Deck 8: Expansion Strategies and Entry Mode Selection

Question 1

Licensing presents less risk to the company than exporting, but it also offers less control than exporting.

Answer 1

False
Licensing presents more risk to the company than exporting, but it also offers more control than exporting. The licensor has the increased risk that it may lose its technology or its expertise to the licensee, which may in turn create a competitor.

Question 2

Using indirect exporting does not require market expertise.

Answer 2

True
Using indirect exporting does not require market expertise, nor a long-term commitment to the international market. The intermediaries that the company sells through have the required market expertise.

Question 3

Transfer pricing is a policy that a government may implement to encourage a company to keep its profits within the country's borders.

Answer 3

False
Transfer pricing is a method whereby the parent company of the international joint venture partner charges the joint venture for equipment and expertise, usually above cost, to repatriate its profits.

Question 4

Starbuck's is targeting Austria's coffee houses. Even though the country has a high proportion of smokers, Starbuck's is unwilling to relax its global nonsmoking policy.

Question 5

Licensing is a principal entry mode for the service industry.

Question 6

Hourly compensation costs for production workers in manufacturing in Mexico are among the lowest in the world.

Question 7

An advantage of licensing is that it prevents licensees from becoming potential competitors.

Question 8

When quality cannot be guaranteed, it is preferable for the products produced under license not to carry the licensor's brand name.

Question 9

Hourly compensation costs for production workers in manufacturing in Denmark and Germany are higher than those for workers in the United States.

Question 10

A disadvantage of franchising is that can create future competitors.

Question 11

Due to the high costs of the labor force, Singapore and Korea are becoming less attractive labor markets.

Question 12

Managers of small and medium enterprises and managers of multinational firm managers alike must evaluate the costs of delivering their products and services to their target markets.

Question 13

Joint ventures are a preferred international entry mode for emerging markets.

Question 14

Indirect exporting indicates that the company is not committed to the market.

Question 15

Companies engaging in direct exporting have their own in-house exporting expertise.

Question 16

Hourly compensation costs for production workers in manufacturing in the United States are among the highest in the world.

Question 17

Companies frequently have a state-owned enterprise as a joint-venture partner.

Question 18

"Mother henning" is the same thing as "piggybacking."

Question 19

In general, companies tend to use licensing in their first attempt to expand internationally.

Question 20

Direct exporting means that the company sells its products to intermediaries in the company's home country who, in turn, sell the product overseas.

Question 21

Which order of entry mode below is ordered from low to high risk?

A)Licensing, direct exporting, joint ventures, wholly-owned subsidiaries
B)Indirect exporting, licensing, joint ventures, wholly-owned subsidiaries.
C)Indirect exporting, franchising, direct exporting, branch offices.
D)Strategic alliances, branch offices, franchising, licensing.

Question 22

Most of current outsourcing activity is handled using internal staff and resources.

Question 23

Which of the countries below has the highest hourly compensation costs for producing workers in manufacturing?

A)Australia
B)Italy
C)United States
D)Israel

Question 24

Companies can avoid some of the disadvantages posed by partnering with other firms by setting up wholly-owned subsidiaries in the target markets.

Question 25

Overall, 70% of all joint ventures break up within 2.5 years.

Question 26

Unlike franchising, joint venture partners are unlikely to turn into competitors.

Question 27

The primary difference between a subsidiary and a branch office is that subsidiaries are separate entities, while branch offices are entities that are part of the international company.

Question 28

Greenfielding is the process of exporting a company's product to a country to which it has not previously exported.

Question 29

An area that has emerged as the outsourcing hub and back office of the Western world is South America.

Question 30

Which entry mode below presents the lowest risk?

A)Licensing,
B)Indirect exporting
C)Franchising
D)Wholly-owned subsidiary

Question 31

Airbus is an example of a wholly-owned subsidiary operating in Europe.

Question 32

Outsourcing is typically handled by internal staff.

Question 33

Outsourcing involves strategic alliances.

Question 34

Which order of entry mode below is ordered from low to high control?

A)Licensing, direct exporting, joint ventures, wholly-owned subsidiaries
B)Indirect exporting, licensing, joint ventures, wholly-owned subsidiaries.
C)Indirect exporting, franchising, direct exporting, branch offices.
D)Strategic alliances, branch offices, franchising, licensing.

Question 35

Branch offices carry the greatest level of risk.

Question 36

Outsourcing is especially popular in the areas of customer service and billing.

Question 37

All joint ventures and licensing agreements are considered to be strategic alliances between companies attempting to reach joint corporate and market-related goals.

Question 38

Outsourcing has been around since about the year 2000.

Question 39

Even weather patterns could lead to the failure of a joint venture.

Question 40

Outsourcing is an example of joint venture.

Question 41

Which of the following is most likely to be used by a firm engaged in direct exporting?

A)Trading companies
B)Freight forwarders
C)Export management companies
D)Agents/brokers

Question 42

Greenfielding refers to the process that occurs for a company when it

A)is forced to comply with international environmental laws.
B)develops its own subsidiary in another country.
C)selects a new target market in a region.
D)takes a "poison pill" to prevent a forced nationalization.

Question 43

Lands End is an example of a company that has expanded internationally through

A)exporting.
B)franchising.
C)licensing.
D)joint ventures.

Question 44

Petrol Complex gas stations in Russia are an example of

A)a franchise agreement with British Petroleum.
B)a licensing agreement with British Petroleum.
C)a joint venture with British Petroleum.
D)a wholly-owned subsidiary of British Petroleum.

Question 45

Which entry mode below presents the highest control?

A)Licensing,
B)Indirect exporting
C)Franchising
D)Wholly-owned subsidiary

Question 46

Which statement is false regarding joint ventures?

A)Joint ventures are a preferred international entry mode for emerging markets.
B)When a joint venture has a state-owned enterprise as a partner it is assured instant local access.
C)It is typical for joint ventures to take place between an international firm and a state-owned enterprise.
D)Joint ventures are frequently discouraged by local governments because of the monopoly-like power that they wield.

Question 47

Which of the following is not a form of cooperative exporting?

A)Piggybacking
B)Mother henning
C)Leap frogging
D)All of the above are forms of cooperative exporting.

Question 48

In a joint venture, what does the international firm usually not provide?

A)Capital
B)Infrastructure
C)Expertise
D)A trademark

Question 49

When a licensee cannot guarantee the product's quality it is preferable for the licensor to

A)export to the market.
B)license with the brand name.
C)license without the brand name.
D)create a joint venture.

Question 50

Why are most governments concerned with consortia?

A)Consortia tend to exploit workers.
B)Consortia require countries to give up some of their sovereignty.
C)Consortia create unique taxation problems.
D)Consortia create a monopoly effect.

Question 51

Which of the following is NOT true with regard to indirect exporting

A)It does not require market expertise
B)It does not require a long-term commitment
C)It creates only minimal risk for the company
D)All of the above are true about indirect exporting

Question 52

Cooperative exporting is also known as

A)Piggybacking
B)Motherhenning
C)a and b
D)None of the above

Question 53

Like licensing, joint venture partners can turn into competitors. But in the joint venture situation

A)the competitor is rarely a threat.
B)the competitor is not protected by the government.
C)the international firm may be able to control the supply chain preventing access to equipment that the competitor needs.
D)All of the above are true.

Question 54

Regarding the advantages and disadvantages of franchising, the international marketer knows that

A)in international markets, the franchisor experiences greater risk than if it opened its own company store.
B)through franchising agreements, the franchisor reduces the possibility of competition.
C)franchising is a method that allows for very rapid market penetration.
D)All of the above are true.

Question 55

Which statement is false regarding indirect exporting?

A)Indirect exporting does not require market expertise.
B)Indirect exporting does not require a long-term commitment.
C)The company's risk is minimal in indirect exporting.
D)Indirect exporting indicates that the firm is not committed to the market.

Question 56

Which entry mode below offers the lowest control?

A)Licensing,
B)Indirect exporting
C)Franchising
D)Wholly-owned subsidiary

Question 57

Which of the following is an assumption behind a wholly-owned subsidiary?

A)The company can afford the costs involved in setting up a wholly-owned subsidiary.
B)The company is willing to commit to the market in the long term.
C)The local government allows foreign companies to set up wholly-owned subsidiaries.
D)All of the above are assumptions behind a wholly-owned subsidiary.

Question 58

Which of the following is true regarding Franchising?

A)Franchising is a principal entry mode for the service industry.
B)The franchisor provides the franchisee with advertising and sales promotion support.
C)The franchisee receives the right to use the franchisor's brand name and all related trademarks.
D)All of the above are true.

Question 59

Which of the following is not true regarding licensing?

A)Licensing is a principal entry mode for the service industry.
B)Licensing permits the company access to closed markets.
C)Licensing may produce a viable competitor in the licensee.
D)All of the above are true.

Question 60

Which of the following is not likely to be used by an indirect exporter?

A)Merchant middlemen
B)Trading companies
C)Agents/brokers
D)Export management companies

Question 61

Moving manufacturing to Mexico would further lower labor costs to less than _________________________ per hour.

Question 62

Which of the following is true about outsourcing?

A)The strategic use of outside resources to perform activities typically handled by internal staff
B)It has been around for a long time
C)Until now, it was restricted to technology
D)All of the above are true about outsourcing

Question 63

Which of the following is not considered to be a strategic alliance?

A)Distribution alliances
B)Manufacturing alliances
C)Marketing alliances
D)Intra-firm functional alliances

Question 64

Motorola Inc., and Singapore's Flextronics International's relationship is best characterized as a

A)joint venture.
B)manufacturing alliance.
C)marketing alliance.
D)distribution alliance.

Question 65

Opel's two-year contract to market its automobiles to AOL customers is an example of a

A)franchise agreement
B)marketing alliance
C)distribution alliance
D)joint venture

Question 66

Stihl, A German manufacturer of chainsaws, is selling products in Romania through a

A)franchise agreement.
B)licensee.
C)branch office.
D)wholly-owned subsidiary.

Question 67

Which of the following is an advantage of wholly-owned subsidiaries?

A)They do not require market expertise.
B)They do not require a long-term commitment.
C)They create only minimal risk for the company.
D)They provide the company with control over operations.

Question 68

Which of the following is NOT an example of a manufacturing alliance

A)Distribution alliance
B)Technological alliance
C)Engineering alliance
D)Research and development alliance

Question 69

The most important advantage that a wholly-owned subsidiary can provide is

A)a relative control of all company operations in the target market.
B)a decreased risk for the parent company.
C)local marketing expertise.
D)increased influence and lobbying power with the local government.

Question 70

The success of outsourcing strategic alliances depends on which of the following?

A)Outsourcing must be done carefully, with clear objectives and expectations
B)Outsourcing partners must be selected based on expertise and based on their cultural fit with the firm
C)The outsourcing plan should provide clear expectations, requirements, and benefits
D)The success of the alliance depends on all of the above.

Question 71

Labor costs in the United States are quite high, averaging around _________________________.

Question 72

In Singapore and Korea, average hourly costs are about _________________________ and _________________________, respectively; considering the high productivity of these countries' highly educated workforce, Singapore and Korea may be attractive labor markets for skilled manufacturing work.

Question 73

Which of the following is true about outsourcing?

A)The strategic use of outside resources to perform activities typically handled by internal staff
B)It has been around for a long time
C)Until now, it was restricted to technology
D)All of the above are true about outsourcing

Question 74

Which statement regarding branch offices is false?

A)Branch offices, like subsidiaries, offer a high level of control over operations.
B)Branch offices are part of the international company (i.e., it is not a separate entity).
C)Branch offices have a higher level of risk than subsidiaries.
D)Branch offices of service providers typically engage in a full spectrum of activity.

Question 75

What region has been identified as the outsourcing hub and back-office of the Western world?

A)Southeastern Europe
B)South America
C)Asia
D)Africa

Question 76

Which of the following is an example of a strategic alliance?

A)Manufacturing alliances
B)Marketing alliances
C)Distribution alliances
D)All of the above

Question 77

The _________________________ mode of entry is the least risky entry mode.

Question 78

Which of the following is considered to more of a short-term strategic alliance?

A)Franchising
B)Joint Ventures
C)Consortia
D)Manufacturing alliances

Question 79

What type of activities can be outsourced?

A)Billing
B)Customer service
C)Technology
D)All of the above can be outsourced

Question 80

Which international marketing strategy carries the greatest level of risk?

A)Joint ventures
B)Wholly-owned subsidiaries
C)Branch offices
D)Licensing