Question 1

When a firm's competitive advantage is based on technological competence,a
50/50 joint venture will often be the preferred entry mode.

Accepted Answer

When a firm's competitive advantage is based on technological competence,a wholly owned subsidiary will often be the preferred entry mode because it reduces the risk of losing control over that competence.

Question 2

India and China,while relatively poor,are attractive targets for inward investment primarily because of their:

Accepted Answer

While some markets are very large when measured by number of consumers (e.g. ,China,India,and Indonesia),one must also look at living standards and economic growth.On this basis,China and India,while relatively poor,are growing so rapidly that they are attractive targets for inward investment.

Question 3

Indonesia is a populous nation,but is a relatively less attractive option for inward investment because of its:

Accepted Answer

While some markets are very large when measured by number of consumers (e.g. ,China,India,and Indonesia),one must also look at living standards and economic growth.On this basis,China and India,while relatively poor,are growing so rapidly that they are attractive targets for inward investment.On the other hand,weak growth in Indonesia implies that this populous nation is a far less attractive target for inward investment.

Question 4

Ultimately,a company must base its choice of nation for foreign expansion on an assessment of the nation's:

Accepted Answer

All the nation-states in this world do not hold the same profit potential for a firm contemplating foreign expansion.Ultimately,the choice must be based on an assessment of a nation's long-run profit potential.

Question 5

It is much easier to change the culture of an acquired unit than it is to build an organization culture from scratch.

Accepted Answer

The big advantage of establishing a greenfield venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.For example,it is much easier to build an organization culture from scratch than it is to change the culture of an acquired unit.

Question 6

Establishing a wholly owned subsidiary gives the firm a 100 percent share in the profits generated in a foreign market.

Accepted Answer

In a wholly owned subsidiary,the firm owns 100 percent of the stock.Therefore,establishing a wholly owned subsidiary gives the firm a 100 percent share in the profits generated in a foreign market.

Question 7

Research suggests joint ventures with local partners face a significantly higher risk of being subject to nationalization or other forms of adverse government interference.

Accepted Answer

In many countries,political considerations make joint ventures the only feasible entry mode.Research suggests joint ventures with local partners face a low risk of being subject to nationalization or other forms of adverse government interference.

Question 8

When a firm perceives its technological advantage to be only transitory,when it expects rapid imitation of its core technology by competitors,the firm will invariably want to invest in a wholly owned subsidiary.

Accepted Answer

When a firm perceives its technological advantage to be only transitory,when it expects rapid imitation of its core technology by competitors.In such cases,the firm might want to license its technology as rapidly as possible to foreign firms to gain global acceptance for its technology before the imitation occurs.

Question 9

A joint venture does not give a firm the tight control over subsidiaries that it might need to realize experience curve or location economies.

Accepted Answer

A joint venture does not give a firm the tight control over subsidiaries that it might need to realize experience curve or location economies.

Question 10

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

Accepted Answer

The greater the pressures for cost reductions are,the more likely a firm will want to pursue some combination of exporting and wholly owned subsidiaries.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 11

While some markets are very large when measured by number of consumers,_____ must also be considered while choosing a market for entry.

Accepted Answer

While some markets are very large when measured by number of consumers (e.g. ,China,India,and Indonesia),one must also look at living standards and economic growth.

Question 12

Greenfield investments are quick to execute.

Accepted Answer

Acquisitions are quick to execute.

Question 13

Trade-offs between the advantages and disadvantages of various entry modes are inevitable when selecting an entry mode.

Accepted Answer

All the entry modes have advantages and disadvantages.Thus,trade-offs are inevitable when selecting an entry mode.

Question 14

Establishing a franchise is generally the most costly method of serving a foreign market from a capital investment standpoint.

Accepted Answer

Establishing a wholly owned subsidiary is generally the most costly method of serving a foreign market from a capital investment standpoint.Firms doing this must bear the full capital costs and risks of setting up overseas operations.

Question 15

In a seminal study of the post-acquisition performance of acquired companies,David
Ravenscraft and Mike Scherer concluded that on average the profits and market shares of acquired companies rose dramatically following acquisition.

Accepted Answer

In a seminal study of the post-acquisition performance of acquired companies,David Ravenscraft and Mike Scherer concluded that on average the profits and market shares of acquired companies declined following acquisition.

Question 16

One advantage of a joint venture is that a firm benefits from a local partner's knowledge of the host country's competitive conditions,culture,language,political systems,and business systems.

Accepted Answer

A firm in a joint venture benefits from a local partner's knowledge of the host country's competitive conditions,culture,language,political systems,and business systems.

Question 17

When a firm makes an acquisition in a foreign market,it acquires valuable intangible assets.

Accepted Answer

When a firm makes an acquisition in a foreign market,it not only acquires a set of tangible assets,such as factories,logistics systems,customer service systems,and so on,but it also acquires valuable intangible assets including a local brand name and managers' knowledge of the business environment in that nation.

Question 18

Which of the following is NOT a basic decision that a firm contemplating foreign expansion must make?

Accepted Answer

A firm contemplating foreign expansion must make three basic decisions: which markets to enter,when to enter those markets,and on what scale.

Question 19

Licensing and franchising are two entry modes that are characterized by low development costs and risks for an international firm.

Accepted Answer

Licensing and franchising are two entry modes that are characterized by low development costs and risks for an international firm.

Question 20

A wholly owned subsidiary may be required if a firm is trying to realize location and experience curve economies.

Accepted Answer

A wholly owned subsidiary may be required if a firm is trying to realize location and experience curve economies.

Quiz 12: Entering Foreign Markets

When a firm's competitive advantage is based on technological competence,a 50/50 joint venture will often be the preferred entry mode.

India and China,while relatively poor,are attractive targets for inward investment primarily because of their:

Indonesia is a populous nation,but is a relatively less attractive option for inward investment because of its:

Ultimately,a company must base its choice of nation for foreign expansion on an assessment of the nation's:

It is much easier to change the culture of an acquired unit than it is to build an organization culture from scratch.

Establishing a wholly owned subsidiary gives the firm a 100 percent share in the profits generated in a foreign market.

Research suggests joint ventures with local partners face a significantly higher risk of being subject to nationalization or other forms of adverse government interference.

When a firm perceives its technological advantage to be only transitory,when it expects rapid imitation of its core technology by competitors,the firm will invariably want to invest in a wholly owned subsidiary.

A joint venture does not give a firm the tight control over subsidiaries that it might need to realize experience curve or location economies.

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

While some markets are very large when measured by number of consumers,_____ must also be considered while choosing a market for entry.

Greenfield investments are quick to execute.

Trade-offs between the advantages and disadvantages of various entry modes are inevitable when selecting an entry mode.

Establishing a franchise is generally the most costly method of serving a foreign market from a capital investment standpoint.

In a seminal study of the post-acquisition performance of acquired companies,David Ravenscraft and Mike Scherer concluded that on average the profits and market shares of acquired companies rose dramatically following acquisition.

One advantage of a joint venture is that a firm benefits from a local partner's knowledge of the host country's competitive conditions,culture,language,political systems,and business systems.

When a firm makes an acquisition in a foreign market,it acquires valuable intangible assets.

Which of the following is NOT a basic decision that a firm contemplating foreign expansion must make?

Licensing and franchising are two entry modes that are characterized by low development costs and risks for an international firm.

A wholly owned subsidiary may be required if a firm is trying to realize location and experience curve economies.