Deck 12: Licensing, Franchising, and Other Contractual Strategies

Question 1

A licensor must periodically renew its right to use intellectual property.

Answer 1

True

Question 2

Cross-border contractual relationships are used strictly in the manufacturing industry, especially in the computer and automobile industry.

Answer 2

False

Question 3

After any technical information or assistance has been provided, the licensor usually continues to advise the licensee on management and marketing issues for the first few years.

Answer 3

False

Question 4

The relationships established in franchising arrangements are typically stable and long-lasting in comparison to licensing arrangements.

Question 5

Master franchising accounts for a small percentage of international franchising arrangements because franchisors dislike the lack of control over their products and services.

Question 6

Foreign laws regarding franchising may affect royalty payments and a franchisor's control over the products and services sold by its franchisees.

Question 7

U.S.-based franchises, such as McDonald's, ensure consistency in their food by shipping all the necessary ingredients from the United States and avoiding unreliable suppliers in foreign markets.

Question 8

Management contracts are especially useful in markets that lack skilled local workers to oversee large scale facilities, such as airports and hospitals.

Question 9

Each of the following is a type of intellectual property except ________.

A) an industrial design
B) the patent for a new invention
C) an author's unpublished book
D) none of the above

Question 10

All of the following are typical characteristics of cross-border contractual relationships except ________.

A) involves the exchange of intellectual property and services
B) generates a consistent level of earnings from foreign operations
C) allows firms to make changes and be flexible
D) provides the focal firm with a high level of control

Question 11

How can a cross-border contractual relationship help focal firms with public relations issues?

A) Domestic complaints against the MNE can be minimized.
B) The fair hiring practices of the MNE can be emphasized.
C) The local partner can protect the MNE from criticism.
D) The local media can contact the local managers.

Question 12

What is the purpose of a firm integrating an industrial design into a product?

A) eliminate the possibility of the design being copied
B) improve a product's performance and marketability
C) protect firms from intellectual property theft
D) identify the product with a young demographic

Question 13

Which of the following is not a geographical indication?

A) Champagne
B) California Raisins
C) Florida Oranges
D) Made in China

Question 14

The purpose of intellectual property rights is to ________.

A) prevent excessive litigation between competing firms over product ownership
B) enable SMEs the opportunity to fairly compete in markets dominated by MNEs
C) allow inventors the chance to gain dominance in a market for a period of time
D) provide born globals with the chance to recoup start-up costs and investments

Question 15

Why are licensing agreements in foreign markets beneficial to Disney?

A) Licensees are able to meet customer needs by using Disney logos on products appropriate for the local market.
B) Disney is able to better distribute its U.S.-made products through local intermediaries in foreign markets.
C) Disney licensees have been trained in the United States and are able to balance corporate needs with local tastes.
D) Licensees in foreign markets are responsible for advertising upcoming Disney movies in the local media.

Question 16

Which of the following items is most likely not an example of a trademark licensing agreement?

A) a collection of short stories by Stephen King
B) a children's toothbrush with Spiderman on the handle
C) a sweatshirt with the Dallas Cowboys' name and logo
D) a bath towel with Martha Stewart's name on the tag

Question 17

Which of the following is most likely not protected under copyright laws?

A) the Nike swoosh
B) the art of Jackson Pollack
C) the poems of Ezra Pound
D) Microsoft Power Point

Question 18

Which of the following companies earns the largest amount of annual licensing revenues?

A) Marvel Entertainment
B) The Cherokee Group
C) Warner Bros.
D) Disney Consumer Products

Question 19

Which of the following products would not be an example of know-how licensing?

A) semiconductors
B) drugs
C) Harry Potter eyewear
D) industrial patent

Question 20

Why is licensing most likely a preferred method of foreign market entry for SMEs?

A) SME managers gain cultural information from local distributors.
B) Licensors gain access to valuable knowledge and technology.
C) Licensing requires very little capital or presence of the licensor.
D) Licensors maintain inventory in exchange for steady royalties.

Question 21

An advantage of licensing is that firms are able to ________.

A) enter markets with extensive trade barriers
B) share knowledge with small, inexperienced firms
C) avoid markets that restrict foreign ownership
D) find success during economic downturns

Question 22

By establishing a brand name and market power through a licensing agreement, licensors are able to ________.

A) deter competition
B) maximize profits
C) learn the culture of the target market
D) increase monopoly power

Question 23

Which of the following is a reason that technological firms should avoid licensing?

A) Foreign governments fear that high-tech firms threaten national security.
B) Foreign markets often lack the technological infrastructures to support production.
C) Firms have difficulties finding highly skilled labor to make their products.
D) Intellectual property might end up in the hands of potential competitors.

Question 24

Franchisors most likely give all of the following to franchisees in a business format franchising agreement except ________.

A) production methods
B) sales systems
C) raw materials
D) ongoing support

Question 25

Master franchise arrangements are characterized by which of the following?

A) licensees that manage franchise networks in one market
B) licensors that assert extensive control within a market
C) franchises managed by licensor representatives
D) franchise networks that pay fewer royalties to franchisors

Question 26

Which of the following is an example of one of the world's top franchisors?

A) Walmart
B) CVS Pharmacy
C) GAP
D) Subway

Question 27

Which of the following is most likely a problem for international franchisors?

A) Franchisees are unwilling to modify products for local needs.
B) Currency exchange rates reduce the profits of franchisees.
C) Franchisors cannot afford to send company executives to each franchise.
D) Franchisees use franchise knowledge to start a competing business.

Question 28

Which of the following is most likely an advantage of franchising to franchisees?

A) cost-effective market entry
B) reduce costs and responsibilities
C) increase brand and customer loyalty
D) all of the above

Question 29

Which of the following most likely makes it difficult to completely duplicate a food franchise in every global market?

A) different local ingredients
B) inconsistent training
C) unique trademarks
D) cultural issues

Question 30

The success of a franchise in a foreign market is most dependent on which of the following?

A) franchisor trademarks
B) strong local intellectual property rights
C) franchisee capabilities
D) franchisor involvement

Question 31

Which of the following terms is used to refer to a business arrangement in which a focal firm plans and implements a major facility abroad and upon completion gives control of it to trained local personnel?

A) build-operate-transfer
B) management contract
C) turnkey contracting
D) leasing contract

Question 32

In Abu Dhabi, a collection of companies received a multibillion dollar contract to build an integrated processing plant for natural gas. This is an example of which of the following?

A) turnkey contracting project
B) build-operate-transfer project
C) management contract project
D) leasing contract project

Question 33

Another term for infringement of property is _______?

A) piracy
B) knocking off
C) counterfeiting
D) all of the above

Question 34

The World Trade organization created the ________ to protect intellectual property rights and to assist in resolving any disputes that arise between countries?

A) Trade Remediation of Intellectual Property Rights
B) Anti-Piracy Act
C) Rome Convention for the Protection of Intellectual Property
D) Trade Related Aspects of Intellectual Property Rights

Question 35

Which of the following is essential to a focal firm that wants to protect its intellectual property in a foreign country?

A) reputable attorneys
B) reliable intermediaries
C) password-based security and other high-tech measures
D) close connections to foreign government officials

Question 36

Wonder Cat Licensing
Wonder Cat is a popular new cartoon series created by the All Cartoon Channel (ACC). Currently, the only Wonder Cat items available for sale are shirts sold exclusively through the ACC website. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions.

-Which of the following questions would be more important to evaluate before ACC enters a licensing agreement with the Chinese firm?

A) What other cartoon characters have been licensed to foreign firms as a way to enter international markets?
B) Will a licensing agreement for the Wonder Cat character lead to additional agreements for other ACC characters?
C) Will the Wonder Cat products made by the Chinese firm be available for sale on the ACC website?
D) What is the likelihood that the Chinese firm will steal the Wonder Cat idea and become a competitor?

Question 37

Wonder Cat Licensing
Wonder Cat is a popular new cartoon series created by the All Cartoon Channel (ACC). Currently, the only Wonder Cat items available for sale are shirts sold exclusively through the ACC website. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions.

-Which of the following most likely supports an ACC decision to enter into a licensing agreement with the Chinese firm?

A) Royalties from toys and apparel would be initially minimal.
B) The Wonder Cat concept could be easily counterfeited.
C) ACC would not have to invest much time or capital.
D) ACC would avoid paying U.S. taxes on Chinese exports.

Question 38

Wonder Cat Licensing
Wonder Cat is a popular new cartoon series created by the All Cartoon Channel (ACC). Currently, the only Wonder Cat items available for sale are shirts sold exclusively through the ACC website. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions.

-Which of the following most likely supports an ACC decision not to enter a licensing agreement with the Chinese firm?

A) ACC is considering entering the Chinese market through FDI in the future.
B) ACC desires a low-risk, low-cost strategy to internationalize the Wonder Cat character.
C) The popularity of the Wonder Cat character in China would generate high royalties.
D) ACC wants to maintain firm control of how the Wonder Cat character is used.

Question 39

Big Boy Burgers
Big Boy Burgers (BBB) is an American chain of fast food restaurants that has franchises around the world. Recently, BBB managers have been concerned about protecting the firm's intellectual property, which for BBB includes the recipes for its unique burger sauces and specialty burger buns. Although BBB has never experienced a theft of intellectual property, the firm's managers feel BBB should be more cautious. Managers are meeting with security and legal experts to discuss the options available to the firm which would protect BBB from future international problems.

-Which of the following questions would be more important for the experts to evaluate when determining how to ensure intellectual property protection for Big Boy Burgers?

A) What intellectual property protections are offered by the World Trade Organization for restaurant chains?
B) Is BBB partnering with ethical franchisees that have no intention of becoming BBB competitors in the future?
C) Have BBB competitors been affected by intellectual property theft since the inception of stronger protections by international organizations such as WIPO?
D) How are BBB franchisees modifying recipes and menus to meet the needs and desires of customers in local markets?

Question 40

Big Boy Burgers
Big Boy Burgers (BBB) is an American chain of fast food restaurants that has franchises around the world. Recently, BBB managers have been concerned about protecting the firm's intellectual property, which for BBB includes the recipes for its unique burger sauces and specialty burger buns. Although BBB has never experienced a theft of intellectual property, the firm's managers feel BBB should be more cautious. Managers are meeting with security and legal experts to discuss the options available to the firm which would protect BBB from future international problems.

-Which of the following most likely supports BBB legal experts fully investigating the intellectual property laws of each nation in which BBB has franchises?

A) Intellectual property laws and their enforcement vary from country to country.
B) Patents and trademarks granted in one country will transfer to another country.
C) TRIPS protects the intellectual property of firms doing business in any nation.
D) Nations with numerous IPR violators are beginning to comply with the WTO.

Question 41

What are intellectual property rights? In a short essay, explain how they are an incentive to inventors.

Question 42

How are trademarks established in the United States and abroad? What are some of the difficulties faced by firms regarding the protection of trademarks?

Question 43

In a short essay, explain how the success of a licensed asset is dependent on the licensee. How do experienced firms avoid having quality disagreements with licensees? Provide an example to illustrate your answer.

Question 44

In a short essay, explain how licensing works as an entry strategy into foreign markets. Describe the risks, or disadvantages, faced by technological firms that enter licensing agreements in foreign countries.

Question 45

How do franchisors attempt to maintain uniformity in their franchise operations? Why is uniformity often difficult to achieve? In a short essay, provide examples of how franchised adapt to foreign surroundings.

Question 46

In a short essay, compare and contrast licensing and franchising as foreign market entry strategies. Why is franchising a more comprehensive strategy?

Question 47

In a short essay, describe four advantages and four disadvantages of franchising to the franchisor.

Question 48

In a short essay, explain the role of intellectual property rights in foreign market contractual strategies. What constitutes the infringement of intellectual property and describe some examples?