Deck 12: Strategies for Analyzing and Entering Foreign Markets

Question 1

What is the difference between direct costs and opportunity costs?

Answer 1

Direct costs are those the firm incurs in entering a new foreign market and include costs associated with setting up a business operation. Opportunity costs are the costs of missing other opportunities by virtue of entering one market rather than another.

Question 2

Which of the following are potential benefits of entering a new market?

A) eliminating synergy with other operations
B) increasing manufacturing costs
C) limiting competitors' profits
D) logistical complexities

Answer 2

C

Question 3

Describe the basic components of foreign market analysis.

Answer 3

Most international businesses have the fundamental goals of expanding market share, revenues and profits. Firms must normally follow three steps: (1) assess alternative markets, (2) evaluate the respective costs, benefits, and risk of entering each, and (3) select those that hold the most potential for entry or expansion.

Question 4

Which of the following is the least effective indicator of a country's potential for economic growth?

A) GDP
B) per capita income
C) energy consumption
D) television viewing patterns

Question 5

________ refer to expenses incurred by the firm as it enters a new foreign market.

A) Indirect costs
B) Direct costs
C) Opportunity costs
D) Variable costs

Question 6

Assessing market potential is the second step in the process of foreign market analysis.

Question 7

Trade policies usually have little effect on a firm's choice of entry mode.

Question 8

Which of the following is not one of the three steps in increasing market share, revenue, and profits?

A) assess alternative markets
B) evaluate respective costs, benefits, and risks
C) perform a situation analysis
D) select market with most potential for entry or expansion

Question 9

A firm specializing in high-priced, higher-quality goods will most likely find a high-income market more attractive than a low-income one.

Question 10

Firms should use both objective and subjective measures when considering the potential for growth in an economy.

Question 11

Government stability is an important factor in foreign market assessment.

Question 12

Direct costs are those the firm incurs in entering a new market and include costs associated with setting up a business operation.

Question 13

Sub-Saharan Africa accounts for ________ of world GDP.

A) 2 percent
B) 12 percent
C) 20 percent
D) 32 percent

Question 14

Which theory listed below is useful in deciding which mode of entry to use when entering foreign markets?

A) ownership advantage theory
B) internalization theory
C) eclectic theory
D) relative factor endowments

Question 15

Gameware recently entered the German market. Gameware incurred significant costs associated with setting up a business operation in Frankfurt, transferring managers to Germany, and shipping equipment to the German facility. Gameware's expenses are best described as ________.

A) opportunity costs
B) setup costs
C) direct costs
D) indirect costs

Question 16

Gameware recently entered the German market. Gameware executives also wanted to enter the Canadian market but had to delay the entry because of limited resources. What type of costs will Gameware incur as a result of being unable to enter the Canadian market?

A) indirect costs
B) direct costs
C) opportunity costs
D) variable costs

Question 17

Firms can reduce the uncertainty associated with sociocultural influences by focusing their internationalization efforts in countries that are culturally similar to their own.

Question 18

What is the first step in selecting a foreign market?

A) assessing market potential
B) monitoring major markets
C) evaluating host country's trade policies
D) assessing general legal and political environments

Question 19

What are the five primary types of entry modes for foreign markets? What types of risks should international firms consider before entering a foreign market?

Question 20

What are the steps involved in foreign market analysis?

Question 21

When deciding which mode of entry to use, a firm must consider things like ownership advantages, location advantages, and internalization advantages.

Question 22

The informational, political, and cultural disadvantages that foreign firms face when trying to compete against local firms in the host country market are referred to as ________.

A) opportunity costs
B) liability of foreignness
C) internalization disadvantages
D) the burden of internationalization

Question 23

Which of the following is a characteristic of exporting?

A) high financial exposure
B) rapid market entry
C) logistical simplicity
D) local market knowledge

Question 24

Research suggests that in ________ of cases, a firm's initial direct exporting to a foreign market is the result of unsolicited orders.

A) one-tenth
B) one-quarter
C) one-third
D) one-half

Question 25

Toyota's efficient manufacturing techniques and reputation for producing high-quality automobiles are examples of ________.

A) location advantages
B) ownership advantages
C) internalization advantages
D) internationalization advantages

Question 26

Dunning's eclectic theory is useful in understanding which mode of entry to use.

Question 27

What is the meaning of ownership advantages? Give an example.

Question 28

________ is the most common form of international business activity.

A) Exporting
B) Licensing
C) Greenfield strategy
D) Management contract

Question 29

________ are those that pull a firm into foreign markets as a result of opportunities available there.

A) Reactive motivations
B) Proactive motivations
C) Opportunity motivations
D) Avoidance motivations

Question 30

________ are those factors that affect the desirability of host country production relative to home country production.

A) Ownership advantages
B) Location advantages
C) National competitive advantages
D) Internalization advantages

Question 31

Embedded technology is often best transferred through an equity mode.

Question 32

The liability of foreignness suggests that foreign firms are at a disadvantage when competing with a local firm because the local firm knows more about local customs, culture, political processes, and so on than the foreign firm. In sports, this is called the home field advantage.

Question 33

Which of the following is the most intensive mode of entry into foreign markets?

A) exporting
B) importing
C) international licensing
D) FDI

Question 34

Delvin Pharmaceuticals, a U.S. firm, is considering the idea of entering the Japanese market. Which entry mode will Delvin most likely use?

A) exporting
B) licensing
C) turnkey
D) franchising

Question 35

________ are tangible or intangible resources owned by a firm which grant it a competitive advantage over its industry rivals.

A) Ownership advantages
B) Location advantages
C) Internalization advantages
D) Competitive advantages

Question 36

________ are those factors that make it desirable for a firm to produce a good or service itself rather than contracting with another firm to produce it.

A) Ownership advantages
B) National competitive advantages.
C) Internalization advantages
D) Resource availabilities

Question 37

Ownership advantages are always tangible or intangible resources owned by a firm that grant it a competitive advantage over its industry rivals.

Question 38

What is liability of foreignness?

Question 39

Wine consumption in China has been at an annual growth rate of ________.

A) 2 percent
B) 20 percent
C) 200 percent
D) 2,000 percent

Question 40

Explain the meaning of internalization advantages.

Question 41

Which term refers to the sale of goods by a firm in one country to an affiliated firm in another country?

A) indirect exporting
B) direct exporting
C) intercorporate transfers
D) intracorporate transfers

Question 42

________ offer services including export management companies, Webb-Pomerene associations, and international trading companies.

A) Intermediaries
B) Wholesalers
C) Exporters
D) Distributors

Question 43

Franklin Carpets engages in indirect exporting, so the firm sells its carpets to a(n) ________.

A) domestic customer who then sells the carpets to a foreign customer
B) foreign customer who then sells the carpets to a domestic customer
C) affiliated company located in a foreign country
D) foreign customer through e-commerce

Question 44

Which term refers to sales made to either distributors or end-users located outside the firm's home country?

A) indirect exporting
B) direct exporting
C) intercorporate transfers
D) intracorporate transfers

Question 45

When British Petroleum ships crude oil from its storage facilities in Kuwait to its Australian subsidiary, ________ has occurred.

A) indirect exporting
B) direct exporting
C) an intracorporate transfer
D) an intercorporate transfer

Question 46

Which of the following statements about Webb-Pomerene associations is most likely true?

A) The number of Webb-Pomerene associations is growing due to globalization.
B) Most Webb-Pomerene associations facilitate trade in the garment industry.
C) Webb-Pomerene associations participate in marketing and promotion.
D) Webb-Pomerene associations are unable to negotiate contracts.

Question 47

Where are the world's most important international trading companies located?

A) Germany
B) Japan
C) Canada
D) China

Question 48

Which of the following would most likely discourage an international firm from relying on exports as an entry mode?

A) tariffs
B) export promotion policies
C) export financing programs
D) home country subsidization

Question 49

A sogo shosha is best described as a(n) ________.

A) export management company
B) freight forwarder
C) international trading company
D) manufacturers' agent

Question 50

What are the third parties that specialize in facilitating imports and exports called?

A) intermediaries
B) wholesalers
C) exporters
D) distributors

Question 51

Unlike an export management company, an international trading company ________.

A) offers customer financing
B) facilitates customs documentation
C) manages international transportation logistics
D) participates in exporting and importing activities

Question 52

________ for exporting are those that push a firm into foreign markets.

A) Reactive motivations
B) Proactive motivations
C) Opportunity motivations
D) Avoidance motivations

Question 53

When Hewlett-Packard buys microchips from Intel to use in manufacturing computers and then exports the completed computers to Europe, ________ has occurred.

A) indirect exporting of Intel's chips
B) direct exporting of Intel's chips
C) an intercorporate transfer of Intel's chips
D) an intracorporate transfer of Intel's chips

Question 54

Tanya is employed by an export management company that provides its services to many exporters in the Chicago area. Tanya would likely be responsible for ________.

A) shipping goods
B) advertising
C) creating strategic marketing plans
D) customer service

Question 55

Which of the following is an advantage of exporting?

A) vulnerability to tariffs
B) logistical complexities
C) potential conflicts with distributors
D) access to new markets

Question 56

Which form of exporting is used by firms in order to lower their production costs?

A) indirect exporting
B) direct exporting
C) intercorporate transfers
D) intracorporate transfers

Question 57

________ occur(s) when a firm sells its products to a domestic customer, which in turn exports the product, in either its original form or a modified form.

A) Indirect exporting
B) Direct exporting
C) Intercorporate transfers
D) Intracorporate transfers

Question 58

A(n) ________ is a firm directly engaged in importing and exporting a wide variety of goods for its own account.

A) Webb-Pomerene association
B) export management company
C) international trading company
D) management broker

Question 59

A(n) ________ is a group of U.S. firms that operate within the same industry and are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws.

A) Webb-Pomerene association
B) Greenfield organization
C) export management company
D) international trading company

Question 60

A(n) ________ is a firm that acts as its client's export department.

A) Webb-Pomerene association
B) Greenfield organization
C) export management company
D) international trading company

Question 61

The licensees that built Tokyo Disneyland insisted on a ________ licensing agreement with the Walt Disney Company before agreeing to invest the funds necessary to build the park.

A) one-year
B) ten-year
C) twenty-five year
D) one-hundred year

Question 62

Which of the following solicits domestic orders for foreign manufacturers on a commission basis?

A) manufacturers' agent
B) export and import broker
C) freight forwarder
D) manufacturers' export agent

Question 63

Reactive motivations for exporting are those that pull a firm into foreign markets as a result of opportunities available there.

Question 64

Manufacturers' agents never get involved in the physical transportation of goods.

Question 65

Which mode of entry has the most potential to create a future competitor?

A) licensing
B) exporting
C) turnkey project
D) contract manufacturing

Question 66

In a brief essay, discuss how both exporting and FDI enable international businesses to maintain control in a foreign environment.

Question 67

What is indirect exporting?

Question 68

The ________ acts as a foreign sales department for domestic producers by selling those firms' goods in foreign markets.

A) manufacturers' agent
B) export and import broker
C) freight forwarder
D) manufacturers' export agent

Question 69

Webb-Pomerene associations play a major role in international business.

Question 70

BTV Enterprises specializes in the physical transportation of goods for its clients by arranging customs documentation and obtaining transportation services. BTV Enterprises is most likely a(n) ________.

A) manufacturers' agent
B) export and import broker
C) freight forwarder
D) manufacturers' export agent

Question 71

Briefly describe the services provided by manufacturers' agents, manufacturers' export agents, export and import brokers, and freight forwarders.

Question 72

________ can bring together international buyers and sellers of standardized commodities like coffee and grains.

A) A manufacturers' agent
B) An export and import broker
C) A freight forwarder
D) A sogo shosha

Question 73

The Mitsubishi Corporation is a firm that is directly engaged in importing and exporting a wide variety of goods for its own account and is a part of a keiretsu system. What type of export intermediary is it?

A) export management company
B) sogo shosha
C) freight forwarder
D) export and import broker

Question 74

Export management companies always take title to the goods.

Question 75

One disadvantage of exporting is the logistical complexities.

Question 76

Which of the following best explains the success of the sogo shosha?

A) access to information about global economic conditions
B) ability to generate e-commerce profits and sales
C) support from local and foreign governments
D) acquisition of intellectual property rights

Question 77

Intracorporate transfers are common in the service sector.

Question 78

What is an export management company? Why would an exporter hire an EMC? What are the two ways that EMCs operate?

Question 79

The most important trading companies in the global marketplace are Japan's sogo shosha.

Question 80

Exporting is the most complicated mode of internationalizing due to the issue of tariffs and nontariff barriers.