Deck 8: Entering Foreign Markets

Question 1

From the perspective of the licensor list three advantages of licensing as a mode of entry.

Answer 1

Not Answer

Question 2

Some firms utilize the entry mode that best serves to minimize risk when expanding into a new foreign market. Such firms are said to be following the _________________ rule in the selection of an entry mode:
(a) Naïve
(b) Pragmatic
(c) Strategy
(d) Repetitive

Answer 2

B

Question 3

Entry modes may be classified by their risk/reward profile. In this context intermediate modes represent a sharing of the risks and rewards between two or more firms.

Answer 3

True

Question 4

Firms engage in foreign direct investment (FDI) for a number of reasons. How may these reasons for FDI be classified?
(a) Market related
(b) Trade related
(c) Cost related
(d) All of the above
(e) (a) and (c) only

Question 5

International joint ventures (IJVs) may help foreign firms overcome existing market access restrictions in countries such as China and open up market opportunities that otherwise would not be available.

Question 6

Which of the following is NOT a cost associated with negotiating a licensing agreement?
(a) Transfer cost
(b) Arbitrage cost
(c) R&D cost
(d) Opportunity cost

Question 7

Define the term 'foreign direct investment (FDI)'. Why is business confidence in the prospective host country so important when making FDI decisions?

Question 8

Companies interested in indirect exporting may find themselves approached by a(n) ______________________ based in their own home country working on behalf of a foreign buyer:
(a) Distributor
(b) Export management company
(c) Export buying agent
(d) Agent

Question 9

Foreign sales subsidiaries are wholly owned by their parent firms and are incorporated under the laws of their home country.

Question 10

Export management companies are firms that assist other firms in marketing their products in foreign markets. What is the generic term for such companies?
(a) Intermediaries
(b) Opportunists
(c) Functional shippers
(d) Product arrangers

Question 11

What is the distinction between export, intermediate and hierarchical modes of entry?

Question 12

Which mode of entry carries the lowest risk and has the lowest potential return?
(a) Exporting
(b) Licensing
(c) Franchising
(d) Foreign direct investment

Question 13

Which of the following (if any) is a method of calculating royalty payments in a licensing transaction?
(a) Running
(b) Lump sum
(c) Minimum
(d) All of the above
(e) None of the above

Question 14

Distinguish between direct and indirect exporting. Which would you recommend to a risk averse company that wants to begin exploring international markets?

Question 15

The ability to circumvent protectionist government policies is often cited as a reason firms engage in foreign direct investment (FDI). How does FDI allow a company to avoid the protectionist policies of a host country government?