Chapter 12 - Entering developed and Emerging Markets

Which of the following is an advantage of a wholly owned subsidiary?

• Complete control over operations

• Shared control with partners

• Limited liability

• Reduced financial risk

Answer explanation

Complete control over operations is an advantage of a wholly owned subsidiary, allowing the parent company to make decisions independently without shared control with partners.

What are the disadvantages of establishing a wholly owned subsidiary?

• High costs and risks

• Easy market entry

• Shared control and profits

• Limited operational control

Answer explanation

The disadvantages of establishing a wholly owned subsidiary include high costs and risks, making it the correct choice.

Which of the following factors should be considered when selecting an entry mode for a foreign market?

• Market size and growth

• Political and economic stability

• Cultural differences

• All of the above

Answer explanation

All of the above factors should be considered when selecting an entry mode for a foreign market, including market size and growth, political and economic stability, and cultural differences.

Under what circumstances might licensing be an appropriate entry mode for a firm with technological know-how?

• When the firm wants to avoid the costs and risks of entering a foreign market

• When the firm has excess production capacity

• When the firm wants to maintain tight control over its technology

• When the firm is looking to diversify its product line

Answer explanation

When the firm wants to avoid the costs and risks of entering a foreign market

Why might a firm with a competitive advantage based on management know-how avoid licensing or joint venture arrangements?

• To protect proprietary information

• To reduce operational costs

• To increase market share

• To comply with regulations

Answer explanation

A firm with management know-how may avoid licensing or joint ventures to protect proprietary information, maintaining their competitive advantage.

In an era of global electronic communications, is there still a need for face-to-face meetings that occur through trade missions?

• Yes, because face-to-face meetings build stronger relationships.

• No, because electronic communications are sufficient.

• Yes, because trade missions provide unique opportunities.

• No, because they are costly and time-consuming.

Answer explanation

Yes, because face-to-face meetings build stronger relationships.

Which of the following best explains the concept of turnkey projects?

• A project where the contractor completes the entire project and hands it over to the client in a ready-to-use state.

• A project where the client is involved in every step of the construction process.

• A project that requires the client to provide all the necessary materials.

• A project that is only partially completed by the contractor.

Answer explanation

A project where the contractor completes the entire project and hands it over to the client in a ready-to-use state.

What is the main advantage of franchising in a foreign market?

• Access to established brand and business model

• High initial investment cost

• Limited control over operations

• Cultural differences

Answer explanation

Access to established brand and business model is the main advantage of franchising in a foreign market, providing a ready-made foundation for success.

What is one advantage of wholly owned subsidiaries in foreign markets?

• Complete control over operations

• Shared risk with local partners

• Limited financial commitment

• Reduced managerial complexity

Answer explanation

One advantage of wholly owned subsidiaries in foreign markets is complete control over operations, allowing the parent company to make decisions without relying on local partners.

When establishing a wholly owned subsidiary in a country, what are the two strategies a firm can choose from?

• Greenfield investment and acquisition

• Joint venture and franchising

• Licensing and exporting

• Strategic alliance and merger

Answer explanation

When establishing a wholly owned subsidiary in a country, the two strategies a firm can choose from are Greenfield investment and acquisition.