Deck 12: Strategies for Analyzing and Entering Foreign Markets

Question 1

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.

Answer 1

C

Question 2

All of the following are potential benefits of entering a new market except ________.

A) eliminating synergy with other operations
B) lowering manufacturing costs
C) limiting competitors' profits
D) gaining new technology

Answer 2

A

Question 3

Which of the following is not a mode of entry into foreign markets?

A) exporting
B) importing
C) international licensing
D) greenfield strategy

Answer 3

B

Question 4

According to the eclectic theory, all of the following should be considered when choosing a mode of entry EXCEPT ________.

A) ownership advantages
B) location advantages
C) financial control advantages
D) internalization advantages

Question 5

Executives at KBH Enterprises are considering the idea of entering the Taiwanese market through a licensing agreement. Which of the following factors is LEAST relevant to the firm's assessment of the Taiwanese market?

A) current size of market
B) potential size of market
C) foreign exchange in market
D) legal and political environment in market

Question 6

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 7

________ 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 8

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 9

Which of the following is not a critical factor in assessing new market opportunities?

A) potential target markets
B) success factors
C) worldwide learning potential
D) product-market differences

Question 10

Which of the following factors is not used to assess the competitive environment in a foreign market?

A) the number of existing firms
B) the size of existing firms
C) current advertising strategies
D) relative market shares

Question 11

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 12

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 13

________ are those 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 14

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 15

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 16

________ 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 17

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 18

LVMH uses all of the following entry methods in its international operations except ________.

A) acquiring small foreign firms
B) entering licensing agreements
C) establishing franchises
D) exporting products

Question 19

________ 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 20

Objective measures of the potential for growth in an economy include all of the following except ________.

A) per capita GDP
B) ownership of private automobiles
C) energy consumption
D) impact of changes in political regime

Question 21

________ 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 22

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

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

Question 23

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 24

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 25

________ is the most common form of international business activity.

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

Question 26

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 27

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

A) shipping goods
B) clearing customs
C) creating strategic marketing plans
D) giving advice about consumer needs

Question 28

Which of the following is not a disadvantage of exporting?

A) vulnerability to tariffs
B) logistical complexities
C) potential conflicts with distributors
D) restrictions on foreign investment

Question 29

Which of the following is NOT a characteristic of exporting?

A) high financial exposure
B) gradual market entry
C) logistical complexities
D) local market knowledge

Question 30

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 31

When an export management company (EMC) acts as a commission agent for exporters, the EMC most likely ________.

A) obtains long-term financing
B) handles shipping responsibilities
C) monitors currency exchange rates
D) resells the goods to domestic distributors

Question 32

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

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

Question 33

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 34

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 35

Which of the following is a characteristic of foreign direct investment?

A) relatively low financial investment
B) low exposure to political risk
C) high profit potential
D) simple management

Question 36

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 37

________ 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 38

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

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

Question 39

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

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

Question 40

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 41

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 42

Which of the following is NOT an aspect of the licensing process?

A) defining the agreement's boundaries
B) establishing compensation rates
C) creating a strategic marketing plan
D) specifying the agreement's duration

Question 43

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 44

________ 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 sosha

Question 45

Carmichael Candies, a U.S. firm, is considering the idea of entering the EU market through an international franchising agreement. What is the main advantage to Carmichael if the firm chooses this entry method?

A) avoidance of tariffs
B) independence from franchisee
C) potential public relations problems
D) high managerial and financial risks

Question 46

Which term refers to compensation under a licensing agreement?

A) sales commission
B) fixed amount
C) sales percentage
D) royalty

Question 47

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 48

Vinson Bicycles, a U.S. firm, is considering the idea of entering the EU market through an international licensing agreement. What is the main disadvantage of this entry method for Vinson?

A) significant financial and political risks
B) foreign investment restrictions
C) limited market opportunities
D) high tariff costs

Question 49

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 sosha
C) freight forwarder
D) export and import broker

Question 50

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 51

Executives at Smithson Soda, a U.S. firm, have decided to enter the Chinese market through a licensing agreement with a beverage manufacturer located in Shanghai. Which of the following statements, if true, most likely undermines this decision?

A) Smithson Soda is low on capital due to a recent expansion of its domestic production plant.
B) Smithson Soda successfully entered the European and Australian markets last year.
C) Smithson Soda typically relies on freight forwarders to handle global shipments.
D) Smithson Soda must protect its unique beverage formula to prevent duplication.

Question 52

The firm that leases the right to use intellectual property is called the ________.

A) leasor
B) licensor
C) licensee
D) franchisee

Question 53

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 54

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 55

Executives at Smithson Soda, a U.S. firm, have decided to enter the Chinese market through a licensing agreement with a beverage manufacturer located in Shanghai. Which of the following statements, if true, best supports this decision?

A) Smithson Soda recently sold one of its manufacturing facilities.
B) Smithson Soda is unfamiliar with the needs of Chinese consumers.
C) Smithson Soda uses an EMC to ship its products to a Chinese distributor.
D) Smithson Soda belongs to a Webb-Pomerene association to gather market research.

Question 56

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 57

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

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

Question 58

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

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

Question 59

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 60

The Nintendo Company manufactures electronic video consoles and game cartridges. Nintendo provides game design firms with technical specifications for how Nintendo consoles function. The game design firms create the games and then pay Nintendo a fee to manufacture those games. What mode of entry is described in this example?

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

Question 61

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

Question 62

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

Question 63

Government stability is an important factor in foreign market assessment.

Question 64

Bechtel, a construction and engineering firm, has a contract with the Indian government to expand the airport in New Delhi. Bechtel will design, construct, and equip the airport before turning the facility over to the Indian government upon completion. Which entry mode for international business is used by Bechtel?

A) B-O-T project
B) turnkey project
C) contract manufacturing
D) foreign direct investment

Question 65

In comparison to licensing, franchising offers a firm ________.

A) less taxation
B) more control
C) higher profit margins
D) fewer financial risks

Question 66

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

Question 67

Juanita recently purchased a FDX Computer. She needs assistance setting it up and contacts the firm's customer service center, which is located in Bangalore, India. FDX Computer most likely engages in which of the following?

A) business process outsourcing
B) foreign direct investment
C) brownfield strategies
D) B-O-T projects

Question 68

Burger King has established a franchise agreement with an individual in Tokyo. Burger King will most likely provide the Japanese franchisee with all of the following EXCEPT ________.

A) intellectual property
B) operating systems
C) financial capital
D) training

Question 69

British Airways has an arrangement with a state-owned airline headquartered in Brazil. British Airways provides the Brazilian airline with advice on reservation services and scheduling. Which entry mode for international business is used by British Airways?

A) management contract
B) turnkey project
C) greenfield strategy
D) licensing

Question 70

What is a common disadvantage of using a greenfield strategy?

A) paying high tariffs
B) using outdated equipment
C) taking over existing debts
D) complying with local regulations

Question 71

Which country is the market leader in providing international business process outsourcing?

A) South Africa
B) Brazil
C) India
D) China

Question 72

Comtex, a U.S. clock manufacturer, recently built a new production facility in Bangladesh. Which term best describes the activities of Comtex?

A) joint venture strategy
B) brownfield strategy
C) acquisition strategy
D) greenfield strategy

Question 73

Which of the following is a method for foreign direct investment?

A) participating in business process outsourcing
B) buying existing assets in a foreign country
C) exporting services and products
D) entering licensing agreements

Question 74

Which of the following is typically critical to a turnkey project?

A) business processes
B) low-wage labor force
C) environmental regulations
D) home government financing

Question 75

When two or more firms agree to work together and create a joint owned firm to promote mutual interest, ________ has occurred.

A) an acquisition
B) a joint venture
C) a licensing agreement
D) a franchise agreement

Question 76

International franchising is most likely to succeed when the franchisor has ________.

A) specialized machinery
B) exported other products
C) succeeded in the domestic market
D) implemented a diversification strategy

Question 77

Which term refers to a firm building and operating a facility before transferring ownership of the facility to another party?

A) FDI
B) B-O-T project
C) turnkey project
D) greenfield strategy

Question 78

Kodak focuses on developing photo editing software, and the firm has agreements with a Chinese manufacturer to assemble most Kodak cameras. Which entry mode for international business is used by Kodak?

A) management contracting
B) international franchising
C) contract manufacturing
D) international licensing

Question 79

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

Question 80

Compu-Mart, a U.S. firm, entered the Chinese market by buying a controlling interest in Three-Star, a Chinese electronics firm. What is the most likely disadvantage Compu-Mart will face as a result of this acquisition?

A) becoming vulnerable to Chinese tariffs
B) creating competition with Three-Star
C) assuming the liabilities of Three-Star
D) complying with Chinese building codes