Deck 11: Entering Foreign Markets

Question 1

Turnkey projects are most common in industries that use complex, expensive production technologies.

Answer 1

True

Question 2

Every export is an import in the home country.

Answer 2

False

Question 3

Intangible property includes patents, inventions, designs, copyrights, visas and licences.

Answer 3

False

Question 4

Cross-licensing agreements enable firms to hold each other hostage, which reduces the probability that they will behave opportunistically towards each other.

Question 5

Franchising is basically a specialised form of licensing in which the franchiser sells not only intangible property to the franchisee but also tangible property.

Question 6

Governments discourage companies from exporting their goods and services, because exporting results in the loss of jobs and has a negative effect on trade balance.

Question 7

Some novice exporters run into significant problems when first trying to do business abroad because of problems securing financing.

Question 8

The two main advantages of exporting are that it avoids the often substantial costs of establishing manufacturing operations overseas, and that it may help a firm to achieve experience curve and location economies.

Question 9

Franchising is similar to ______________ , although franchising tends to involve ______________ commitments.

A) joint ventures; operational
B) licensing; longer-term
C) exporting; infrastructure
D) wholly owned subsidiary; network

Question 10

In many countries, political considerations make _______________ the only feasible entry mode. Research suggests that this form of entry lowers the risk of being subject to nationalisation or other forms of adverse government interference.

A) business networks
B) wholly owned subsidiary
C) franchise
D) joint venture

Question 11

Firms can use any of six different modes to enter foreign markets. These six modes include:

A) strategic alliances, licensing and expansion.
B) exporting, wholly owned subsidiaries and buy-outs.
C) joint ventures, franchising and turnkey projects.
D) contract manufacturing, exporting and joint ventures.

Question 12

__________________ is/are frequently used when a firm possesses some intangible property that might have business applications, but it does not want to develop those applications itself.

A) Joint ventures
B) Licensing
C) Strategic alliances
D) Contract manufacturing

Question 13

The most typical joint venture involves the following percentages of ownership stake and a team of managers who share operating control:

A) 60/40
B) 75/25
C) 80/20
D) 50/50

Question 14

Many high-tech firms prefer ________________ as their entry mode for overseas expansion, because it reduces the risk of losing control over their technological competence.

A) a wholly owned subsidiary
B) licensing
C) a joint venture
D) a strategic alliance

Question 15

The term 'indirect exporting' refers to the use of an agent located within the home country. This approach is best suited to ____________________, as it allows them to avoid or minimise the need to manage export documentation and procedures.

A) novice, small exporters
B) cash-poor exporters
C) culturally different exporters
D) inexperienced exporters

Question 16

The main advantage of establishing a greenfield venture in a foreign country is that it:

A) gives the firm a much greater ability to build the kind of subsidiary it wants.
B) uses the resources and expertise of the local workforce.
C) allows economies of scale.
D) builds on competitive strengths.

Question 17

Acquisitions have the following three main points in their favour:

A) cooperative synergies, established markets and fixed costs.
B) building of goodwill in the local community, existing workforce and existing infrastructure.
C) they are quick to execute, allow firms to pre-empt their competitors and are perceived to be less risky.
D) tactical partnerships, known revenue and plenty of choice.

Question 18

One of the disadvantages of joint venture agreements is that:

A) the skills of the partners are not compatible.
B) they do not give a firm the control over subsidiaries that it might need to realise experience curve economies.
C) a firm can give away more than it receives.
D) while the firms share costs, one may create more costs than the other.

Question 19

One of the principal risks of franchising relates to:

A) forging alliances partners.
B) giving control of the firm's technology to its partner(s).
C) the fact that the firm must bear the full capital costs and risks of setting up overseas operations.
D) quality control.

Question 20

The risks associated with learning to do business in a new culture are reduced if the firm acquires an established host-country enterprise. However, acquisitions raise additional problems, including:

A) speed of execution.
B) increased risk.
C) trying to marry divergent corporate cultures.
D) complexity of the contract.

Question 21

In industries such as footwear, it is too expensive to manufacture products in Australia. In order to remain competitive, footwear companies such as Blundstone have shifted their production overseas, with the finished goods being _____________ back to their home country, Australia.

A) released
B) outsourced
C) exported
D) imported

Question 22

Cochlear gained substantial scale economies and market share in bionic ears by:

A) forging alliances with partners, along with sensible exporting.
B) establishing licensing arrangements with partners globally.
C) forming a joint venture with South Korean firm Samsung.
D) manufacturing in a central location and exporting to other markets.

Question 23

Among the three main disadvantages associated with a turnkey strategy are:

A) reduced likelihood of realising experience curve economies.
B) missed opportunities to form partnerships with other firms.
C) inadvertently creating a competitor.
D) unfair distribution of rewards.

Question 24

With its roots in the simple trading of goods and services for other goods and services, countertrade has evolved into a diverse set of activities that include all except which two of the following?

A) Barter and counter purchasing
B) Hedging and speculating
C) Offset and switch trading
D) Compensation and buy-back

Question 25

A firm's optimal choice of entry mode depends on the firm's strategy. When technological know-how constitutes a firm's core competence, _______________________ is the preferred entry mode.

A) wholly owned subsidiary
B) licensing
C) acquisition
D) turnkey project

Question 26

All except which one of the following are reasons why acquisitions may fail?

A) Failure to integrate operations
B) The acquiring firm overpaying for the target
C) Lack of government support
D) High level of management attrition after acquisition

Question 27

Joint venture agreements can be constructed to minimise the risk of unwittingly giving away a technology that is central to the core competence of one of the firms. One option is to hold majority ownership; another is to:

A) patent technology.
B) 'wall off' technology.
C) hide technology.
D) form agreements with firms with similar capabilities.

Question 28

Vetafarm is a small firm located in regional New South Wales that specialises in pet and zoo animal health and welfare products. The company chose to internationalise because of a:

A) desire to help all animals.
B) limited domestic market.
C) licence agreement.
D) takeover.

Question 29

After half a century of operating internationally, German discount retailer Aldi entered the Australian grocery market in 2001 using a _____________ strategy.

A) franchising
B) exporting
C) greenfield
D) acquisition

Question 30

Cross-licensing agreements are one way to achieve the goal of swapping ____________ and _______________ that each company in a strategic alliance covets, and ensuring a chance for equitable gain.

A) competencies; knowledge
B) information; markets
C) skills; technologies
D) technologies; valuable assets

Question 31

The term _______________ refers to a diverse set of activities that can be categorised into five distinct types of trading arrangement: barter, counter purchase, offset, switch trading and compensation or buy-back.

A) tactical trading
B) countertrade
C) trade affiliation
D) economic association

Question 32

Barter is the direct exchange of goods or services between two parties, without a cash transaction. The problems with barter are twofold. Firstly, if goods are not exchanged simultaneously then one party ends up financing the other for a period and, secondly, firms risk:

A) losing time over negotiating terms.
B) losing the opportunity to form alliances with other firms
C) having to accept goods they cannot use or find difficult to resell.
D) losing control over operational processes