question

A firm contemplating foreign expansion must make three decisions: (1) which __________ ___ __________, (2) __________ to enter the markets, and (3) on what _________.

answer

Markets to enter, when, scale

question

The costs and risks associated with doing business in a foreign country are typically lower in __________ advanced and politically stable ___________ nations.

answer

Economically, democratic

question

The benefit-cost-risk trade-off is likely to be most favorable in politically stable developed and developing nations that have __________ ___________ systems, and where there is not a dramatic upsurge in either __________ rates or __________-__________ debt.

answer

Free market, inflation, private-sector

question

True/False: If an international business can offer a product that has not been widely available in a market and that satisfies an unmet need, the value of that product to consumers is likely to be much lower.

answer

False

question

Definition: Entry is early when a firm enters a foreign market before other foreign firms and late when a firm enters after other international businesses have established themselves.

answer

Timing of entry

question

Definition: Advantages accruing to the first to enter a market.

answer

First-mover advantages

question

Definition: Disadvantages associated with entering a foreign market before other international businesses.

answer

First-mover disadvantages

question

Definition: Costs that an early entrant has to bear that a later entrant can avoid, such as the time and effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.

answer

Pioneering costs

question

One first-mover advantage is the ability to preempt rivals and capture __________ by establishing a strong brand name.

answer

Demand

question

One first-mover advantage is the ability to build __________ volume in that country and ride down the ___________ curve ahead of rivals, giving the early entrant a cost advantage.

answer

Sales, experience

question

One first-mover advantage is the ability of early entrants to create _________ __________ that tie customers into their products or services.

answer

Switching costs

question

Pioneering costs include: (a) the costs of business _________ if the firm, due to its ignorance of the foreign environment, makes major mistakes, (b) the costs of ___________ and establishing a product offering, including the costs of __________ customers; and (c) the costs associated with a change in __________ that invalidate prior assumptions about the best business model in a country.

answer

Failure, promoting, educating, regulations

question

True/False: Research confirms that the probability of firm survival increases if an international business enters a national market after several other foreigns firms have already done so.

answer

True

question

True/False: Entering a market on a large scale involves rapid entry.

answer

True

question

_________-scale entrants are more likely to be able to capture first-move advantages.

answer

Large

question

_________-scale entry allows a firm to learn about a foreign market while limiting the firm's exposure to that market.

answer

Small

question

Small-scale entry ___________ the risks associated with a subsequent large-scale entry.

answer

Reduces

question

Christopher ___________ and Sumantra ___________ argue that companies based in developing nations should use the entry of foreign multinationals as an opportunity to _________ from these competitors by benchmarking their operations and performance against them.

answer

Bartlett, Ghoshal, learn

question

Christopher ___________ and Sumantra ___________ argue that companies based in developing nations can differentiate itself from a foreign multinational by focusing on market _________ that the multinational ignores or is unable to serve effectively.

answer

Bartlett, Ghoshal, niches

question

Firms can use six different modes to enter foreign markets: (1) ___________, (2) __________ projects, (3) __________, (4) ____________, (5) establishing ____________ __________ with a host-country firm, or (6) setting up a _______, ____________ __________ subsidiary within the host country.

answer

Exporting, turnkey, licensing, franchising, joint ventures, new, wholly owned

question

Definition: Sale of products produced in one country to resident of another country.

answer

Exporting

question

Exporting has two main advantages: (1) It avoids the substantial costs of establishing ____________ operations in the host country, and (2) Exporting may help a firm achieve ____________ curve and ____________ economies.

answer

Manufacturing, experience, location

question

Exporting has many drawbacks: (1) It may not be appropriate if _________-_________ locations for manufacturing can be found abroad; (2) It has high _________ costs, especially for bulk products; (3) _________ barriers can make exporting uneconomical.

answer

Lower-cost, transportation, tariff

question

Though exporting has high transportation costs, one way of getting around this is to manufacture _________ products regionally.

answer

Bulk

question

The way around exporting's problems is to set up __________ ___________ subsidiaries in foreign nations to handle local marketing, sales, and services.

answer

Wholly owned

question

Definition: A project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational.

answer

Turnkey project

question

_________ _________ are most common in the chemical, pharmaceutical, petroleum refining, and metal refining industries, all of which use complex, expensive production technologies.

answer

Turnkey projects

question

True/False: The main advantages to turnkey projects is that they are a way of earning great economic returns from a valuable asset, and that they can be less risky than conventional FDI.

answer

True

question

There are three disadvantages to turnkey projects: (1) A firm will have no ________-________ interest in the foreign country; (2) A firm may inadvertently create a _________; and (3) If the firm's process technology is a source of competitive advantage, selling this technology through a turnkey project is selling competitive advantage to _________.

answer

Long-term, competitor, competitors

question

Definition: Occurs when a firm licenses the rights to produce its product, its production processes, or its brand name or trademark to another firm; in return, the licensor collects a royalty fee from the licensee.

answer

Licensing

question

The advantages of licensing are that (a) the firm does not have to bear the ____________ costs and risks associated with opening a foreign market; (b) the firm is able to get around foreign ___________ to investment; and (c) allows firms to use intangible property in business without developing ____________ itself.

answer

Development, barriers, applications

question

Licensing has three main disadvantages: (1) It does not give a firm tight ___________ over manufacturing, marketing, and strategy; (2) It does not allow a firm to coordinate strategic moves across countries by using __________ from one country to support attacks on another; and (3) Firms are less able to maintain control over their ____________ know-how within the framework of a licensing agreement.

answer

Control, profits, technological

question

There are a couple ways to minimize the risk of licensing: (1) Entering into a _________-__________ agreement with a foreign firm, and (2) Linking an agreement to license know-how with the formation of a __________ ___________.

answer

Cross-licensing, joint venture

question

Franchising tends to involve __________-term commitments than licensing.

answer

Longer

question

Definition: A specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business.

answer

Franchising

question

A franchiser typically receives a __________ payment that amounts to some percentage of the franchisee's revenues.

answer

Royalty

question

The main advantage of franchising is that the firm is relieved of many of the _________ and __________ of opening a foreign market on its own.

answer

Costs, risks

question

The disadvantages of franchising are (a) it may inhibit the firm's ability to take profits out of one country to support competitive ___________ in another, and (b) it may inhibit the firm's ability to control the ___________ created by the franchisee.

answer

Attacks, quality

question

Franchising can sometime inhibit a firm's ability to control the quality of the product upheld by the franchisee. One way around this disadvantage is to set up a ___________ in each country in which the firm expands.

answer

Subsidiary

question

Definition: Establishing a firm that is jointly owned by two or more otherwise independent firms.

answer

Joint venture

question

The main advantages of a joint venture are: (1) A firm benefits from a _________ _________'s knowledge of the host country's competitive conditions, culture, language, etc.; (2) When the development costs and/or risks of opening a foreign market are high, a firm might gain by __________ these costs with a local partner; and (3) In many countries, __________ considerations make joint ventures the only feasible entry mode.

answer

Local partner, sharing, political

question

Joint ventures have major disadvantages: (1) A firm risks giving control of its ___________ to its partner; (2) A firm doesn't have the tight ____________ over subsidiaries that it needs to realize experience curve or location economies; (3) A firm doesn't have the tight control over a subsidiary that it needs for a coordinated __________ ___________ against rivals; and (4) They can lead to conflicts between the investing firms if their __________ change or they disagree on what the ___________ should be.

answer

Technology, control, global attack, goals, strategy

question

Sometimes a joint venture can be risky because a firm risks giving control of its technology to its partner. This risk can be minimized if the firm holds __________ ownership in the venture or "_________ _________" from a partner technology that is central to the core competence of the firm.

answer

Majority, walls off

question

True/False: Sometimes a joint venture can be risky because a firm risks a conflict over the strategy. These conflicts often end in the dissolution of the venture.

answer

True

question

Definition: A subsidiary in which the firm owns 100% of the stock.

answer

Wholly owned subsidiary

question

The advantages of wholly owned subsidiaries: (1) When a firm's competitive advantage is based on technological competence, this method of entry reduces the risk of losing __________ over that competence; (2) A firm has tight control over operations in different __________; and (3) This method of entry may be __________ if a firm is trying to realize location and experience curve economies.

answer

Control, countries, required

question

Disadvantages of wholly owned subsidiaries: (1) It is a __________ method of serving a foreign market from a capital investment standpoint; and (2) The problems with trying to marry __________ corporate cultures.

answer

Costly, divergent

question

True/False: If a firm's competitive advantage is based on control over proprietary technological know-how, licensing and joint-venture arrangements are the best methods of entry into a foreign market.

answer

False

question

Licensing technological know-how has two main advantages: (1) By licensing it to ___________, a firm may deter them from developing their own technology; and (2) A firm can establish its technology as the ___________ design in the industry.

answer

Competitors, dominant

question

Licensing a technology can be risky; however, it can be a good entry method if the technological advancement is only ____________ and it expects a rapid imitation of the technology by competitors.

answer

Transitory

question

True/False: For service firms, the risk of losing control over management skills to franchisees or joint-venture partners is not great.

answer

True

question

The __________ the pressures for cost reductions are, the more likely a firm will want to pursue some combination of exporting and wholly owned subsidiaries.

answer

Greater

question

True/False: Firms pursuing global standardization or transnational strategies tend to avoid establishing wholly owned subsidiaries.

answer

False

question

Advantages of acquisitions: (1) They are __________ to execute; (2) In many cases, firms make acquisitions to preempt their __________; and (3) Acquisitions are less __________ than greenfield ventures.

answer

Quick, competitors, risky

question

When a firm makes an acquisition in a foreign market, it acquires ___________ assets like factories, logistics systems, and customer service systems, and ___________ assets like a brand name and manager knowledge.

answer

Tangible, intangible

question

Acquisitions fail for several reasons: (1) Acquiring firms often __________ for the assets of the acquired firm; (2) There is a clash between the _________ of the acquiring and acquired firm; (3) Attempts to realize synergies by integrating the acquired and acquiring entities take _________ than forecast; and (4) Sometimes firms have inadequate pre-acquisition __________.

answer

Overpay, cultures, longer, screening

question

Sometimes firms overpay for acquisitions because the price of the target firm can get bid up if ________ _________ _________ firm is interested in its purchase, and the management of the acquiring firm could be too __________ about the value of the acquisition.

answer

More than one, optimistic

question

The ___________ ____________ postulates that top managers typically overestimate their ability to create value from an acquisition, primarily because rising to the top of a corporation has given them an exaggerated sense of their own capabilities.

answer

Hubris hypothesis

question

True/False: After an acquisition, many acquired companies experience high management turnover.

answer

True

question

Screening a firm before an acquisition can help make sure the firm (1) does not ________ too much for the acquired unit, (2) does not uncover any nasty ________ after the acquisition, and (3) acquires a firm whose organization culture is not _________ to the acquiring firm.

answer

Pay, surprises, antagonistic

question

The main advantage to establishing a __________ ___________ is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

answer

Greenfield venture

question

It is __________ to establish a set of operating routines in a new subsidiary than it is to convert the operating routines of an acquired unit.

answer

Easier

question

True/False: Greenfield ventures are quicker to establish than acquisitions.

answer

False

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