Practice 15

The costs and risks associated with doing business in a foreign country are typically 

• low in an economically advanced nation. 

• low in the countries of the European Union. 

• high in an economically advanced nation. 

• high in a politically stable democratic nation. 

_____ are the advantages associated with entering a market early. 

• Pioneering advantages 

• First-mover advantages 

• Core competencies 

• Late-mover advantages 

Large-scale strategic commitments may 

• have many benefits and few to no risks. 

• increase strategic flexibility. 

• have many risks and few to no benefits. 

• limit strategic flexibility. 

A _____ is more likely to capture first-mover advantages associated with demand preemption, scale economies, and switching costs. 

• large-scale entrant 

• joint venture 

• small-scale entrant 

• turnkey contract 

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

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

• Small-scale entry is a way to gather information about a foreign market before deciding whether to enter on a significant scale. 

• By giving a firm time to collect information, small-scale entry increases the risks associated with a subsequent large-scale entry. 

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

An advantage of _____ with a local partner is the knowledge of the local environment that the local partner contributes to the venture. 

• turnkey contracts 

• licensing contracts 

• joint ventures 

• wholly owned subsidiary contracts

How can a firm protect its proprietary information in a joint venture? 

• Share only the technology that is central to the core competence of the firm. 

• Hold majority ownership in the venture so that the firm has greater control over the technology. 

• Share only the technology of the firm, not the patents and copyrighted information. 

• Hold minority ownership in the venture so that the firm does not have to give over control of the technology

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 _____ agreement. 

• a turnkey 

• a licensing 

• greenfield 

• an acquisition 

Firms engaging in a _____ 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. 

• turnkey project 

• joint venture 

• greenfield investment

• licensing arrangement 

A _____ entails establishing a firm that is owned together by two or more otherwise independent firms. 

• joint venture 

• licensing agreement 

• franchisee 

• turnkey contract