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 firm entering into a turnkey project with a foreign enterprise, inadvertently creating a competitor.

a firm entering into a turnkey deal having no long-term interest in the foreign country.

a country subsequently proving to be a major market for the output of the process that has been exported.

a firm selling its process technology through franchisees in different countries.

Which of the following is a distinct advantage of exporting?

It avoids the often substantial costs of establishing manufacturing operations in the host country.

It avoids the threat of tariff barriers by the host-country government.

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

What is the primary advantage of licensing?

It helps a firm avoid the development costs and risks associated with opening a foreign market.

It gives a firm the tight control over manufacturing, marketing, and strategy.

It helps a firm achieve experience curve and location economies.

It increases a firm's ability to utilize a coordinated strategy.

Which of the following is a disadvantage of licensing?

It does not give a firm the tight control over strategy that is required for realizing experience curve and location economies.

It does not help firms that lack capital to develop operations overseas.

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

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

Which of the following statements about franchising is true?

It is a specialized form of licensing.

It guarantees consistent product quality.

It tends to involve more short-term commitments than licensing.

It is employed primarily by manufacturing firms.

Which of the following is an advantage of franchising?

A firm is relieved of many of the costs and risks of opening a foreign market on its own.

A firm takes profits out of one country to support competitive attacks in another.

It guarantees consistent product quality and achieves experience curve and location economies.

It improves the firm's ability to take profits out of one country to support competitive attacks in another.

Which of the following is true of wholly owned subsidiaries?

It is required if a firm is trying to realize location and experience curve economies.

It is the least expensive method of serving a foreign market from a capital investment standpoint.

It the most feasible entry mode due to the political considerations.

It is particularly useful where FDI is limited by host-government regulations.

A wholly owned subsidiary is appropriate when the firm wants

100 percent of the profits generated in a foreign market.

to share the cost and risk of developing a foreign market.

a plant that is ready to operate.

Apple exports its products to many countries. An advantage of exporting products to another country is that it

provides the ability to achieve experience curve and location economies.

gives firms access to local knowledge.

When technological know-how constitutes a firm's core competence, which entry mode is the optimal choice?

foreign franchises controlled by joint ventures

If a firm's core competency is based on control over proprietary technological know-how, ________ and________ arrangements should be avoided if possible to minimize the risk of losing control over that technology.

wholly owned subsidiary; exporting

What is true of acquisitions?

In many cases, firms make acquisitions to preempt their competitors.

It is a time-consuming process.

Managers view them as more risky than greenfield ventures.

They give the firm a much greater ability to build the kind of subsidiary company that it wants.

According to the_______, top managers typically overestimate their ability to create value from an acquisition.

performance extrapolation hypothesis

To increase the potential for a successful acquisition, a firm should

screen the foreign enterprise to be acquired.

always bid low to allow for partial failure.

try to acquire a firm with a very different corporate culture so there is no forced overlap.

rush to beat out other competitors.

Which of the following is true of establishing a greenfield venture in a foreign country?

A degree of uncertainty is associated with a greenfield venture because of future revenue and profit prospects.

Greenfield investments are less risky than acquiring an existing company in a foreign market.

Greenfield investments virtually eliminate the possibility of a more aggressive global competitor entering the market via acquisitions.

Greenfield investments are quick to establish.

Which of the following statements is true of strategic alliances?

A firm risks giving away technological know-how and market access to its alliance partner.

The fixed costs and associated risks of developing new products or processes are borne by the alliance partner.

They are a way to bring together complementary skills and assets that both companies develop.

They limit the entry of firms into foreign markets.

An advantage of forming a strategic alliance is that it helps firms

share the risks of developing new products or processes.

protect their procedures and technologies.

reduce the level of conflicts that occur within an organization.

increase the cultural similarities between employees.

Which of the following is true of strategic alliances?

Strategic alliances allow firms to bring together complementary skills and assets that neither company could easily develop on its own.

Strategic alliances can make entry into a foreign market difficult.

Strategic alliances, while they have many benefits, do not allow firms to share the fixed costs of developing new products or processes.

Strategic alliances, while beneficial to firms, make the establishment of technological standards for an industry difficult.

Chapter 15 Entry Strategy and Strategic Alliances

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University

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Chapter 15 Entry Strategy and Strategic Alliances

96 questions

The choice of which international markets to enter should be driven by an assessment of absolute short-run growth and profit potential.

The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country.

When determining the value of a foreign market, an international firm must consider both its products and the competition.

Educating customers is an element of pioneering costs.

A strategic commitment can be reversed by the top management at will.

Gadgets, Inc., wants to enter a foreign market on a small scale. This will allow it to learn about the market while limiting the firm's exposure to that market.

Exporting from a firm's home base is most appropriate when lower-cost locations for manufacturing the product can be found abroad.

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

By producing its product in a centralized location, licensing limits a firm's ability to realize experience curve and location economies.

Franchising enables a firm to quickly build a global presence.

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