Int-Bus14 – Flashcards
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Q. Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in
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Politically stable developed and developing nations that have free market systems
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Q. Which of the following statements about value creation by an international business in a foreign market is false?
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Greater value translates into an ability to charge lower prices
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Q. The advantages frequently associated with entering a market early are commonly known as
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First-mover advantages
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Q. Which of the following is not an advantage association with entering a foreign market before other international businesses?
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Ability to avoid pioneering costs
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Q. Switching costs
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Make it difficult for later entrants to win business
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Q. Pioneering costs are
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Costs that the firm has to bear that a later entrant can avoid
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Q. Early entrants to a market that are able to create switching costs that tie the customer to the product are capitalizing on
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First-mover advantages
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Q. All of the following are examples of pioneering costs except the costs of
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Learning from the mistakes of early entrants
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Q. The costs of promoting and establishing a product offering when a firm enters a foreign market prior to its rivals are known as
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Pioneering costs
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Q. A strategic commitment
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Is difficult to reverse
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Q. A large-scale entrant is more likely than a small-scale entrant to be able to capture first-mover advantages associated with
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Demand preemption
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Q. The ____ entrant is more likely than the ___ entrant to be able to capture the first mover advantages associated with demand preemption, scale economies and switching costs.
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Large Scale; Small scale
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Q. Which of the following statements about small-scale entry is true?
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Small-scale entry is a way to gather information about a foreign market before deciding whether to enter on a significant scale.
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Q. If a firm can realize location economies by moving production elsewhere, it should avoid
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Exporting
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Q. Which of the following is a distinct advantage of exporting?
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It avoids the often substantial costs of establishing manufacturing operations in the host country
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Q. Which of the following is a distinct advantage of exporting?
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It may help a firm achieve experience curve and location economies
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Q. When a firm faces significant transportation costs, ____ can be uneconomical.
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Exporting
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Q. Manufacturing bulk products regionally
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Enables a firm to realize some economies from large-scale production
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Q. When an exporting firm finds that its local agent is also carrying competitors' products, the firm may switch to a ___ to handle local marketing, sales and services.
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Wholly owned subsidiary
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Q. When local agents carry the products of competing firms and have divided loyalties, ____ is not appropriate
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Exporting
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Q. The threat of tariff barriers by the host government can make ___ very risky.
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Exporting
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Q. Identify the incorrect statement about turnkey projects.
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They are most common in industries which use inexpensive production technologies.
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Q. In which of the following industries are turnkey projects the most common?
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Chemical, pharmaceutical and metal refining
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Q. A turnkey strategy
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Is useful where FDI is limiter by host-government regulations
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Q. Many Western firms that sold oil-refining technology to firms in Gulf states now find themselves competing with these firms in the world oil market. This is an example of
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The firm entering into a turnkey project with a foreign enterprise, inadvertently creating a competitor
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Q. Which of the following is a drawback associated with a turnkey strategy?
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Possible creation of a competitor
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Q. Firms that lack the capital necessary to develop foreign operations may choose __ as a means of expanding internationally.
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Licensing
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Q. An arrangement whereby a firm grants the rights to intangible property to another entity for a specified time period in exchange for royalties is a(n) ___ agreement.
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Licensing
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Q. Patents, inventions, formulas, processes, designs, copyrights and trademarks are all forms of
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Intangible property
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Q. What is the primary advantage of licensing?
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It helps a firm avoid the development costs associated with opening a foreign market
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Q. Which of the following is a disadvantage of licensing?
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It does not give a firm the tight control over strategy that is required for realizing experience curve and location economies
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Q. When a company has some intangible property that might have business applications, but the firm does not want to develop those applications itself, ______ makes sense.
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Licensing
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Q. Cross-licensing agreements are increasingly common in the _____ industry.
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High-technology
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Q. Identify the correct statement concerning cross-licensing agreements.
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They increase the probability that parties will behave opportunistically towards each other
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Q. Which mode of entry is pursued primarily by manufacturing firms?
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Licensing
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Q. This mode of entry is primarily used by service firms.
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Franchising
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Q. If a service firm wants to build a global presence quickly and at a relatively low cost and risk, ____ makes sense.
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Franchising
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Q. Which of the following statements about franchising is true?
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It is a specialized form of licensing
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Q. Which of the following is an advantage of franchising?
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A firm is relieved of many of the costs and risks of opening a foreign market on its own
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Q. Firms engaging in ___ with a local company can benefit from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems and business systems.
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Joint ventures
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Q. Identify the advantage of establishing a wholly owned subsidiaries.
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It may be required if a firm is trying to realize location and experience curve economies
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Q. A wholly owned subsidiary is appropriate when
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The firm wants 100 percent of the profits generated in a foreign market
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Q. A firm that establishes a ___ must bear the full costs and risks of entering a foreign market.
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Wholly owned subsidiary
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Q. A ___ is the most costly method of serving a foreign market from a capital investment standpoint.
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Wholly owned subsidiary
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Q. If a firm's core competency is based on control over proprietary technological know-how, it should avoid ___ and ___ arrangements if possible, to minimize the risk of losing control over the technology.
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Licensing, Joint-venture
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Q. Most service firms have found that ___ with local partners work best for controlling subsidiaries.
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Joint ventures
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Q. ___ are the preferred method of market entry for firms pursuing global standardization or transnational strategies.
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Wholly owned subsidiaries
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Q. Firms may prefer acquisitions to green field investments for all of the following reasons except
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They allow companies to completely side step government regulations on investment
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Q. The hubris hypothesis attempts to explain
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Why acquisitions fail
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Q. According to the ___, top managers typically overestimate their ability to create value from an acquisition.
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Hubris hypothesis
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Q. To increase the potential for a successful acquisition, a firm should
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Screen the foreign enterprise to be acquired
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Q. Which of the following is not important in the acquisition process?
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The hubris hypothesis should be maintained
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Q. When a firm wants to enter a market where there are already well-established incumbent companies and where global competitors are also interested in establish a presence, the firm should consider
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Acquisitions
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Q. Firms entering markets where there are no incumbent competitors to be acquired should choose
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Greenfield investments
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Q. High transportation costs, trade barriers and problems with local marketing agents are all disadvantages of
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Exporting
