Deck 9: Global Market Entry Strategies: Licensing, Investment, and Strategic Alliances

Question 1

A joint venture with a local partner represents a more extensive form of strategy that is similar to exporting and licensing.

Answer 1

False

Question 2

In China, regulations require foreign franchisers to directly own two or more stores for a minimum of one year before franchising.

Answer 2

True

Question 3

The joint venture between Corning Glass and Mexican manufacturer Vitro failed primarily due to conflicts arising out of cultural differences.

Answer 3

True

Question 4

Sony was the first company to manufacture and market a transistor radio.

Question 5

Companies may find that the upfront easy money obtained from licensing turns out to be a very expensive source of revenue.

Question 6

Companies that use contract manufacturing provide technical specifitications to a sub-contractor or local manufacturer.

Question 7

Executives at Guatemala's Pollo Campero SA knew how to spot a market entry opportunity by observing passengers flying to the United States from Guatemala City and San Salvador who often carried packages of the company's spicy chicken on board the planes.

Question 8

Foreign direct investment figures reflect investment flows out of the home country as companies invest in or acquire plants, equipment, or other assets.

Question 9

Franchising in a global market is actually a market entry strategy that is typically executed with less localization than licensing.

Question 10

Apple's failure to license its technology in the pre-Windows era arguably cost the company tens of billions of dollars.

Question 11

One of the advantages of a license arrangement is that it can create export market opportunities and open the door to a high-risk manufacturing relationship.

Question 12

A lesson that can be learned from Anheuser-Busch's experience in Japan is that it is better to give control to a local partner via a licensing agreement rather than making a major investment.

Question 13

Licensing is a contractual agreement whereby one company (the licensor)makes a legally protected asset available to another company (the licensee)in exchange for royalties, license fees, or some other form of compensation.

Question 14

Organizations as diverse as Disney, Caterpillar, and National Basketball Association make extensive use of licensing in overseas markets.

Question 15

McDonald's has learned the wisdom of leveraging local market knowledge by granting franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific preferences and taste.

Question 16

Franchising is another variation of licensing strategy.

Question 17

Foreign investment can take the form of minority or majority shares in joint ventures, minority or majority equity stakes in another company, or outright acquisition.

Question 18

The only costs in licensing are the signing agreement and policing its implementation.

Question 19

Franchising is a variation of licensing strategy in which there is a contract between the parent company franchiser and a franchisee that allows the franchisee to operate a business developed by the franchiser in return for all rights for operations.

Question 20

Starbucks had to close its small coffee cafe in Beijing's Forbidden City in 2007 bowing to criticism that the present of a Western brand near the former imperial palace was disrespectful.

Question 21

Asian cultures exhibit collectivist social values where cooperation and harmony are highly valued in both personal life and the business world.Therefore, it is not surprising that some of the Asia's biggest companies, including Mitsubishi and Hyundai, pursue cooperation strategies.

Question 22

One of the disadvantages of global strategic partnerships is it may strengthen a competitor in another country thereby presenting a number of risks.

Question 23

Following its bankruptcy filing in 2009, GM divested itself of several non-core businesses and brands, including Saab.

Question 24

Prior to the economic crisis of 1997-1998, the south Korea's "chaebol" had become bloated and heavily in debt.

Question 25

In an alliance, one has to learn skills of the partner.For example, Toyota learned many new things from its partnership with GM.

Question 26

Japan's Fuji Photo Film Company invested hundreds of millions of dollars in the United States after the U.S.government ruled that Fuji was guilty of dumping.

Question 27

GM and South Korea's Daewoo Group formed a joint venture which helped Daewoo improve its competitiveness.The venture was terminated since Daewoo prevented the import of GM cars to Korea.

Question 28

Sony entered into a strategic partnership with Samsung in order to produce flat-panel TV screens due to the high product development costs.

Question 29

To succeed in global markets, firms can rely exclusively on the technological superiority or core competence which made them successful in the past.

Question 30

Companies may move from licensing or joint venture strategies to ownership in order to achieve faster expansion in a market, greater control, or higher profits.

Question 31

The virtual corporation will seem to be a single entity with vast capabilities but will really be the result of numerous collaborations assembled only when needed.

Question 32

"Greenfield investment" is a phrase sometimes used interchangeably with the phrase "licensing agreement."

Question 33

Because "keiretsu" relationships are crossing the Pacific and directly affecting the American market, U.S.companies have reason to be concerned.

Question 34

Monsanto and the German pharmaceutical company, Bayer AG, entered a joint venture in order to have subsidiaries in Japan.

Question 35

If government restrictions prevent majority or 100-percent ownership by foreign companies, the investing company will have to settle for a minority equity stake.

Question 36

Avon Products uses both acquisition and joint ventures to enter developing markets.

Question 37

In a country and market concentration strategy, a company serves many markets in a few countries.

Question 38

The alliance between GE and Snecma got off to a strong start due to the personal chemistry between the top two executives of respective companies in spite of the differing views regarding governance, management, and organization.

Question 39

In 2008, the largest merger and acquisition deal in the pharmaceutical industry, Roche's acquisition of Genentech, is an example of an equity stake.

Question 40

The South Korean government has recently abandoned the "chaebol" industry structure in favor of the "keiretsu" structure.

Question 41

In the mid-1980s, Apple Computer lost tens of billions of dollars by not using:

A)joint ventures.
B)licensing.
C)100% ownership.
D)exporting.
E)global strategic alliances.

Question 42

Honda has invested $550 million in building an assembly plant in Greensburg, Indiana; IKEA spent nearly $2 billion to open stores in Russia; and South Korea's LG Electronics purchased a 58% stake in Zenith Electronics.All of these are examples of:

A)acquisition.
B)licensing.
C)franchising.
D)FDI.
E)exporting.

Question 43

Licensing as a market entry mode has several disadvantages and opportunity costs, which do not include:

A)limited market control.
B)agreement may have short life.
C)leveraging and exploiting by licensee.
D)similar product or technology development by licensee.
E)adaptations by licensee to fit local tastes.

Question 44

The disadvantages of joint venturing can include all of the following except:

A)Joint venture partners must share rewards as well as risks.
B)Joint ventures allow partners to achieve synergy.
C)Joint ventures can have the potential for conflict between partners.
D)A dynamic joint venture partner can evolve into a strong competitor.
E)A company incurs very significant costs by joint venturing.

Question 45

Ford Motor Company (United States)has a 50-50 joint venture to build Ford Fiestas with:

A)Toyota (Japan).
B)Shanghai Automotive Industry (China).
C)BMW (Germany).
D)Mahindra & Mahindra (India).
E)Mazda (Japan).

Question 46

McDonald's success in franchising in global markets can be attributed to several factors which do not include:

A)a well known global brand name.
B)a business system that can be easily replicated.
C)local market knowledge.
D)cross licensing.
E)granting franchisees leeway to tailor menu offerings to suit local tastes.

Question 47

In order to prevent a licensor-competitor from gaining unilateral benefit, licensing agreements should provide for:

A)contract manufacturing.
B)franchising.
C)cross licensing.
D)strategic decision-making.
E)adaptation for local tastes.

Question 48

GM executives are looking for a joint venture with AvtoVAZ, the largest carmaker in:

A)Germany.
B)Lithuania.
C)Russia.
D)Kazakhstan.
E)Turkey.

Question 49

Which of the following does not fit into the sequence of experiences Anheuser-Busch had in Japan?

A)Anheuser-Busch first entered Japan by means of a licensing agreement with Suntory, the smallest brewery in Japan.
B)Anheuser-Busch created a joint venture with Kirin Brewery, the market leader.
C)Anheuser-Busch dissolved the joint venture with Kirin Brewery.
D)Anheuser-Busch entered into a joint venture with Kirin Brewery.
E)Anheuser-Busch reverted to a licensing agreement with Kirin Brewery.

Question 50

In a joint venture with Russian manufacturer AvtoVAZ, GM executives were planning to have a stripped-down reengineered car based on its Opel model.However, the market research revealed that a "Made-in-Russia" car would only be acceptable if:

A)it has a German name.
B)it sported a very low sticker price.
C)it has an American name.
D)it has a very high sticker price.
E)it has a Russian name.

Question 51

As a general rule, the Chinese government allows foreign companies to participate in its market only if those companies agree to establish operations with local Chinese enterprises.Which market entry mode would be the appropriate choice under these circumstances?

A)acquisition
B)licensing
C)joint venture
D)exporting
E)franchising

Question 52

Pollo Campero, a chicken restaurant chain based in Central America, is using the following method for expanding operations in the United States.

A)joint ventures
B)licensing
C)exporting
D)franchising
E)acquisition

Question 53

The agreements that allow McDonald's franchisees around the globe to use McDonald's trademarked name and menu items represent, in essence, which form of market entry?

A)joint ventures
B)franchising
C)100% ownership
D)exporting
E)acquisition

Question 54

________ represent(s)a market entry strategy whereby one company permits a foreign company to make use of its patents, know-how, technology, company name, or other intangible assets in return for a royalty payment.

A)Joint ventures
B)One-hundred-percent ownership
C)Licensing
D)Exporting
E)Global strategic alliances

Question 55

Sony Ericsson is a ________ Sweden's Telefonaktiebolaget LM and Japanese consumer electronics giant Sony Corporation.

A)joint venture between
B)licensor for
C)licensee for
D)franchisee for
E)franchisor for

Question 56

The strategy to use joint ventures has several advantages which do not include:

A)risk sharing.
B)reduced financial risk.
C)reward sharing.
D)achieve synergy.
E)only way to enter a country or region.

Question 57

The president of a Mexican company recently remarked, "Business in Mexico is done on a consensus basis, very genteel and sometimes slow by U.S.standards." A few months later, the Mexican company and its U.S.joint venture partner parted company.Judging by the president's remark, one important reason for the "divorce" was:

A)failure of one partner to live up to the terms of the contract.
B)cultural differences.
C)the cancellation of NAFTA.
D)the U.S.government's insistence on quick negotiations.
E)the language barrier.

Question 58

For Starbucks and other companies whose business models include a service component, it is not recommended that they use this method for going global.

A)joint ventures
B)licensing
C)100-percent ownership
D)exporting
E)franchising

Question 59

The specialty retailing industry, as well as the fast-food industry, favors ________ for global growth.

A)licensing
B)investment
C)franchising
D)joint ventures
E)strategic alliances

Question 60

Which automaker currently has a joint venture with Hindustan Motors (India)?

A)Volkswagen
B)Ford
C)GM
D)Renault
E)Mazda

Question 61

"Discussion and consensus must be the norms.Partners must be viewed as equals." When applied to global strategic partnerships, this statement indicates the importance of which factor?

A)mission
B)strategy
C)governance
D)culture
E)organization

Question 62

GSPs (Global Strategic Partnerships)are attractive for several reasons which do not include:

A)sharing high product development costs.
B)sharing technological developments.
C)securing access to national and regional markets.
D)continuous transfer of technology between partners.
E)focus on a single national market or a specific problem.

Question 63

Which of the following does not fit in with the factors that should be considered by companies forming GSPs?

A)Partners are competitors to each other.
B)Harmony is not the most important measure of success.
C)All employees and managers must understand where cooperation ends and competitive compromise begins.
D)Learning from partners is critically important.
E)none of the above

Question 64

Which of the following is not a characteristic of global strategic alliances?

A)Participants maintain independence outside the framework of alliance.
B)Participants share benefits of the alliance.
C)Participants share control over the performance of the assigned tasks.
D)Participants make ongoing contributions in technology, products, and other areas.
E)Participants agree not to compete in areas unrelated to the alliance.

Question 65

Saab markets two luxury car models, both prized by drivers for their "quirkiness." About 30% of Saab's sales come from the USA, with most of the rest from Western Europe.Which strategy does Saab appear to be using?

A)country concentration/market segment concentration
B)country diversification/market segment concentration
C)country concentration/market segment diversification
D)country diversification/market segment diversification
E)none of the above

Question 66

Gerber's woes in France illustrate some of the disadvantages of which market entry strategy?

A)joint ventures
B)licensing
C)100% ownership
D)exporting
E)franchising

Question 67

Which of the following statements most accurately describes the extent to which GM and Toyota outsource components?

A)GM and Toyota each outsource approximately 50% of their components.
B)Toyota outsources about 50% of its components; GM outsources about 75%.
C)GM outsources about 50% of its components; Toyota outsources about 75%.
D)Neither GM nor Toyota outsources a significant proportion of its components.
E)GM and Toyota each outsource approximately 25% of their components.

Question 68

Which automaker owns an equity stake in Japan's Nissan Motor?

A)GM
B)Volkswagen
C)Ford
D)DaimlerChrysler
E)Renault

Question 69

Which of the following is not true of Japanese keiretsu?

A)promotes risk sharing
B)promotes long-term employment
C)ensures low prices for Japanese consumers
D)blocks foreign suppliers from the Japanese market
E)relationships are cemented by bank ownership

Question 70

Boeing developed the wide-bodied aircraft, the 777, with about ________ of the work subcontracted out to Mitsubishi, Fuji, and Kawasaki.

A)50%
B)25%
C)20%
D)60%
E)75%

Question 71

The terminology used to describe the new forms of cooperation strategies varies widely and the phrases used include all of the following except:

A)collaborative agreements.
B)strategic alliances.
C)global strategic partnerships.
D)strategic international alliances.
E)Greenfield operations.

Question 72

Tata Motors (India)acquired the following auto company:

A)Volkswagen AG (Germany).
B)Volvo (Sweden).
C)Jaguar (UK).
D)Toyota (Japan).
E)Hyundai (South Korea).

Question 73

Another perspective on the future of cooperative strategies envisions the emergence of:

A)mergers and acquisition.
B)virtual corporations.
C)franchising.
D)joint ventures.
E)keiretsu.

Question 74

Which of the following is true about Japanese keiretsu?

A)Toyota is a vertical keiretsu, Mitsubishi is a horizontal keiretsu.
B)Toyota is a horizontal keiretsu, Mitsubishi is a vertical keiretsu.
C)Toyota and Mitsubishi are both horizontal keiretsu.
D)Toyota and Mitsubishi are both vertical keiretsu.
E)none of the above

Question 75

A number of factors combine to make Russia an excellent location for an alliance which do not include:

A)a well-educated workforce.
B)quality is important to Russian consumers.
C)abundance of supplies.
D)potential for economic growth.
E)potential for growth in service sector.

Question 76

Which of the following currently owns a 70% stake in Skoda, the Czech automaker?

A)GM
B)Volkswagen
C)Ford
D)DaimlerChrysler
E)Renault

Question 77

"Successful GSPs create win-win situations, where participants pursue objectives on the basis of mutual advantage." When applied to global strategic partnerships, this statement indicates the importance of which factor?

A)mission
B)strategy
C)governance
D)culture
E)organization

Question 78

The success of CFM International (the strategic partnership between GE and Snecma)can be attributed to which of the following?

A)compatibility of the partners.
B)capability of the partners.
C)commitment of the partners.
D)personal chemistry between executives.
E)all of the above

Question 79

According to a 1991 report by McKinsey & Co., problems of alliances between Western and Japanese firms were related to all of the following factors except:

A)objective levels of performance.
B)a feeling of mutual disillusionment.
C)difference in expectations.
D)balance between partners.
E)frictional loss.

Question 80

Which of the following is not a characteristic of global strategic alliances?

A)Participants maintain independence outside the framework of alliance.
B)Participants share benefits as well as control.
C)Participants make ongoing contributions in technology, products, and other areas.
D)Participants focus on an individual country market.
E)Participants share benefits of the alliance.