Question 1

U.S.-based Fran Wilson Creative Cosmetics attributes its success in Japan to a top-quality product, effective advertising, and a novel ________ strategy, in which it uses Japanese distributors to reach beauty salons rather than department stores.
A) joint venture
B) licensing
C) franchising
D) indirect export
E) direct investment

Accepted Answer

The strategy described involves using Japanese distributors to reach beauty salons, which aligns with the concept of indirect export, where a company sells its products in a foreign market through intermediaries.

Question 2

Which type of exporting has the least amount of commitment and risk but will probably return the least profit?
A) direct
B) indirect
C) licensing
D) joint
E) unilateral

Accepted Answer

Indirect exporting involves using intermediaries to sell products in foreign markets, which minimizes commitment and risk but also typically results in lower profits compared to other methods.

Question 3

All of the following are disadvantages of licensing except which?
A) The licensor has reduced potential profits compared to direct investment.
B) The foreign country does not benefit from increases in local employment for product manufacturing.
C) The licensor forgoes control of its product.
D) Should the licensee prove to be a poor choice, the name or reputation of the company may be harmed.
E) The licensor may be creating its own competition.

Accepted Answer

Licensing can actually increase local employment in the foreign country as the licensee may need to hire local workers to manufacture and distribute the product.

Question 4

Indirect exporting refers to
A) offering the right to a trademark, patent, trade secret, or similarly valued item of intellectual property in return for a royalty or fee.
B) selling a firm's domestically produced products in a foreign country without interference by that government.
C) contracting with a foreign firm to manufacture products according to stated specifications.
D) avoiding the use of additional parties when a firm sells its domestically produced products in another country.
E) selling a firm's domestically produced products in a foreign country through an intermediary.

Accepted Answer

Indirect exporting involves selling a firm's domestically produced products in a foreign country through an intermediary, which helps manage the complexities of international sales.

Question 5

A small Canadian winery located in British Columbia has developed a new table wine. It has no overseas contacts but wants to get its wine on the shelves in selected Asian and European markets where growth has been substantial in the past two years. Which type of exporting option would best suit this company?
A) direct exporting
B) licensing
C) indirect exporting
D) joint venture
E) cooperative partnership

Accepted Answer

Indirect exporting would be the best option for the winery as it allows them to utilize intermediaries who have the necessary contacts and expertise to enter foreign markets without the winery needing to establish its own overseas presence.

Question 6

Which global market entry strategy involves slightly more risk than indirect exporting for a company but also opens the door to increased profits?
A) direct exporting
B) licensing
C) cooperative
D) joint venture
E) direct investment

Accepted Answer

Direct exporting involves selling directly to the foreign market, which has more risk than indirect exporting but can lead to higher profits due to direct control over sales and marketing.

Question 7

Offering the right to a trademark, patent, trade secret, or other similarly valued items of intellectual property in return for a royalty or a fee is referred to as
A) direct exporting.
B) indirect exporting.
C) licensing.
D) contract manufacturing.
E) external branding.

Accepted Answer

Licensing involves granting permission to use intellectual property rights, such as trademarks or patents, in exchange for a royalty or fee.

Question 8

Most companies become involved in direct exporting when
A) foreign governments believe that they will benefit the most from allowing the entry of direct exports.
B) emerging markets in foreign countries become economically viable.
C) they believe their volume of sales will be sufficiently large and easy to obtain, thus making intermediaries unnecessary.
D) the domestic market becomes saturated with competing products and services.
E) evolving technologies in foreign countries come online.

Accepted Answer

Companies typically engage in direct exporting when they anticipate that their sales volume will be large enough to justify bypassing intermediaries, thereby reducing costs and increasing control over the export process.

Question 9

When a firm sells its domestically produced products in a foreign country through an intermediary, it is referred to as
A) direct exporting.
B) indirect exporting.
C) licensing.
D) franchising.
E) foreign assembly.

Accepted Answer

Indirect exporting involves selling products to a foreign market through an intermediary, such as an agent or distributor, rather than directly to the end customer.

Question 10

The prominent global market entry strategy among small- and medium-sized companies is
A) exporting.
B) franchising.
C) licensing.
D) joint venture.
E) direct investment.

Accepted Answer

Exporting is often the most accessible and least risky market entry strategy for small- and medium-sized companies, allowing them to reach international markets without significant investment.

Question 11

Indirect exporting occurs when a firm sells its domestically produced products in a foreign country
A) in violation of a quota.
B) without paying import tariffs.
C) without paying export duties.
D) through a joint venture.
E) through an intermediary.

Accepted Answer

Indirect exporting involves selling products to a foreign market through an intermediary, such as an export agent or trading company, rather than directly to the foreign buyer.

Question 12

The U.S. motorcycle manufacturer Harley-Davidson uses intermediaries to sell its motorcycles in numerous nations outside the United States. Harley-Davidson uses
A) direct exporting.
B) licensing.
C) contract manufacturing.
D) indirect exporting.
E) foreign assembly.

Accepted Answer

Indirect exporting involves using intermediaries to sell products in foreign markets, which is what Harley-Davidson does by using intermediaries to sell its motorcycles outside the U.S.

Question 13

All of the following are advantages of licensing except which?
A) the foreign country's increased employment by having the product manufactured locally
B) the licensee's access to information that allows it to start with a competitive advantage
C) the lower risk to the company granting the license compared to direct investment
D) the licensor's ability to protect its brand name from harm
E) the capital-free entry into a foreign country

Accepted Answer

Licensing does not inherently protect a brand name from harm; it can actually pose a risk if the licensee does not maintain the brand's standards.

Question 14

Which of the following is a disadvantage associated with licensing?
A) The licensee pays lower wages and sells at lower prices.
B) The licensor may create its own competition.
C) The foreign government dislikes it because it does not increase local employment.
D) This is the most expensive and risky method for global expansion.
E) The firm's brand does not get international exposure.

Accepted Answer

Licensing can lead to the licensor creating its own competition if the licensee becomes a competitor after gaining access to the licensor's technology or brand.

Question 15

Direct exporting refers to
A) offering the right to a trademark, patent, trade secret, or similarly valued items of intellectual property in return for a royalty or fee.
B) contracting with a foreign firm to manufacture products according to certain specifications.
C) a foreign country and a local firm investing together to create a local business.
D) using additional parties when a firm sells its domestically produced goods in another country.
E) a firm selling its domestically produced goods in a foreign country without intermediaries.

Accepted Answer

Direct exporting involves a firm selling its domestically produced goods in a foreign country without using intermediaries.

Question 16

To avoid competing with Japanese firms through their traditional channel of distribution, Fran Wilson Creative Cosmetics Moodmatcher lip coloring is sold in which type of retail venue?
A) grocery stores
B) flower shops
C) beauty salons
D) department stores
E) gift stores

Accepted Answer

Moodmatcher lip coloring is sold in beauty salons to avoid competing with Japanese firms through their traditional channel of distribution, which is department stores.

Question 17

Which form of entry into a global market makes a firm the most vulnerable to harm regarding its brand name or reputation?
A) direct exporting
B) indirect exporting
C) licensing
D) direct investment
E) joint venture

Accepted Answer

Licensing makes a firm vulnerable because it allows another company to produce and sell its products, which can lead to quality control issues and potential damage to the brand's reputation if the licensee does not maintain the expected standards.

Question 18

Which of the following is an advantage inherent in the use of licensing as a global market entry strategy?
A) The licensor retains control of its product.
B) The licensor is protected from creating a potential competitor.
C) It provides an exemption from domestic trade regulations.
D) There is an increase in potential profit compared with direct investment.
E) The licensee gains information that allows it to start with a competitive advantage.

Accepted Answer

The answer of Which of the following is an advantage...

Question 19

When a U.S. airplane manufacturer sells its airplanes to a company in Germany without using intermediaries, it is referred to as
A) direct exporting.
B) indirect exporting.
C) licensing.
D) foreign manufacturing.
E) foreign assembly.

Accepted Answer

Direct exporting occurs when a company sells its products directly to a foreign buyer without using intermediaries.

Question 20

Licensing refers to
A) offering the right to a trademark, patent, trade secret, or other similarly valued items of intellectual property in return for a royalty or a fee.
B) contracting with a foreign firm to manufacture products according to certain specifications.
C) a foreign country and a local firm investing together to create a local business.
D) having a company handle its own exports directly without intermediaries.
E) exporting through an intermediary, which often has the knowledge and means to succeed in selling a firm's product abroad.

Accepted Answer

Licensing involves granting rights to intellectual property such as trademarks or patents to another party in exchange for a royalty or fee.

Quiz 7: Understanding and Reaching Global Consumers and Markets

U.S.-based Fran Wilson Creative Cosmetics attributes its success in Japan to a top-quality product, effective advertising, and a novel ________ strategy, in which it uses Japanese distributors to reach beauty salons rather than department stores.

Which type of exporting has the least amount of commitment and risk but will probably return the least profit?

All of the following are disadvantages of licensing except which?

Indirect exporting refers to

Which global market entry strategy involves slightly more risk than indirect exporting for a company but also opens the door to increased profits?

Offering the right to a trademark, patent, trade secret, or other similarly valued items of intellectual property in return for a royalty or a fee is referred to as

Most companies become involved in direct exporting when

When a firm sells its domestically produced products in a foreign country through an intermediary, it is referred to as

The prominent global market entry strategy among small- and medium-sized companies is

Indirect exporting occurs when a firm sells its domestically produced products in a foreign country

The U.S. motorcycle manufacturer Harley-Davidson uses intermediaries to sell its motorcycles in numerous nations outside the United States. Harley-Davidson uses

All of the following are advantages of licensing except which?

Which of the following is a disadvantage associated with licensing?

Direct exporting refers to

To avoid competing with Japanese firms through their traditional channel of distribution, Fran Wilson Creative Cosmetics Moodmatcher lip coloring is sold in which type of retail venue?

Which form of entry into a global market makes a firm the most vulnerable to harm regarding its brand name or reputation?

Which of the following is an advantage inherent in the use of licensing as a global market entry strategy?

When a U.S. airplane manufacturer sells its airplanes to a company in Germany without using intermediaries, it is referred to as

Licensing refers to