as________ the more likely firms will aggressively leverage them overseas.
a. Tangible assets
b. Know-how
c. Software
d. All of the above
e. None of the above

Question 30

Greenfield operations refers to:
a. Licensing/franchising.
b. Turnkey projects.
c. R&D contracts.
d. Co marketing.
e. Wholly owned subsidiaries.

Question 31

Organizing firm-specific resources and capabilities as a bundle:
a. Favors firms with strong complementary assets.
b. Prevents having assets integrated s a system.
c. Discourages using them overseas.
d. Is counterproductive.
e. Occurs only in domestic markets.

Question 32

All of the follow are true of direct exports except:
a. Most basic mode of entry.
b. Capitalizes on economies of scale in production concentrated in the home country.
c. Affords better control over distribution.
d. The agendas and objectives of the intermediaries and exporters are the same.
e. Designs and productions geared for the domestic market first and foremost.

Question 33

Small firms in a large domestic market are referred to as:
a. Enthusiastic internationalizers.
b. Follower internationalizers.
c. Slow internationalizers.
d. Occasional internationalizers.
e. Domestic internationalizers.

Question 34

Which is not true of joint ventures?
a. They are jointly owned by two or more parent companies.
b. They share risks with local partners.
c. They gain access o the local partner's knowledge about the host country.
d. They are politically less acceptable than wholly owned subsidiaries.
e. The goals of partners may diverge.

Question 35

Which of the following is not a location specific advantage?
a. Agglomeration.
b. Knowledge spillovers.
c. A skilled labor force.
d. A pool of specialized suppliers and buyers.
e. All of the above are location advantages.

Question 36

Firms may choose not to enter certain countries if:
a. They possess rare firm-specific assets.
b. The transaction costs are be too low.
c. There are dissemination risks.
d. There is an authorized diffusion of firm-specific assets.
e. All of the above.

Question 37

Late mover advantages do not include:
a. Taking a free ride on first movers' investments.
b. Joining the game with massive firepower when some of the uncertainties are removed.
c. Preempting scarce assets.
d. Taking advantage of first movers' inflexibility by leapfrogging over them.
e. Choice of Strategy.

Question 38

First mover advantages do not include:
a. Developing proprietary, technological leadership.
b. Preempting scarce assets.
c. Establishing entry barriers.
d. Successful clashes with dominant firms in domestic markets.
e. Creating good relationships with key stakeholders.

Question 39

As firms expand into more countries, they should recognize:
a. Foreign firms are still often discriminated against.
b. Foreign firms primarily deploy overwhelming resources and capabilities that offset the liability of foreignness.
c. Foreign firms are able to offset the liability of foreignness and still have some competitive advantage.
d. All of the above.
e. None of the above.

Question 40

Small-scale entries normally benefit by their:
a. Focus on accumulating experience.
b. Emphasis on "learning by doing."
c. Strong strategic commitment.
d. First mover advantages.
e. A and B above.

Question 41

The text points out that from a resource-based view, you and your firm need to develop overwhelming capabilities to offset the liability of foreignness. However, how does a small firm do that?

Question 42

Schmaltz argues: "If a company wishes to be a global corporation it should truly globalize, not just operate within the so-called Triad." What might Schmaltz be overlooking?

Question 43

J. Lee disagrees with M. Schmaltz above): "If a company wishes to be a global corporation, it does not need to locate in every continent - it should focus on those locations that are most profitable." What do you think?

Question 44

Is "foreignness" a liability or an asset? What causes it to be one or the other?

Question 45

Discussion of strategies for MNEs focus on growth and global expansion. Under what circumstances can downsizing and withdrawing from countries make sense? Why might some firms fail to withdraw or downsize?