Question 1

How does the hubris hypothesis affect a company that is considering an acquisition?

Accepted Answer

A)   The host country places additional tariff barriers on companies who want to acquire another business.
B)   Home country managers are less likely to understand the culture associated with the acquired business.
C)   Top managers typically overestimate their ability to create value from the acquisition.
D)   The additional transportation costs devalue the potential for profit.
E)   The acquired company must surrender its technological know-how.F) All of the above
G) C) and D)

Question 2

What is a disadvantage of franchising?

Accepted Answer

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.F) B) and D)
G) C) and D)

Question 3

In a ________, a firm agrees to set up an operating plant for a foreign client and hand over the plant when it is fully operational.

Accepted Answer

A)   franchising agreement
B)   turnkey project
C)   licensing agreement
D)   wholly owned subsidiary
E)   joint ventureF) All of the above
G) A) and D)

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

What is one way a wholly owned subsidiary can be established in a foreign market?

Accepted Answer

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 agreementF) B) and C)
G) B) and E)

Question 6

Franchising as a mode of entry is employed primarily by

Accepted Answer

A)   service firms.
B)   manufacturing companies.
C)   online outfits.
D)   high-technology companies.
E)   primary industries.F) A) and E)
G) B) and C)

Question 7

Cal-Com Systems is a high-tech firm looking to set up operations in a foreign country. The firm's core competency is in technological know-how. Which mode of entry would be most favorable to the firm if it wants to keep a tight control over its technology?

Accepted Answer

A)   wholly owned subsidiary
B)   joint venture
C)   franchising
D)   licensing
E)   turnkey projectF) C) and D)
G) B) and C)

Question 8

Small-scale entry into a foreign market makes it difficult to build market share because it

Accepted Answer

A)   necessitates rapid entry into a foreign market.
B)   is associated with a lack of commitment demonstrated by the foreign firm.
C)   leads to escalating strategic commitments.
D)   requires that extra time be spent in analyzing a foreign market.
E)   leads to increased exposure to a foreign market.F) B) and E)
G) C) and D)

Question 9

Licensing gives an international firm tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies.

Accepted Answer

A) True 
 B)False

Question 10

When assessing the attractiveness of a country as a potential market, an international business must understand how the benefits, costs, and risks of doing business in that country will balance out.

Accepted Answer

A) True 
 B)False

Question 11

One disadvantage of large-scale entry into a foreign market is the

Accepted Answer

A)   decrease in a firm's exposure to the foreign market.
B)   difficulty attracting customers and distributors for the product.
C)   inability to build rapid market-share irrespective of the scale of entry.
D)   limited product acceptance due to the avoidance of potential losses.
E)   availability of fewer resources to support expansion in other desirable markets.F) A) and B)
G) B) and E)

Question 12

When Yum Brands (which owns KFC, Taco Bell, and Pizza Hut)  entered China, it had to spend heavily to establish itself in that market. What would be a disadvantage of Yum Brands' large-scale entry into China?

Accepted Answer

A)   decrease in a firm's exposure to the foreign market
B)   difficulty attracting customers and distributors for the product
C)   inability to build rapid market-share irrespective of the scale of entry
D)   limited product acceptance due to the avoidance of potential losses
E)   availability of fewer resources to support expansion in other desirable marketsF) A) and D)
G) All of the above

Question 13

Establishing a wholly owned subsidiary provides a company with tight control over the operations in another country.

Accepted Answer

A) True 
 B)False

Question 14

Rather than build a new facility in Canada where it wants to make a presence, Denver-based Mountain Man Gear decides to purchase Canada Goose Gear based in Toronto. This purchase allows Mountain Man Gear to establish a bigger presence much faster than exporting their products to Canadian customers. What mode of entry did Mountain Man Gear use?

Accepted Answer

A)   turnkey project
B)   licensing
C)   wholly owned subsidiary
D)   acquisition
E)   franchisingF) C) and D)
G) A) and B)

Question 15

According to Christopher Bartlett and Sumantra Ghoshal, how can local companies differentiate themselves from foreign multinationals?

Accepted Answer

A)   licensing their core technologies
B)   entering into turnkey projects
C)   standardizing their product offerings
D)   focusing on market niches
E)   raising trade barriersF) A) and B)
G) C) and E)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

As the Chief Financial Officer for a metal refinery, Kaylee disagrees with using a turnkey strategy to enter into the Asian market. She is concerned that the company will not benefit from a long-term interest and could lose financially if the market proves to be successful. What is one way the metal refinery could get around this concern?

Accepted Answer

A)   Sell competitive advantage to competitors.
B)   Agree to import another product from the Asian market.
C)   Take a minority equity interest in the operation.
D)   Withhold vital process technology from the local firm.
E)   Establish a franchise operation.F) A) and E)
G) A) and C)

Question 18

An international firm considering foreign expansion should take into account that

Accepted Answer

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 firm's core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology.
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.F) A) and D)
G) A) and B)

Question 19

The probability of survival for an international business increases if it

Accepted Answer

A)   enters a national market after several other foreign firms have already done so.
B)   avoids the use of countertrade agreements.
C)   enters a national market early.
D)   enters a foreign market via turnkey projects.
E)   avoids engaging in joint ventures.F) A) and B)
G) C) and D)

Question 20

An international firm that perceives its technological advantage to be transitory and susceptive to rapid imitation might want to license its technology to foreign firms.

Accepted Answer

A) True 
 B)False

Exam 13: Entering Foreign Markets

Establishing a wholly owned subsidiary provides a company with tight control over the operations in another country.

Correct Answer
verified

When assessing the attractiveness of a country as a potential market, an international business must understand how the benefits, costs, and risks of doing business in that country will balance out.

Correct Answer
verified

According to Christopher Bartlett and Sumantra Ghoshal, how can local companies differentiate themselves from foreign multinationals?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

How does the hubris hypothesis affect a company that is considering an acquisition?

Correct Answer
verified

What is a disadvantage of franchising?

Correct Answer
verified

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

Correct Answer
verified

Cal-Com Systems is a high-tech firm looking to set up operations in a foreign country. The firm's core competency is in technological know-how. Which mode of entry would be most favorable to the firm if it wants to keep a tight control over its technology?

Correct Answer
verified

Licensing gives an international firm tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies.

Correct Answer
verified

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.

Correct Answer
verified

Small-scale entry into a foreign market makes it difficult to build market share because it

Correct Answer
verified

In a ________, a firm agrees to set up an operating plant for a foreign client and hand over the plant when it is fully operational.

Correct Answer
verified

When Yum Brands (which owns KFC, Taco Bell, and Pizza Hut) entered China, it had to spend heavily to establish itself in that market. What would be a disadvantage of Yum Brands' large-scale entry into China?

Correct Answer
verified

The probability of survival for an international business increases if it

Correct Answer
verified

An international firm that perceives its technological advantage to be transitory and susceptive to rapid imitation might want to license its technology to foreign firms.

Correct Answer
verified

What is one way a wholly owned subsidiary can be established in a foreign market?

Correct Answer
verified

An international firm considering foreign expansion should take into account that

Correct Answer
verified

One disadvantage of large-scale entry into a foreign market is the

Correct Answer
verified

Franchising as a mode of entry is employed primarily by

Correct Answer
verified

Exam 13: Entering Foreign Markets

Establishing a wholly owned subsidiary provides a company with tight control over the operations in another country.

Correct AnswerverifiedShow Answer

When assessing the attractiveness of a country as a potential market, an international business must understand how the benefits, costs, and risks of doing business in that country will balance out.

Correct AnswerverifiedShow Answer

According to Christopher Bartlett and Sumantra Ghoshal, how can local companies differentiate themselves from foreign multinationals?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How does the hubris hypothesis affect a company that is considering an acquisition?

Correct AnswerverifiedShow Answer

What is a disadvantage of franchising?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Cal-Com Systems is a high-tech firm looking to set up operations in a foreign country. The firm's core competency is in technological know-how. Which mode of entry would be most favorable to the firm if it wants to keep a tight control over its technology?

Correct AnswerverifiedShow Answer

Licensing gives an international firm tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Small-scale entry into a foreign market makes it difficult to build market share because it

Correct AnswerverifiedShow Answer

In a ________, a firm agrees to set up an operating plant for a foreign client and hand over the plant when it is fully operational.

Correct AnswerverifiedShow Answer

When Yum Brands (which owns KFC, Taco Bell, and Pizza Hut) entered China, it had to spend heavily to establish itself in that market. What would be a disadvantage of Yum Brands' large-scale entry into China?

Correct AnswerverifiedShow Answer

The probability of survival for an international business increases if it

Correct AnswerverifiedShow Answer

An international firm that perceives its technological advantage to be transitory and susceptive to rapid imitation might want to license its technology to foreign firms.

Correct AnswerverifiedShow Answer

What is one way a wholly owned subsidiary can be established in a foreign market?

Correct AnswerverifiedShow Answer

An international firm considering foreign expansion should take into account that

Correct AnswerverifiedShow Answer

One disadvantage of large-scale entry into a foreign market is the

Correct AnswerverifiedShow Answer

Franchising as a mode of entry is employed primarily by

Correct AnswerverifiedShow Answer

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