Question 1

A U.S. firm with a production facility in Brazil uses its own personnel to handle almost all activities because their outsourcing would be too costly and inefficient. Its internalization will most likely lead to cost savings because the firm can avoid ________.
A) costly customs brokers
B) high, fixed start-up costs
C) the costs of enforcing an agreement
D) sharing profits

Accepted Answer

Internalization allows a firm to avoid the costs associated with enforcing agreements with external parties, such as monitoring, legal fees, and ensuring compliance.

Question 2

A U.S. firm owns 100% of its production facility in Brazil,thus is most likely using a ________ strategy.
A) comprehensive ownership
B) vertical integration
C) appropriability
D) internalization

Accepted Answer

Internalization strategy involves a firm owning and controlling its operations in a foreign country, which is the case when a U.S. firm owns 100% of its production facility in Brazil.

Question 3

Appropriability theory refers to ________.
A) denying rivals access to competitive resources such as management know-how
B) categorizing the appropriateness of a firm's foreign investments in terms of host country objectives
C) explaining an investing firm's choice of partner in a joint venture
D) predicting the general pattern of direct investment locations

Accepted Answer

Appropriability theory refers to the ability of a firm to retain the benefits from its investments or innovations by denying rivals' access to these resources. The theory emphasizes the importance of protecting intellectual property rights and minimizing imitation and free-riding by competitors.

Question 4

Coca-Cola collaborates extensively abroad,but it refuses collaboration that might imperil control of its core competency. As a result,which of the following is NOT one of its international collaborative forms?
A) sharing ownership in the production of its secret formula concentrate
B) using franchisers to bottle, sell, and deliver Coke beverages
C) licensing Coke's trademark for use on products in which it lacks skills
D) forming joint ventures with companies that provide supplies for Coke products

Accepted Answer

Coca-Cola closely guards its secret formula concentrate and does not share ownership in its production with anyone, including international collaborators. Therefore, sharing ownership in the production of its secret formula concentrate is not one of its international collaborative forms. The other options (B, C, and D) are all examples of Coca-Cola's international collaborative forms.

Question 5

Why can a company more easily pursue a global strategy when it owns 100 percent of foreign operations?
A) The company is not likely to face overcapacity issues.
B) The company limits foreign exchange rates fluctuations.
C) The company avoids communication misunderstandings.
D) The company can sub-optimize results in one country in order to optimize results globally.

Accepted Answer

When a company owns 100 percent of its foreign operations, it has full control over decision-making and can strategically manage resources and operations across different countries to optimize overall global performance, even if it means sub-optimizing in individual countries.

Question 6

A company that makes a foreign investment largely to acquire knowledge is most likely to use ________ as a means of expansion.
A) a greenfield investment
B) internalization
C) an acquisition
D) a licensing agreement

Accepted Answer

Acquisitions are often used by companies to quickly access new technologies, skills, or competencies that the target company possesses, making it a common strategy for acquiring knowledge.

Question 7

A U.S. firm is acquiring an existing company in Germany rather than starting up a new foreign operation. Which of the following statements best supports this decision?
A) Because the German firm is performing poorly, there is a good turn-around opportunity.
B) The U.S. firm's U.S. facility is working at capacity.
C) Stock market prices have been very high in Germany.
D) The German firm has skilled personnel that the U.S. firm cannot hire at a good price on its own.

Accepted Answer

By acquiring an existing company in Germany, the U.S. firm can gain access to skilled personnel that it may not be able to hire at a good price on its own. This makes it a more cost-effective option than starting up a new foreign operation. The other three options do not provide a strong rationale for the decision to acquire an existing company in Germany.

Question 8

A greenfield investment is another name for a company's decision to ________.
A) acquire an interest in an existing foreign operation
B) implement sustainable marketing practices
C) construct a new facility in a foreign market
D) build a facility for a local company

Accepted Answer

A greenfield investment refers to the decision to construct a new facility in a foreign market from scratch, without acquiring an existing business or operation. Therefore, the best choice is C. A is incorrect because it involves the acquisition of an existing foreign operation, which is not a greenfield investment. B is incorrect because it refers to sustainable marketing practices, which are not related to greenfield investments. D is incorrect because it mentions building a facility for a local company, which does not necessarily involve foreign investment or a new facility from scratch.

Question 9

In which of the following situations would Company X most likely seek a collaborative arrangement with Company Z in which Company Z would handle work for Company X?
A) Company X has excess capacity.
B) Fixed costs for the work are high, and Company X has large volumes of work.
C) Company X is inexperienced in outsourcing work.
D) Fixed costs for the work are high, and Company X has small volumes of work.

Accepted Answer

If fixed costs for the work are high and Company X has small volumes of work, it may not be economically feasible for Company X to handle the work in-house. In this case, outsourcing to Company Z through a collaboration can be a cost-effective solution. A collaborative arrangement can help Company X to benefit from economies of scale and save on fixed costs. Excess capacity (A) or volume of work (B) are not mentioned as reasons for seeking a collaborative arrangement. Inexperience in outsourcing work (C) is not necessarily a factor as Company X could seek external advice or expertise.

Question 10

Which of the following is the LEAST likely reason that consumers would prefer domestically made products over imports?
A) belief that imports are subsidized
B) feelings of national pride and sentiment
C) negative associations with products from certain countries
D) concerns that parts will be difficult to obtain for foreign products

Accepted Answer

The least likely reason consumers would prefer domestically made products over imports is the belief that imports are subsidized. This belief does not directly relate to a preference for domestic products, as subsidies are a form of government support for producers rather than a reflection of the product's quality or availability.

Question 11

Executives at a U.S. firm are debating whether to start a new operation in Russia or acquire an existing one. Which of the following factors best supports a decision to start up a new operation in Russia?
A) The Russian government places restrictions on the outward transfer of foreign capital.
B) Labor relations at existing Russian firms are poor and difficult to change.
C) Russia's currency is weak and stock market prices are significantly depressed.
D) Existing companies have goodwill and positive brand recognition in Russia.

Accepted Answer

Starting a new operation could allow the U.S. firm to establish its own labor relations policies from the outset, potentially avoiding the challenges associated with poor labor relations at existing Russian firms.

Question 12

Risk is an important factor for companies engaged in international business. One way a collaborative arrangement helps minimize risk when operating abroad is by ________.
A) reducing the possibility of technological appropriation
B) freeing up resources so a company can diversify into more countries
C) preventing the entry of new competitors
D) eliminating losses from exchange rate depreciation abroad

Accepted Answer

The answer of Risk is an important factor for companies...

Question 13

The more a company engages in international collaborative arrangements as opposed to wholly owned foreign operations,the more it is likely to ________.
A) decrease its exposure to political risk
B) increase its control over foreign operations
C) learn rapidly about foreign environments
D) protect its core assets

Accepted Answer

The answer of The more a company engages in international...

Question 14

Which of the following is an argument for using a collaborative agreement?
A) to prevent problems caused by minority shareholders
B) to preserve a concentration strategy
C) to secure vertical and horizontal links
D) to maintain better control

Accepted Answer

Using a collaborative agreement helps secure both vertical and horizontal links between the collaborating parties. This can lead to better communication and coordination, as well as provide access to new markets, technologies, and resources. The other choices (A, B, and D) are not necessarily arguments for using a collaborative agreement. Minority shareholders can be addressed through other means such as shareholder agreements or buyout provisions, a concentration strategy can be achieved through internal efforts or mergers/acquisitions, and control can be maintained through other governance mechanisms such as board structure or executive compensation.

Question 15

Coca-Cola has collaborative arrangements whereby it produces concentrate that it sells to other companies to bottle its drinks. Which of the following terms best describes this type of arrangement?
A) vertical alliance
B) horizontal alliance
C) link alliance
D) scale alliance

Accepted Answer

This is a vertical alliance as Coca-Cola is collaborating with companies in a different part of the supply chain (bottling) in order to bring its product to market.

Question 16

Small economies are sometimes less successful than large countries in attracting FDI by raising import restrictions. What is the most likely reason for this?
A) Large economies impose higher trade restrictions.
B) Transportation costs are generally higher in small economies.
C) People in small economies are more nationalistic in their purchases.
D) Small economies frequently lack sufficient markets for large-scale production.

Accepted Answer

Small economies may lack sufficient markets for large-scale production, making investment in these countries less appealing for multinational corporations. This is because economies of scale may not be achievable in these markets, resulting in higher production costs and lower profits. Therefore, raising import restrictions may not be effective in attracting FDI in these cases.

Question 17

All of the following are ways that Coca-Cola has been attempting to increase its global sales EXCEPT ________.
A) gaining licenses to use brand names of other companies
B) acquiring companies with complementary products
C) adding alcoholic beverages to its product line
D) distributing soft drinks from other companies

Accepted Answer

The other choices (A, B, and D) are all ways that Coca-Cola has been attempting to increase its global sales, but adding alcoholic beverages to its product line is not a strategy that Coca-Cola has pursued.

Question 18

What is a key industry?
A) an industry that is locked up competitively by domestic producers
B) a turnkey operator specializing in the construction of infrastructure components
C) an industry that receives government subsidies
D) an industry that significantly affects the economy by virtue of its size or influence on other sectors

Accepted Answer

A key industry is one that plays a significant role in the economy due to its size, impact on other sectors, and contribution to the GDP. Examples of key industries include healthcare, transportation, communications, and financial services. These industries generally have a large number of firms operating within them, making them highly competitive and critical to economic development.

Question 19

A U.S. firm plans to shift from exporting to production in China to serve the Chinese market. Which of the following statements would best explain this decision?
A) China's currency is appreciating relative to the U.S. dollar.
B) The firm is nearing capacity utilization in its U.S. plant.
C) The company need not alter its products for the Chinese market.
D) Transportation costs have become low relative to production costs.

Accepted Answer

The firm is nearing capacity utilization in its U.S. plant, which suggests that they need to expand production capacity to meet demand. Since the Chinese market is growing, it makes sense to shift production there to better serve that market. None of the other statements provide a direct explanation for why the firm would shift from exporting to production in China.

Question 20

In which of the following situations is a firm most likely to be able to choose the foreign operating form it would most like to use?
A) Its main motive is to gain location-specific assets.
B) It has a desired and unique resource.
C) Its preference for entering foreign markets is via acquisition of foreign facilities.
D) It has little concern about appropriability.

Accepted Answer

A firm with a desired and unique resource is in a stronger position to choose its preferred mode of foreign operation because it possesses something valuable that gives it leverage in negotiations or decisions regarding how to enter or operate in a foreign market.

Quiz 14: Direct Investment and Collaborative Strategies

A U.S. firm with a production facility in Brazil uses its own personnel to handle almost all activities because their outsourcing would be too costly and inefficient. Its internalization will most likely lead to cost savings because the firm can avoid ________.

A U.S. firm owns 100% of its production facility in Brazil,thus is most likely using a ________ strategy.

Appropriability theory refers to ________.

Coca-Cola collaborates extensively abroad,but it refuses collaboration that might imperil control of its core competency. As a result,which of the following is NOT one of its international collaborative forms?

Why can a company more easily pursue a global strategy when it owns 100 percent of foreign operations?

A company that makes a foreign investment largely to acquire knowledge is most likely to use ________ as a means of expansion.

A U.S. firm is acquiring an existing company in Germany rather than starting up a new foreign operation. Which of the following statements best supports this decision?

A greenfield investment is another name for a company's decision to ________.

In which of the following situations would Company X most likely seek a collaborative arrangement with Company Z in which Company Z would handle work for Company X?

Which of the following is the LEAST likely reason that consumers would prefer domestically made products over imports?

Executives at a U.S. firm are debating whether to start a new operation in Russia or acquire an existing one. Which of the following factors best supports a decision to start up a new operation in Russia?

Risk is an important factor for companies engaged in international business. One way a collaborative arrangement helps minimize risk when operating abroad is by ________.

The more a company engages in international collaborative arrangements as opposed to wholly owned foreign operations,the more it is likely to ________.

Which of the following is an argument for using a collaborative agreement?

Coca-Cola has collaborative arrangements whereby it produces concentrate that it sells to other companies to bottle its drinks. Which of the following terms best describes this type of arrangement?

Small economies are sometimes less successful than large countries in attracting FDI by raising import restrictions. What is the most likely reason for this?

All of the following are ways that Coca-Cola has been attempting to increase its global sales EXCEPT ________.

What is a key industry?

A U.S. firm plans to shift from exporting to production in China to serve the Chinese market. Which of the following statements would best explain this decision?

In which of the following situations is a firm most likely to be able to choose the foreign operating form it would most like to use?