Question 1

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 2

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

A

Question 3

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 4

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 when a company decides to construct a new facility or operation in a foreign market from scratch, rather than acquiring an existing one. This can be a more expensive and risky option, but can also provide greater control and the ability to create a customized operation to fit the company's specific needs.

Question 5

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 6

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, which can make them less attractive to foreign investors who seek economies of scale. Even if they raise import restrictions, it may not be enough to make up for this disadvantage. Additionally, larger economies may have more resources and infrastructure to enforce trade restrictions, making them a more secure option for foreign investors.

Question 7

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

Accepted Answer

When a U.S. firm owns 100% of its production facility in Brazil, it is using an internalization strategy. This approach involves a firm conducting its operations within the organization rather than relying on external partners or licensing, to retain control over its resources and capabilities.

Question 8

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.

Question 9

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 protect the benefits of its investments from being shared with others, such as denying rivals access to competitive resources like management know-how.

Question 10

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 has a significant impact on the economy, either by virtue of its size or its influence on other sectors. Examples of key industries include healthcare, technology, and finance. These industries often drive innovation, create jobs, and contribute to economic growth.

Question 11

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 12

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 does not share ownership in the production of its secret formula concentrate as it would jeopardize its control of its core competency. The other options (using franchisers, licensing its trademark, and forming joint ventures) are all forms of international collaboration that Coca-Cola employs.

Question 13

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 rate 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

The answer of Why can a company more easily pursue...

Question 14

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, indicating that it may no longer be efficient or cost-effective to continue exporting to China from the U.S. Therefore, the company needs to establish a production facility in China to serve the Chinese market. The other options do not provide a convincing explanation for this decision.

Question 15

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

When 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 such a scenario, Company X may seek a collaborative arrangement with Company Z. This would allow Company X to outsource the work to Company Z, who can handle it more efficiently due to their economies of scale. Additionally, Company Z may be able to offer lower costs due to their expertise and experience in handling similar work.

Question 16

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 options, gaining licenses to use brand names of other companies, acquiring companies with complementary products, and distributing soft drinks from other companies, are all examples of ways Coca-Cola has been attempting to increase its global sales. However, adding alcoholic beverages to its product line is not a strategy that Coca-Cola has pursued.

Question 17

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

Choosing to acquire an existing company in Germany rather than starting up a new foreign operation makes sense if the German firm has skilled personnel that the U.S. firm cannot hire at a good price on its own. This is because the acquired company's skilled personnel can help the U.S. firm achieve its goals without incurring significant hiring and training costs. The other three choices are not relevant to the decision to acquire an existing company in Germany.

Question 18

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 type of arrangement is known as a vertical alliance as Coca-Cola is working with downstream partners involved in the production and sale of its products.

Question 19

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

A collaborative agreement can help secure vertical and horizontal links between companies, allowing for more efficient and effective operations. The other options do not necessarily require a collaborative agreement.

Question 20

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...

Quiz 15: Direct Investment and Collaborative Strategies

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?

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 the LEAST likely reason that consumers would prefer domestically made products over imports?

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

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 ________.

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 U.S.firm owns 100% of its production facility in Brazil; thus it is most likely using a(n) ________ strategy.

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?

Appropriability theory refers to ________.

What is a key industry?

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

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 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 would Company X most likely seek a collaborative arrangement with Company Z in which Company Z would handle work for Company X?

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

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?

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?

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

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