Question 1

Equity entry modes include licensing, management contracts, and exporting.

Accepted Answer

Equity entry modes include joint ventures, wholly owned subsidiaries, and acquisitions, while licensing, management contracts, and exporting are non-equity entry modes.

Question 2

High investment risk due to large capital commitment and long pay-back periods, yet no co-owner and integration risks, is associated with which entry mode?&#10;A)Greenfield&#10;B)Full acquisition&#10;C)Joint venture&#10;D)Partial acquisition

Accepted Answer

Greenfield involves building a new facility from scratch in the foreign market, which requires a large investment and a long time for payback. However, there is no co-owner or integration risks as the company has complete control over the operations. Partial or full acquisition and joint venture involve partnering with other companies, which can lead to integration and coordination challenges.

Question 3

Companies engaging in brownfield acquisitions take over an existing firm and substantially transform its operations.

Accepted Answer

Brownfield acquisitions involve taking over an existing firm and making significant changes to its operations, as opposed to greenfield acquisitions, where a new company is built from scratch.

Question 4

First mover advantages are only of concern in branded consumer goods industries.

Accepted Answer

First mover advantages can exist in various industries, including technology, pharmaceuticals, and automotive.

Question 5

Partial acquisitions are difficult to manage from an acquirer's perspective; however, they have been observed frequently:&#10;A)in the context of privatization processes.&#10;B)when previous owners have a continuing interest in the company.&#10;C)where acquirers wish to provide incentives for a founding entrepreneur to stay.committed to the company after the take-over.&#10;D)all of the above situations.&#10;E)none of the above situations.

Accepted Answer

Partial acquisitions can occur in the context of privatization processes, where the government may choose to retain partial ownership of the company. They can also occur when previous owners have a continuing interest in the company and are willing to sell only part of their stake. In addition, acquirers may wish to provide incentives for a founding entrepreneur to stay committed to the company after the take-over, which can be achieved through a partial acquisition. Therefore, all of the above situations are examples where partial acquisitions are observed frequently.

Question 6

Which entry mode enables a foreign investor to create a local operation in its own image without the need to incorporate existing structures or demands by local partners?&#10;A)Greenfield&#10;B)Joint venture&#10;C)Full acquisition&#10;D)Partial acquisition

Accepted Answer

Greenfield entry mode enables a foreign investor to create a local operation from scratch, without acquiring or collaborating with any existing local structures or partners. This means the foreign investor can fully customize and control the new operation according to its own image and requirements. In contrast, Joint venture, Full acquisition or Partial acquisition all involve some level of collaboration or acquisition with existing local structures or partners, which limits the investor's control and customization. Therefore, Greenfield is the best choice for creating a local operation in its own image without any compromises.

Question 7

Which of the following statements regarding institutional frameworks and foreign entry strategies is correct?&#10;A)Regulatory institutions may prohibit certain types of operations or transactions.&#10;B)Institutional idiosyncrasies may increase the need for acquiring local knowledge.&#10;C)Lack of contract enforcement institutions may increase the costs of arm-length contracts.&#10;D)All of the above statements are correct.&#10;E)None of the above statements is correct.

Accepted Answer

All of the above statements are correct. Regulatory institutions can prohibit certain types of operations or transactions, institutional idiosyncrasies may increase the need for acquiring local knowledge, and lack of contract enforcement institutions can increase the costs of arm-length contracts. These institutional factors are important considerations when deciding on foreign entry strategies.

Question 8

Non-equity mode is a mode of entry that involves investing in a local firm.

Accepted Answer

Non-equity modes of entry typically involve arrangements like exporting, licensing, or franchising, where the company does not make a direct investment in the form of ownership stakes in a local enterprise.

Question 9

Which statement about joint-ventures (JVs)is not correct?&#10;A)A foreign investor could establish a JV in the form of a minority, majority or equal equity JV.&#10;B)A joint venture allows foreign investors to share costs and risks of an investment with a local partner.&#10;C)50-50 ownership arrangements are strongly discouraged because it creates ambiguities in decision making processes.&#10;D)A JV does not normally involve integrating and restructuring of an existing operation.

Accepted Answer

50-50 ownership arrangements are not strongly discouraged, but they can create ambiguities in decision making processes. The other statements about JVs are correct.

Question 10

Market-seeking FDI is investors' quest to go after countries that offer strong demand for their products and services.

Accepted Answer

Market-seeking FDI refers to investors seeking countries with promising markets where they can sell their products and services. This involves locating markets with strong demand for their goods or services and setting up operations in those countries to serve those markets.

Question 11

Location-specific advantages are those advantages that can be exploited by those present at a location.

Accepted Answer

The answer of Location-specific advantages are those advantages that can...

Deck 11: Starting International Business