Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries?

Accepted Answer

A)   It gives firms sound knowledge of the local markets, culture, and the political environment.
B)   It helps protect competitive advantages based on technology.
C)   It allows firms to use the profits generated in one market to improve its competitive position in another market.
D)   It is the most politically accepted mode of entry into foreign markets.
E)   It has the least costs and risks associated with developing a foreign market.

Question 3

John developed a food additive that replaces processed sugars. He granted the right to use this additive to a major cereal manufacturer, and John now receives a $0.50 royalty for every box of cereal sold that contains this additive. What is this an example of?

Accepted Answer

A)   franchising
B)   acquisition
C)   licensing
D)   exporting
E)   turnkey project

Question 4

Describe the factors that affect the long-run economic benefits of doing business in a foreign country.

Accepted Answer

The long-run economic benefits of doing ...

Question 5

High transportation costs are a disadvantage for companies that

Accepted Answer

A)   are service based.
B)   produce and ship products regionally.
C)   ship large, bulky products.
D)   use customization.
E)   ship component parts.

Question 6

Which type of entry allows a company to learn about the foreign market while limiting the firm's exposure to that market?

Accepted Answer

A)   early entry
B)   small-scale entry
C)   large-scale entry
D)   late entry
E)   rapid entry

Question 7

California Fresh Food wants to expand internationally. Sales Director Sun-Jun Lee prefers that the company export to foreign markets. What rationale should Lee use to show the advantage of exporting as a mode of entry?

Accepted Answer

A)   A firm can avoid the cost of establishing manufacturing operations in the host country.
B)   A firm shares the development costs and risks with its host partner.
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. A

Question 8

What form of entry into a foreign market gives a firm tight control for coordinating a globally dispersed value chain?

Accepted Answer

A)   signing joint-venture agreements
B)   installing manufacturing units in locations with optimal factor conditions
C)   setting up wholly owned marketing subsidiaries
D)   establishing a greenfield venture
E)   using foreign marketing agents

Question 9

What is one disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?

Accepted Answer

A)   lack of control over quality
B)   high costs and risks
C)   problems with local marketing agents
D)   inability to engage in global strategic coordination
E)   lack of control over technology

Question 10

To reduce the risks of failure of an acquisition, managers must

Accepted Answer

A)   pay more for the acquired unit to please its existing employees.
B)   encourage and facilitate management turnover.
C)   acquire a firm without wasting time on screening.
D)   move rapidly after an acquisition to put an integration plan in place.
E)   ensure that the work cultures are significantly different from each other. D

Question 11

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

Accepted Answer

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 12

First-mover disadvantages refer to

Accepted Answer

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 13

What are first-mover advantages? Describe three first-mover advantages for international businesses.

Accepted Answer

The advantages frequently associated wit...

Question 14

With a wholly owned subsidiary, a firm shares the costs of setting up overseas operations with partner firms.

Accepted Answer

A) True 
 B)False

Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

Licensing increases the risk of losing control over a firm's proprietary technological know-how.

Accepted Answer

A) True 
 B)False

Question 17

What is an advantage of turnkey projects as a mode of entry into foreign markets?

Accepted Answer

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 18

Describe the factors that should be considered for a firm choosing between a greenfield venture and an acquisition.

Accepted Answer

The choice between acquisitions and gree...

Question 19

Porter's PaleAle is considering small-scale entry into the European market. What would be a disadvantage of small-scale entry for this firm?

Accepted Answer

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

Question 20

A company might not want to consider ________ as a means of entry into a foreign market because it is generally the most costly method from a capital investment standpoint.

Accepted Answer

A)   licensing
B)   a wholly owned subsidiary
C)   franchising
D)   a joint venture
E)   exporting B

Exam 13: Entering Foreign Markets

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

Correct AnswerverifiedShow Answer

Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries?

Correct AnswerverifiedShow Answer

John developed a food additive that replaces processed sugars. He granted the right to use this additive to a major cereal manufacturer, and John now receives a $0.50 royalty for every box of cereal sold that contains this additive. What is this an example of?

Correct AnswerverifiedShow Answer

Describe the factors that affect the long-run economic benefits of doing business in a foreign country.

Correct AnswerverifiedThe long-run economic benefits of doing ...View AnswerShow Answer

High transportation costs are a disadvantage for companies that

Correct AnswerverifiedShow Answer

Which type of entry allows a company to learn about the foreign market while limiting the firm's exposure to that market?

Correct AnswerverifiedShow Answer

California Fresh Food wants to expand internationally. Sales Director Sun-Jun Lee prefers that the company export to foreign markets. What rationale should Lee use to show the advantage of exporting as a mode of entry?

Correct AnswerverifiedA

What form of entry into a foreign market gives a firm tight control for coordinating a globally dispersed value chain?

Correct AnswerverifiedShow Answer

What is one disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?

Correct AnswerverifiedShow Answer

To reduce the risks of failure of an acquisition, managers must

Correct AnswerverifiedD

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

Correct AnswerverifiedShow Answer

First-mover disadvantages refer to

Correct AnswerverifiedShow Answer

What are first-mover advantages? Describe three first-mover advantages for international businesses.

Correct AnswerverifiedThe advantages frequently associated wit...View AnswerShow Answer

With a wholly owned subsidiary, a firm shares the costs of setting up overseas operations with partner firms.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Licensing increases the risk of losing control over a firm's proprietary technological know-how.

Correct AnswerverifiedShow Answer

What is an advantage of turnkey projects as a mode of entry into foreign markets?

Correct AnswerverifiedShow Answer

Describe the factors that should be considered for a firm choosing between a greenfield venture and an acquisition.

Correct AnswerverifiedThe choice between acquisitions and gree...View AnswerShow Answer

Porter's PaleAle is considering small-scale entry into the European market. What would be a disadvantage of small-scale entry for this firm?

Correct AnswerverifiedShow Answer

A company might not want to consider ________ as a means of entry into a foreign market because it is generally the most costly method from a capital investment standpoint.

Correct AnswerverifiedB

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The long-run economic benefits of doing ...
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The advantages frequently associated wit...
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The choice between acquisitions and gree...
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