International marketing multiple choices

AACSB: Analytic Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 15-01 Explain the three basic decisions that firms contemplating foreign expans

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Blooms: Remember Difficulty: 1 Easy Learning Objective: 15-01 Explain the three basic decisions that firms contemplating foreign expansion must

make: which markets to enter; when to enter those markets; and on what scale.

Topic: Basic Entry Decisions

3 The costs and risks associated with doing business in a foreign country are typicallyhigh in an economically advanced and politically stable democratic nation

FALSE

The costs and risks associated with doing business in a foreign country are typicallylower in economically advanced and politically stable democratic nations, and they are greater in less developed and politically unstable nations

AACSB: Analytic Accessibility: Keyboard Navigation

Blooms: Understand

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4 The value an international business creates in a foreign market depends on the suitability of its product offering to that market and the nature of indigenous

5 First-mover advantages are the advantages associated with entering a market early

TRUE

The advantages frequently associated with entering a market early are commonly known as first-mover advantages

6 Costs that an early entrant has to bear that a later entrant can avoid are known as first-mover costs

FALSE

Pioneering costs are costs that an early entrant has to bear that a later entrant can avoid

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7 Educating customers is a part of pioneering costs

TRUE

Pioneering costs include the costs of promoting and establishing a product offering,including the costs of educating customers

8 A strategic commitment can be reversed by the top management according to their convenience

FALSE

A strategic commitment has a long-term impact and is difficult to reverse

Blooms: Understand Difficulty: 1 Easy Learning Objective: 15-01 Explain the three basic decisions that firms contemplating foreign expansion must

9 Large strategic commitments increase strategic flexibility

FALSE

Strategic commitments, such as rapid large-scale market entry, can have an

important influence on the nature of competition Large strategic commitments limit strategic flexibility

Blooms: Understand Difficulty: 2 Medium Learning Objective: 15-01 Explain the three basic decisions that firms contemplating foreign expansion must

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10 A small-scale entrant is more likely than a large-scale entrant to capture mover advantages associated with demand preemption, scale economies, and switching costs

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

TRUE

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

12 Exporting is advantageous because it avoids the cost of establishing manufacturingoperations in the host country and because it may help a firm achieve experience curve and location economies

TRUE

Exporting has two distinct advantages First, it avoids the often substantial costs of establishing manufacturing operations in the host country Second, exporting may help a firm achieve experience curve and location economies

Blooms: Remember Difficulty: 1 Easy Learning Objective: 15-02 Compare and contrast the different modes that firms use to enter foreign markets.

Topic: Entry Modes

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13 Exporting is most appropriate when lower-cost locations for manufacturing the product can be found abroad

14 In a turnkey project, the contractor agrees to handle every detail of the project for

15 An advantage of turnkey projects is that the firm that enters into a turnkey deal willhave no long-term interest in the foreign country

FALSE

A drawback of turnkey projects is that the firm that enters into a turnkey deal will have no long-term interest in the foreign country

16 Tangible property includes patents, designs, copyrights, and trademarks

FALSE

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Difficulty: 1 Easy Learning Objective: 15-02 Compare and contrast the different modes that firms use to enter foreign markets.

17 Licensing limits the firm's ability to realize experience curve and location

economies by producing its product in a centralized location

TRUE

Licensing limits the firm's ability to realize experience curve and location

economies by producing its product in a centralized location

AACSB: Reflective Thinking Accessibility: Keyboard Navigation

18 By its very nature, licensing increases a firm's ability to utilize a coordinated

strategy

FALSE

Competing in a global market may require a firm to coordinate strategic moves across countries by using profits earned in one country to support competitive attacks in another By its very nature, licensing limits a firm's ability to do this

19 McDonald's is an example of a firm that uses a franchising strategy

FALSE

The franchiser often assists the franchisee to run the business on an ongoing basis

As with licensing, the franchiser typically receives a royalty payment, which

amounts to some percentage of the franchisee's revenues McDonald's is a good example of a firm that has grown by using a franchising strategy

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20 Franchising enables a firm to quickly build a global presence

TRUE

Using a franchising strategy, a service firm can build a global presence quickly and

at a relatively low cost and risk

21 The most typical joint venture is a 25/75 venture

22 An advantage of joint ventures with a local partner is the knowledge of the local environment that the local partner contributes to the venture

23 A wholly owned subsidiary limits a firm's control over operations in different

countries

FALSE

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Difficulty: 1 Easy Learning Objective: 15-02 Compare and contrast the different modes that firms use to enter foreign markets.

24 Firms entering a market via a wholly owned subsidiary must bear all the costs and risks associated with the venture

TRUE

Establishing a wholly owned subsidiary is generally the most costly method of serving a foreign market from a capital investment standpoint Firms doing this must bear the full capital costs and risks of setting up overseas operations

Blooms: Understand Difficulty: 1 Easy Learning Objective: 15-02 Compare and contrast the different modes that firms use to enter foreign markets.

25 Brand names are generally well-protected by international laws pertaining to trademarks

TRUE

Brand names are generally well-protected by international laws pertaining to trademarks

Blooms: Remember Difficulty: 1 Easy Learning Objective: 15-03 Identify the factors that influence a firm's choice of entry mode.

Topic: Selecting an Entry Mode

26 A joint venture is often politically more acceptable than a wholly owned subsidiary and brings a degree of local knowledge to the subsidiary

TRUE

The subsidiaries may be wholly owned or joint ventures, but most service firms have found that joint ventures with local partners work best for the controlling subsidiaries A joint venture is often politically more acceptable and brings a

degree of local knowledge to the subsidiary

Blooms: Understand Difficulty: 1 Easy Learning Objective: 15-03 Identify the factors that influence a firm's choice of entry mode.

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27 Firms pursuing global standardization or transnational strategies tend to prefer joint-venture arrangements over wholly owned subsidiaries

28 Acquisitions are quick to execute

TRUE

By acquiring an established enterprise, a firm can rapidly build its presence in the target foreign market

Blooms: Remember Difficulty: 1 Easy Learning Objective: 15-04 Recognize the pros and cons of acquisitions versus greenfield ventures as an entry

strategy Topic: Greenfield Venture or Acquisition?

29 Acquisitions rarely produce disappointing results

FALSE

Acquisitions often produce disappointing results

30 Overpayment for assets of an acquired firm is one reason acquisitions fail

TRUE

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31 The main advantage of greenfield investment is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants

TRUE

The big advantage of establishing a greenfield venture in a foreign country is that itgives the firm a much greater ability to build the kind of subsidiary company that it wants

32 Greenfield ventures are less risky than acquisitions in the sense that there is less potential for unpleasant surprises

33 If a firm is trying to enter a market where there are already well-established

companies, and where global competitors are also interested in establishing a presence, the firm should choose a greenfield investment

FALSE

If the firm is seeking to enter a market where there are already well-established incumbent enterprises, and where global competitors are also interested in

establishing a presence, it may pay the firm to enter via an acquisition

Blooms: Understand Difficulty: 2 Medium Learning Objective: 15-04 Recognize the pros and cons of acquisitions versus greenfield ventures as an entry

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34 Unlike joint ventures, strategic alliances require the firm to bear all the costs and risks of foreign expansion

Topic: Strategic Alliances

35 An alliance is a way to bring together complementary skills and assets that neither company could easily develop on its own

TRUE

An alliance is a way to bring together complementary skills and assets that neither company could easily develop on its own

Blooms: Remember Difficulty: 1 Easy Learning Objective: 15-05 Evaluate the pros and cons of entering into strategic alliances.

36 A good ally will expropriate the firm's technological know-how while giving away little in return

FALSE

A good partner is unlikely to try to opportunistically exploit the alliance for its own ends, that is, to expropriate the firm's technological know-how while giving away little in return

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37 Contractual safeguards cannot be written into an alliance agreement to guard against the risk of opportunism by a partner

FALSE

Contractual safeguards can be written into an alliance agreement to guard against the risk of opportunism by a partner

38 Cross-licensing agreements can be used to formalize arrangements to swap skills and technology in a strategic alliance

TRUE

Both parties to an alliance can agree in advance to swap skills and technologies that the other covets, thereby ensuring a chance for equitable gain Cross-licensingagreements are one way to achieve this goal

Blooms: Understand Difficulty: 2 Medium Learning Objective: 15-05 Evaluate the pros and cons of entering into strategic alliances.

39 Relational capital refers to the building of interpersonal relationships between the firms' managers in a strategic alliance

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40 To maximize the learning benefits of an alliance, a firm must try to learn from its partner and then apply the knowledge within its own organization

Multiple Choice Questions

41 Other things being equal, the benefit-cost-risk trade-off is likely to be most

Blooms: Remember Difficulty: 2 Medium Learning Objective: 15-01 Explain the three basic decisions that firms contemplating foreign expansion must

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42 Early entrants to a market that are able to create switching costs that tie the customer to the product are capitalizing on _

43 Which of the following is a first-mover advantage?

A lower research and development costs and marketing costs than

Blooms: Understand Difficulty: 2 Medium Learning Objective: 15-01 Explain the three basic decisions that firms contemplating foreign expansion must

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Blooms: Remember Difficulty: 2 Medium Learning Objective: 15-01 Explain the three basic decisions that firms contemplating foreign expansion must

45 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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46 A large-scale entrant is more likely than a small-scale entrant to be able to capture first-mover advantages associated with

47 Which of the following statements about small-scale entry is true?

A The commitment associated with a small-scale entry makes it possible for the small-scale entrant to capture first-mover advantages

B Small-scale entry is a way to gather information about a foreign market before

deciding whether to enter on a significant scale

C By giving a firm time to collect information, small-scale entry increases the risksassociated with a subsequent large-scale entry

D Small-scale entry limits a firm's ability to learn about a foreign market thereby also limiting the firm's exposure to that market

Small-scale entry allows a firm to learn about a foreign market while limiting the firm's exposure to that market By giving the firm time to collect information, small-scale entry reduces the risks associated with a subsequent large-scale entry But the lack of commitment associated with small-scale entry may make it more

difficult for the small-scale entrant to build market share and to capture first-mover

or early-mover advantages

Blooms: Understand Difficulty: 3 Hard Learning Objective: 15-01 Explain the three basic decisions that firms contemplating foreign expansion must

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48 If a firm can realize location economies by moving production elsewhere, it should avoid:

Particularly for firms pursuing global or transnational strategies, it may be

preferable to manufacture where the mix of factor conditions is most favorable from a value creation perspective and to export to the rest of the world from that location

49 Which of the following is a distinct advantage of exporting?

A It avoids the threat of tariff barriers by the host-country

government

B Firms benefit from a local partner's knowledge of the host country's competitive conditions

C It avoids the often substantial costs of establishing manufacturing operations in

the host country

D It is appropriate if lower cost locations for manufacturing the product can be found abroad

Another advantage of exporting is that it helps a firm achieve experience curve andlocation economies

Blooms: Understand Difficulty: 2 Medium Learning Objective: 15-02 Compare and contrast the different modes that firms use to enter foreign markets.

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50 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 service

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

In a turnkey project, the contractor agrees to handle every detail of the project for

a foreign client, including the training of operating personnel At completion of the contract, the foreign client is handed the "key" to a plant that is ready for full operation—hence, the term turnkey

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52 Turnkey projects are most common in which of the following industries?

A fresh fruit, grain, and meat

53 Which of the following statements is true of turnkey projects?

A Turnkey projects are most common in industries which use simple, inexpensive production technologies

B A turnkey strategy can be more risky than

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54 Many American firms that sold oil-refining technology to firms in the Gulf now find themselves competing with these firms in the world oil market This is an example of:

A a firm entering into a turnkey project with a foreign enterprise, inadvertently

A drawback of turnkey strategy is that if the firm's process technology is a source

of competitive advantage, then selling this technology through a turnkey project is also selling competitive advantage to potential and/or actual competitors

Blooms: Apply Difficulty: 3 Hard Learning Objective: 15-02 Compare and contrast the different modes that firms use to enter foreign markets.

55 An arrangement whereby a firm grants the right of intangible property to another entity for a specified time period in exchange for royalties is a(n) _ agreement

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56 Patents, inventions, formulas, processes, designs, copyrights, and trademarks are all forms of

57 What is the primary advantage of licensing?

A It helps a firm avoid the development costs associated with opening a foreign

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58 Which of the following is a disadvantage of licensing?

A It does not help firms that lack capital to develop operations

overseas

B It does not give a firm the tight control over strategy that is required for

realizing experience curve and location economies

C It cannot be used when a firm possesses some intangible property that might have business applications

D The firm has to bear the development costs and risks associated with opening a foreign market

Licensing typically involves each licensee setting up its own production operations This severely limits the firm's ability to realize experience curve and location economies by producing its product in a centralized location

59 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

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60 Cross-licensing agreements are increasingly common in the _ industries

61 _ is pursued primarily by manufacturing firms and _ is employed primarily

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