question

What is the main disadvantage of wholly owned subsidiaries?

answer

the firm bears the full cost and risk of setting up overseas operations

question

Wholly owned subsidiary

answer

the firm owns 100 percent of the stock

question

If a firm wants the option of global strategic coordination, the firm should choose

answer

a wholly owned subsidiary

question

Establishing a wholly owned subsidiary in a foreign country can be done

answer

by setting up a new operation or by acquiring an established firm

question

Wholly owned subsidiaries are attractive

answer

*reduce the risk of losing control * give a firm the tight control in different countries * may be required in order to realize location and experience curve economies

question

What is the most costly form of foreign market entry?

answer

Wholly owned subsidiary

question

Which entry mode has high costs and risks?

answer

Wholly owned subsidiaries

question

Turnkey Project

answer

contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel

question

What are the six different ways to enter a foreign market?

answer

exporting turnkey projects licensing franchising establishing joint ventures with a host country firm setting up a new wholly owned subsidiary in the host country

question

Turnkey projects are a means of exporting _____ to other countries

answer

process technology

question

Turnkey projects are most common in the following industries:

answer

chemical, pharmaceutical, petroleum refining, and metal refining.

question

An advantage of _____ is that they are a way of earning great economic returns from technological assets.

answer

turnkey projects

question

In which strategy does a foreign client have the least input in details of a project?

answer

turnkey strategy

question

Creating competitors and lack of long-term market presence are disadvantages of:

answer

turnkey projects

question

Which of the following is an advantage of turnkey projects?

answer

earning great returns from the technological know-how of running a complex process.

question

Why are wholly owned subsidiaries preferred by firms pursuing global or transnational strategies?

answer

they allow the use of profits generated in one market and improve the competitive position in another.

question

Turnkey Contract Advantage

answer

ability to earn returns from process technology skills in countries where FDI is restricted

question

Turnkey Contract Disadvantage

answer

*creating efficient competitors lack of long-term market presence

question

Exporting

answer

is a common first step in the international expansion process for many manufacturing firms

question

How do most firms begin their international expansion?

answer

with exporting

question

Tariff barriers can make it uneconomical to use which mode of entry?

answer

exporting

question

All of the following statements are disadvantages of exporting EXCEPT

answer

exporting may help a firm achieve experience curve economies.

question

Which of the following is an advantage of exporting?

answer

Allows a firm to achieve experience curve and location economies.

question

The greater the pressures for cost reductions are, the most likely a firm will want to pursue some combination of:

answer

exporting and wholly owned subsidiaries.

question

Licensing Agreement

answer

an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified time period, and in return, the licensor receives a royalty fee from the licensee

question

An arrangement whereby a licensor grants the rights to intangible property to another entity for a specified time period in exchange for royalties is a(n) _____ agreement.

answer

licensing

question

A primary advantage of _____ is that the firm does not have to bear the development costs and risks associated with opening a foreign market.

answer

licensing

question

A disadvantage of licensing is

answer

lack of control over technology inability to realize location & experience curve economies

question

Another disadvantage of licensing is

answer

Inability to engage in global strategic coordination

question

Which of the following is NOT a drawback of licensing?

answer

Licensing can become unprofitable due to trade barriers and transportation costs.

question

Under a(n) _____ agreement, a firm might license some valuable intangible property to a foreign partner, but in addition to a royalty payment, the firm might also request that the foreign partner license some of its valuable know-how to the firm.

answer

cross-licensing

question

Which type of agreement is believed to reduce the risks associated with licensing technological know-how?

answer

Cross-licensing agreement

question

Although they are similar, _____ tends to involve longer-term commitments than:

answer

franchising; licensing.

question

Advantages of _____ are low development costs and risks.

answer

franchising and licensing

question

Franchising is employed primarily by:

answer

service firms

question

Because the _____ typically assumes most costs and risks, he or she has the incentive to build a profitable operation as quickly as possible.

answer

franchisee

question

Which entry mode has low development costs and risks?

answer

Franchising

question

Which entry mode has a lack of control over quality?

answer

Franchising

question

The magnitude of the advantages and disadvantages associated with an entry mode is NOT determined by:

answer

the surface area of the country

question

A _____ entails establishment of a firm that is jointly owned by two or more otherwise independent firms.

answer

joint venture

question

Which of the following is NOT a disadvantage of joint ventures?

answer

a joint venture is the most costly and risky choice

question

Which of the following is a disadvantage of joint ventures?

answer

*lack of control over technology *inability to engage in global strategic coordination *inability to realize location & experience economies

question

What is the advantage of joint venture?

answer

*access to local partner's knowledge *sharing development costs and risks *politically acceptable

question

The advantages frequently associated with entering a market early are commonly known as:

answer

first-mover advantages

question

Which of the following is a first-mover advantage?

answer

create switching costs that tie customers into their products or services.

question

What are disadvantages associated with entering a market early commonly known as?

answer

first-mover disadvantages

question

The ability to preempt rivals and capture demand by establishing a strong brand name is an example of:

answer

first-mover advantages.

question

Which theory suggests that in case where there may be important first mover advantages, governments can help firms from their countries attain these advantages?

answer

strategic trade theory

question

Suzi's Sleds, Inc. is considering establishing a subsidiary in Japan, where there are no other incumbent competitors to acquire. Suzi's would do best in Japan with a(n):

answer

green-field venture.

question

The big advantage of establishing a(n) _____ in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

answer

greenfield venture

question

Greenfield strategy

answer

building a subsidiary from the ground up

question

Which venture is risky?

answer

greenfield

question

All of the following are advantages of acquisitions EXCEPT

answer

it is easy to realize synergies by integrating the operations of the acquired entites

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