Question 1

The most typical joint venture is a 60-40 venture, in which one party holds most of the ownership stake.

Accepted Answer

The most typical joint venture is a 50-50 venture, in which there are two parties, each of which holds a 50 percent ownership stake and contributes a team of managers to share operating control.

Question 2

Overpayment for assets of an acquired firm is one reason acquisitions fail.

Accepted Answer

Acquisitions fail for several reasons. The acquiring firms often overpay for the assets of the acquired firm.

Question 3

Greenfield ventures are less risky than acquisitions in the sense that there is less potential for unpleasant surprises.

Accepted Answer

Greenfield ventures are less risky than acquisitions in the sense that there is less potential for unpleasant surprises.

Question 4

Franchising enables a firm to quickly build a global presence.

Accepted Answer

Using a franchising strategy, a service firm can build a global presence quickly and at a relatively low cost and risk.

Question 5

The choice of which international markets to enter should be driven by an assessment of absolute short-run growth and profit potential.

Accepted Answer

The choice of which international markets to enter should be driven by an assessment of relative long-run growth and profit potential.

Question 6

By producing its product in a centralized location, licensing limits a firm's ability to realize experience curve and location economies.

Accepted Answer

Licensing limits the firm's ability to realize experience curve and location economies by producing its product in a centralized location.

Question 7

When determining the value of a foreign market, an international firm must consider both its products and the competition.

Accepted Answer

The value an international business can create in a foreign market depends on the suitability of its product offering to that market and the nature of indigenous competition.

Question 8

The greater the pressures for cost reductions, the more likely a firm will want to pursue some combination of exporting and wholly owned subsidiaries.

Accepted Answer

By manufacturing in those locations where factor conditions are optimal and then exporting to the rest of the world, a firm may be able to realize substantial location and experience curve economies.

Question 9

Acquisitions rarely produce disappointing results.

Accepted Answer

Despite the arguments for engaging in acquisitions, many acquisitions often produce disappointing results.

Question 10

A strategic commitment can be reversed by the top management at will.

Accepted Answer

A strategic commitment has a long-term impact and is difficult to reverse.

Question 11

A wholly owned subsidiary limits a firm's control over marketing and sales in different countries.

Accepted Answer

A wholly owned subsidiary gives a firm tight control over operations in different countries.

Question 12

Tangible property includes patents, designs, copyrights, and trademarks.

Accepted Answer

Intangible property includes patents, inventions, formulas, processes, designs, copyrights, and trademarks.

Question 13

Gadgets, Inc., wants to enter a foreign market on a small scale. This will allow it to learn about the market while limiting the firm's exposure to that market.

Accepted Answer

Small-scale entry allows a firm to learn about a foreign market while limiting the firm's exposure to that market.

Question 14

If a firm's core competence is proprietary technological knowledge, a joint venture is preferable.

Accepted Answer

If a firm's competitive advantage (its core competence) is based on control over proprietary technological know-how, licensing and joint ventures should be avoided if possible to minimize the risk of losing control over that technology.

Question 15

Brand names such as Starbucks and Subway are well protected by international laws pertaining to trademarks.

Accepted Answer

Brand names are generally well protected by international laws pertaining to trademarks.

Question 16

The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country.

Accepted Answer

Benefits, costs, and risks associated with doing business in a country all play a role in the attractiveness of that market.

Question 17

Exporting from a firm's home base is most appropriate when lower-cost locations for manufacturing the product can be found abroad.

Accepted Answer

Exporting may not be appropriate if lower-cost locations for manufacturing the product can be found abroad.

Question 18

Johan's firm is considering entering a country where there are no incumbent competitors to be acquired. Its best option is likely to be a greenfield venture.

Accepted Answer

If the firm is considering entering a country where there are no incumbent competitors to be acquired, then a greenfield venture may be the only mode.

Question 19

Educating customers is an element of pioneering costs.

Accepted Answer

Pioneering costs include the costs of promoting and establishing a product offering, including the costs of educating customers.

Question 20

A joint venture is often politically more acceptable than a wholly owned subsidiary and brings a degree of local knowledge to the subsidiary.

Accepted Answer

The subsidiaries may be wholly owned or joint ventures, but most service firms have found that joint ventures with local partners work best for the controlling subsidiaries. A joint venture is often politically more acceptable and brings a degree of local knowledge to the subsidiary.

Quiz 15: Entry Strategy and Strategic Alliances

The most typical joint venture is a 60-40 venture, in which one party holds most of the ownership stake.

Overpayment for assets of an acquired firm is one reason acquisitions fail.

Greenfield ventures are less risky than acquisitions in the sense that there is less potential for unpleasant surprises.

Franchising enables a firm to quickly build a global presence.

The choice of which international markets to enter should be driven by an assessment of absolute short-run growth and profit potential.

By producing its product in a centralized location, licensing limits a firm's ability to realize experience curve and location economies.

When determining the value of a foreign market, an international firm must consider both its products and the competition.

The greater the pressures for cost reductions, the more likely a firm will want to pursue some combination of exporting and wholly owned subsidiaries.

Acquisitions rarely produce disappointing results.

A strategic commitment can be reversed by the top management at will.

A wholly owned subsidiary limits a firm's control over marketing and sales in different countries.

Tangible property includes patents, designs, copyrights, and trademarks.

Gadgets, Inc., wants to enter a foreign market on a small scale. This will allow it to learn about the market while limiting the firm's exposure to that market.

If a firm's core competence is proprietary technological knowledge, a joint venture is preferable.

Brand names such as Starbucks and Subway are well protected by international laws pertaining to trademarks.

The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country.

Exporting from a firm's home base is most appropriate when lower-cost locations for manufacturing the product can be found abroad.

Johan's firm is considering entering a country where there are no incumbent competitors to be acquired. Its best option is likely to be a greenfield venture.

Educating customers is an element of pioneering costs.

A joint venture is often politically more acceptable than a wholly owned subsidiary and brings a degree of local knowledge to the subsidiary.