Q&A Hero

Q: Under a cross-licensing agreement, a firm can either request a royalty payment or license some valuable intangible property to a foreign partner.

Q: In a typical international licensing deal, a licensor puts up most of the capital necessary to get an overseas operation going.

Q: Licensing, a mode of entry into a foreign market, gives an international firm tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies.

Q: An international firm that enters into a turnkey deal has a long-term interest in the foreign country.

Q: A drawback of exporting is that tariff barriers can make it uneconomical as a mode of entry into a foreign market.

Q: Exporting, as a mode of entry into foreign markets, does not help a firm achieve experience curve and location economies.

Q: According to Christopher Bartlett and Sumantra Ghoshal, firms from developing countries cannot succeed in foreign markets in the presence of other established global competitors.

Q: A risk-averse international firm that enters a foreign market on a small scale will increase its potential losses.

Q: Large-scale entry allows an international firm to learn about a foreign market while limiting the firm's exposure to that market.

Q: In international business, an early entrant to a foreign market may be at a disadvantage relative to a later entrant, if regulations change in a way that diminishes the value of an early entrant's investments.

Q: In international business, a strategic commitment has a short-term impact and is easily reversible.

Q: The probability of survival decreases if an international business enters a national market after several other foreign firms have already done so.

Q: For an international firm, entering a foreign market before other international businesses does not have any drawbacks.

Q: If an international business can offer a product that has been widely available in that market, the value of that product to consumers is likely to be much greater than if the international business offers a product that has not been widely available in that market.

Q: First-mover advantages refer to the advantages frequently associated with entering a market early.

Q: The attractiveness of a country as a potential market for an international business depends solely on the size of its consumer market.

Q: A firm contemplating expansion should choose a foreign market based on an assessment of the nation's long-run profit potential.

Q: According to Christopher Bartlett and Sumantra Ghoshal, what strategies can a firm from a developing country adopt to successfully enter foreign markets?

Q: If a firm is considering entering a country where there are no incumbent competitors to be acquired, then which of the following modes of entry into foreign markets is most suitable? A. Acquisition B. Licensing deal C. Greenfield venture D. Turnkey project E. Franchising deal

Q: If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, then a _____ is the preferable mode of entry. A. greenfield venture B. joint venture C. licensing agreement D. franchising deal E. turnkey project

Q: If a firm is seeking to enter a market via a wholly owned subsidiary where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, a(n) _____ is a suitable mode of entry. A. acquisition B. licensing deal C. greenfield venture D. turnkey project E. exporting deal

Q: Which of the following is a disadvantage of greenfield ventures as a mode of entering foreign markets? A. Greenfield ventures have a higher potential for throwing up unpleasant surprises. B. It is much more difficult to build an organizational culture from scratch than to change the culture of an existing unit. C. Companies find it difficult to avoid the hubris hypothesis of acquisitions. D. There is a possibility of being preempted by aggressive global competitors who enter via acquisitions. E. A firm does not have the freedom to build the kind of subsidiary that it wants.

Q: Which of the following is a disadvantage of greenfield ventures as a mode of entry into foreign markets? A. They have a higher potential for throwing up unpleasant surprises. B. It is much more difficult to build an organizational culture from scratch than to change the culture of an existing unit. C. Companies find it difficult to avoid falling into the trap of the hubris hypothesis. D. It is slower to establish than acquisitions. E. A firm does not have the freedom to build the kind of subsidiary that it wants.

Q: An advantage of a(n) _____ as a mode of entry into foreign markets is that it is much easier to build an organization culture from scratch than it is to change the culture of an acquired unit. A. joint venture B. greenfield venture C. merger D. acquisition E. turnkey project

Q: An advantage of a(n) _____, a mode of entry into foreign markets, is that it provides a firm with much greater ability to build the kind of subsidiary company that it wants. A. acquisition B. merger C. franchise D. greenfield venture E. turnkey project

Q: To reduce the risks of failure of an acquisition, managers must: A. pay more for the acquired unit to please its existing employees. B. encourage and facilitate management turnover. C. acquire a firm without wasting time on screening. D. move rapidly after an acquisition to put an integration plan in place. E. ensure that the work cultures are significantly different from each other.

Q: Which of the following is an advantage of acquisitions as a means of entry into foreign markets? A. When a firm makes an acquisition, it buys a set of assets that are producing a known revenue. B. Acquiring firms underpay for the assets of the acquired firm. C. After an acquisition, many acquired companies face a rise in recruitments. D. Integrating the operations of the acquired and acquiring entities often takes a short period of time. E. Most acquisitions succeed due to detailed pre-acquisition screening.

Q: Which of the following is a way in which the risk of failure of an acquisition can be reduced? A. By undervaluing the assets of an acquired firm B. By ensuring that firms are acquired in the home country C. By replacing high-level managers of an acquired firm D. By a detailed auditing of operations, financial position, and management culture E. By investing only in a firm that is managing to break even

Q: Spring, an American firm, recently acquired another company known as Tazel Inc. in Indonesia. The high-level managers at Tazel Inc. quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because: A. managers overestimate their ability to create value from an acquisition. B. integration of operations between the two firms takes longer than forecasted. C. there is a clash between the cultures of the acquired and the acquiring firm. D. an acquiring firm overpays for the assets of an acquired firm. E. inadequate pre-acquisition screening has been done.

Q: Which of the following is a reason why acquisitions, a mode of entering foreign markets, fail? A. There is a clash between the cultures of the acquiring and acquired firm. B. Acquisitions take a long time to execute. C. Acquisitions are easily preempted by making greenfield investments. D. The revenue and profit stream generated by an acquisition's resources is usually unknown. E. Losses produced by intangible assets outweigh profits from acquired tangible assets.

Q: The management of an acquiring firm is often too optimistic about the value that can be created via an acquisition and is thus willing to pay a significant premium over a target firms market capitalization. This is known as the _____ and is the reason why acquisitions fail. A. bandwagon effect B. Fisher effect C. hubris hypothesis D. international Fisher effect E. learning effect

Q: Which of the following is a reason why firms often overpay for the assets of an acquired firm? A. Studies supporting the rise of failed companies post acquisitions B. Evidence of high management turnover post acquisitions C. The success rate of acquisitions exceeding that of failures D. Interest of more than one party in acquiring a particular firm E. Inevitable clash between cultures of acquiring and acquired firms

Q: Which of the following postulates that top managers typically overestimate their ability to create value from an acquisition? A. Bandwagon effect B. Fisher effect C. Hubris hypothesis D. International Fisher effect E. Learning effect

Q: Which of the following is an advantage of an acquisition as a means of entry into foreign markets? A. It is much easier to change the culture of an existing organization than build a new organization. B. It is easier to convert the operating routines of acquired units than establish routines in new subsidiaries. C. It yields greater long-run returns than greenfield ventures. D. It gives firms access to valuable intangible assets along with a set of tangible assets. E. Acquired firms are often undervalued and hence assets can be purchased at minimal prices.

Q: Which of the following is an advantage of acquisitions as a means of entering foreign markets? A. Acquiring firms often underpay for the assets of the acquired firm. B. It enables firms to preempt their competitors. C. After an acquisition, many acquired companies face increased recruitments. D. Integrating the operations of the acquired and acquiring entities takes a very short time. E. Most acquisitions are successful due to adequate pre-acquisition screening.

Q: Which of the following is an advantage of acquisitions as a means of entering foreign markets? A. They are quick to execute and help firms to rapidly build their presence in the target foreign market. B. It is much easier to change the culture of an existing organization than build a new organization. C. It is easier to convert the operating routines of acquired units than establish routines in new subsidiaries. D. They give firms access to valuable intangible assets while minimizing a pileup of tangible assets. E. Acquired firms are often undervalued and hence assets can be purchased at minimal prices.

Q: Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries? A. It gives firms sound knowledge of the local markets, culture, and the political environment. B. It helps protect competitive advantages based on technology. C. It allows firms to use the profits generated in one market to improve its competitive position in another market. D. It is the most politically accepted mode of entry into foreign markets. E. It has the least costs and risks associated with developing a foreign market.

Q: A firm that expects rapid imitation of its core technology by competitors should: A. revert to older technologies. B. engage in exporting on a large scale. C. license its technology to foreign firms. D. set up a wholly owned subsidiary. E. enter into a joint venture with a foreign firm.

Q: Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets? A. Lack of control over quality B. High costs and risks C. Problems with local marketing agents D. Inability to engage in global strategic coordination E. Lack of control over technology

Q: Which of the following modes of entry is suitable for service firms where the risk of losing control over the management skills or technological know-how is not much of a concern, and where the firms' valuable asset is their brand name? A. Exporting B. Franchising C. Licensing D. Turnkey projects E. Cross-licensing

Q: Jupiter Systems is a high-tech firm looking to set up operations in a foreign country to profit from its technological know-how which is its core competency. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology? A. Wholly owned subsidiary B. Joint venture C. Franchising D. Licensing E. Turnkey project

Q: Axiom International wants to expand its operations to a country that is politically, culturally, and economically different from its home country. The firm needs to select a mode of entry which would give it access to local knowledge, allow sharing of development costs and risks, and also be politically acceptable. Which of the following modes of entry into foreign markets is most suitable for Axiom International? A. Wholly owned subsidiary B. Joint venture C. Exporting D. Greenfield investments E. Licensing

Q: Which of the following modes of entry into foreign markets have the advantage of being characterized by low development costs and risks? A. Exporting B. Licensing C. A greenfield investment D. A wholly owned subsidiary E. A joint venture

Q: Which of the following modes of entry into foreign markets can result in a lack of control over quality? A. Exporting B. Franchising C. Turnkey projects D. Wholly owned subsidiaries E. Joint ventures

Q: Which of the following modes of entry into foreign markets has the ability to realize location and experience curve economies? A. Turnkey projects B. Joint ventures C. Licensing D. Exporting E. Franchising

Q: Which of the following is true of international firms considering foreign expansion? A. The timing and scale of entry of foreign expansion are minor details in comparison with the choice of foreign market. B. The long-run economic benefits of doing business in a country are solely a function of the country's population size. C. If the firms core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology to the joint-venture partner. D. The costs and risks associated with foreign expansion are higher in economically advanced nations. E. Politically unstable and less developed nations offer favorable benefit-cost-risk trade-off conditions.

Q: Which of the following modes of entry into foreign markets has the distinct advantages of protection of technology, the ability to engage in global strategic coordination, and the ability to realize location and experience curve economies? A. Franchising B. Wholly owned subsidiaries C. Joint ventures D. Licensing E. Exporting

Q: Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets? A. Foreign firms find it difficult to maintain control over how their technological know-how is used. B. Foreign firms cannot use profits earned in one country to support competitive attacks in another. C. Foreign firms tend to have short-term commitments in the foreign market. D. Foreign firms cannot realize substantial experience curve and location economies. E. Foreign firms must bear the full capital costs and risks of setting up overseas operations.

Q: Which of the following is generally the most costly form of serving a foreign market from a capital investment standpoint? A. Joint venture B. Licensing C. Franchising D. Wholly owned subsidiary E. Exporting

Q: Which of the following is an advantage of wholly owned subsidiaries as a mode of entry into foreign markets? A. A foreign firm is relieved of many of the costs and risks associated with opening a foreign market on its own. B. The risk of losing control over a firm's technological competence is reduced. C. A foreign firm is insulated completely from the threat posed by high transport costs. D. It is the most politically acceptable mode of entry into foreign markets. E. It helps create competition which in turn increases the quality of production.

Q: Which of the following entry modes into a foreign market best serves a high-tech firm? A. Turnkey projects B. Franchising C. Wholly owned subsidiaries D. Joint ventures E. Exporting

Q: Establishing a _____ gives international firms a 100 percent share in the profits generated in a foreign market. A. franchising agreement B. licensing deal C. joint venture D. wholly owned subsidiary E. turnkey project

Q: Which of the following is a way in which a wholly owned subsidiary may be established in a foreign market? A. Through a turnkey operation with a local partner B. Through franchising C. By acquiring an established firm in the host nation D. By exporting E. Through a licensing agreement

Q: Which of the following is an advantage of joint ventures as a mode of entry into foreign markets? A. A foreign firm shares the costs and risks of development with its local partner. B. A foreign firm can easily maintain control over how its technological know-how is used by a local partner. C. There is less cause for friction and conflict between partners involved in a joint venture. D. Joint ventures are ideal to maintain tight control over subsidiaries. E. Joint ventures benefit firms lacking the capital to expand operations overseas.

Q: Which of the following is a disadvantage of joint ventures as a mode of entry into foreign markets? A. Joint ventures with local partners face a high risk of being subjected to government interference. B. Joint ventures can lead to conflicts and battles for control between the investing firms. C. Firms engaged in joint ventures have short-term commitments in the foreign market. D. In many countries, political considerations make joint ventures impractical as an entry mode. E. The foreign firm cannot rely on its local partner for unbiased information about the host country.

Q: Which of the following is a disadvantage of joint ventures as a mode of entry into foreign markets? A. Joint ventures with local partners face a high risk of being subjected to adverse government interference. B. Firms engaged in joint ventures have short-term commitments in the foreign market. C. Joint ventures do not give a firm tight control over subsidiaries that it might need to realize experience curve or location economies. D. In many countries, political considerations make joint ventures impractical as an entry mode. E. Quality control problems arise due to lack of interest of local partners.

Q: Which of the following is an advantage of joint ventures as a mode of entry into foreign markets? A. The foreign firm benefits from a local partner's knowledge of the host country. B. The foreign firm can protect its technology from being appropriated by its local partner. C. There is less cause for friction and conflict between the foreign and local partners. D. It gives a firm tight control over subsidiaries that which enable it to realize experience curve or location economies. E. The foreign firm does not have to bear any development costs and risks associated with opening a foreign market.

Q: A joint venture in which both parties hold equal ownership stakes is known as a(n) _____. A. offshore joint venture B. 50/50 joint venture C. 25/75 joint venture D. marketing joint venture E. fully integrated joint venture

Q: A _____, a mode of entry into foreign markets, entails establishing a firm that is collectively owned by two or more otherwise independent firms. A. licensing agreement B. wholly owned subsidiary C. franchising agreement D. joint venture E. greenfield investment

Q: Which of the following can be used to overcome quality control problems associated with franchising as a mode of entry into foreign markets? A. Licensing agreements B. Subsidiaries C. Turnkey projects D. Export licenses E. Cross-licensing agreements

Q: Which of the following is a disadvantage of franchising as a mode of entry into foreign markets? A. The franchiser has to bear development costs and risks associated with foreign expansion. B. While franchising offers an ideal entry mode for manufacturing firms, it often leads to undesirable results for service firms. C. Poor quality standards of a foreign franchisee can cause a decline in the franchising firm's worldwide reputation. D. The franchiser has no incentive to sustain a long-term interest in the foreign country. E. Franchising often forces a franchiser to take out profits from one country to support competitive attacks in another.

Q: Which of the following is a disadvantage of franchising as a mode of entry into foreign markets? A. The franchiser has to bear development costs and risks associated with foreign expansion. B. Franchising leads to undesirable results for service firms. C. It is difficult to maintain quality control across foreign franchisees that are distant from the franchiser. D. The franchiser has no long-term interests in the foreign country. E. It forces a franchiser to take out profits from one country to support competitive attacks in another.

Q: Which of the following is an advantage of franchising as a mode of entry into foreign markets? A. The franchiser is relieved of many of the costs and risks of opening a foreign market on its own. B. The franchiser is allowed to take profits out of one country to support competitive attacks in another. C. The franchiser can easily maintain uniform quality across many geographically dispersed franchisees. D. Manufacturing concerns can be effectively coordinated across adjacent processes. E. The franchiser can support its short-term interests in a country with an unstable economy.

Q: Franchising, a mode of entry into foreign markets, is employed primarily by _____ firms. A. service B. manufacturing C. online D. high-technology E. primary

Q: Which of following is true of franchising as a mode of entry into foreign markets? A. The franchiser insists that the franchisee agree to abide by strict rules as to how it does business. B. The franchiser incurs all costs related to starting operations in a foreign market. C. Franchising is employed primarily by manufacturing firms. D. Franchising allows firms to take profits from one country to support competitive attacks in another. E. A significant advantage of franchising is quality control.

Q: _____, a mode of entry into foreign markets, enable firms to hold each other hostage, which reduces the probability that they will behave opportunistically toward each other. A. Cross-licensing agreements B. Turnkey projects C. Joint ventures D. Greenfield ventures E. Wholly owned subsidiaries

Q: Which of the following is an example of an industry in which cross-licensing agreements are increasingly becoming common? A. Glass-blowing B. Biotechnology C. Organic farming D. Basketry E. Weaving

Q: _____ with a foreign firm are believed to reduce the risks associated with licensing technological know-how. A. Compulsory licensing agreements B. Reciprocal licensing agreements C. Open source licensing agreements D. Cross-licensing agreements E. Exclusive licensing agreements

Q: 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. A. open source licensing B. non-exclusive licensing C. cross-licensing D. exclusive licensing E. reciprocal licensing

Q: Which of the following is a drawback of licensing as a mode of entry into foreign markets? A. The licensor has to bear all costs and risks associated with developing a foreign market. B. Licensing does not give a firm tight control over manufacturing, marketing, and strategy. C. Licensing does not benefit firms lacking the capital to expand operations overseas. D. Licensing deals fail when there are barriers to foreign investment in a particular country. E. A firm that enters into a licensing deal with a foreign country will have no long-term interest in that country.

Q: Which of the following is an advantage of licensing as a mode of entry into foreign markets? A. It helps a firm to realize substantial experience curve and location economies. B. It gives the firm tight control over manufacturing, marketing, and strategy. C. The licensor does not have to bear the development costs and risks associated with opening a foreign market. D. Firms can easily maintain control over how their technological know-how is used by a licensee. E. Licensing allows a foreign firm to use profits earned in one country to support competitive attacks in another.

Q: Which of the following is true of licensing as a mode of entry into foreign markets? A. The licensor grants the rights to tangible property to a licensee. B. A licensing agreement grants rights to intangible property to a licensee for an unspecified period. C. The licensee puts up most of the capital necessary to get the overseas operation operational. D. The licensor bears the development costs and risks associated with opening a foreign market. E. A licensing agreement allows a licensor to maintain control over its technological know-how.

Q: In terms of licensing, which of the following is an intangible property? A. Infrastructure B. Machinery C. Leased equipment D. Advanced computing systems E. Patent

Q: Which of the following is true of licensing as a mode of entry into foreign markets? A. A licensor grants the rights to tangible property to a licensee. B. A licensing agreement grants rights to intangible property to a licensee for an unspecified period. C. The licensor receives a royalty fee from the licensee. D. The licensor puts up all of the capital necessary to start a business. E. The licensor maintains control over its technological know-how.

Q: In a(n) _____,a mode of entry into foreign markets, a firm grants the rights to intangible property to another firm for a specified period, and in return, receives a royalty fee. A. licensing agreement B. turnkey project C. acquisition D. joint venture E. wholly owned subsidiary

Q: Turnkey projects being short-term propositions can be disadvantageous for a firm if a country subsequently proves to be a major market for the output of the process that has been exported. The firm can get around this problem by: A. selling competitive advantage to competitors. B. competing with the local firm in the global market. C. taking a minority equity interest in the operation. D. withholding vital process technology from the local firm. E. establishing a joint venture with a local firm.

Q: A drawback of a(n) _____, a mode of entry into foreign markets, is that the firm that uses this strategy will have no long-term interest in a foreign country. A. joint venture B. greenfield venture C. acquisition D. turnkey deal E. franchising agreement

Q: Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets? A. It helps create competition which in turn increases the quality of production. B. It can be less risky than conventional FDI. C. It is an ideal way to establish a long-term presence in a foreign country. D. It helps protect the competitive advantage of process technology. E. The firm that enters into a turnkey project with a foreign enterprise avoids giving rise to potential competitors.

Q: Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets? A. It is an ideal way to gain entry into a country where FDI is not limited by government regulations. B. It is a useful strategy to earn great returns from the know-how of a technologically complex process. C. It is an ideal way to establish a firm's long-term presence in a foreign country. D. It helps protect a firm's competitive advantage. E. The firm that enters into a turnkey project with a foreign enterprise avoids giving rise to potential competitors.

Q: In the context of modes of entry into foreign markets, turnkey projects are a means of: A. granting rights to intangible property to other firms. B. establishing firms that are jointly owned by two or more otherwise independent firms. C. exporting process technology to other countries. D. setting up wholly owned subsidiaries in foreign nations. E. selling products produced in one country to residents of other countries.