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

Question 1

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.

Answer 1

False

Question 2

Generally speaking, franchising is a market-entry strategy that is typically executed with more localization than is licensing.

Answer 2

False

Question 3

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.

Answer 3

False

Question 4

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 5

For Starbucks and other companies whose business models include a service component, it is not recommended that they use one of the following methods for going global.

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

Question 6

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 7

One of the advantages of licensing is:

A)licensees have limited control.
B)licensees have considerable autonomy.
C)license agreements have short life.
D)licensees can develop similar products.
E)licensees have considerable leverage.

Question 8

A licensed asset may be a brand name, company name, patent, trade secret, or product formulation

Question 9

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 10

Would-be franchisors ask all of the following questions except one before expanding overseas:

A)How tough is the local competition?
B)Does the government respect trademark and copyrights?
C)Can profits be easily repatriated?
D)Can products be easily counterfeited?
E)Is commercial space available?

Question 11

________ represents 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)A joint venture
B)One-hundred-percent ownership
C)Licensing
D)Exporting
E)A Global strategic alliance

Question 12

The advantages of "contract manufacturing" include all of the following except:

A)access to technical specifications by subcontractors.
B)access to technical specifications by local manufacturers.
C)a licensing firm can specialize in product marketing.
D)limited commitment of financial resources.
E)considerable commitment of management resources.

Question 13

For Walt Disney Company, the best mode for going global is by:

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

Question 14

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

Question 15

________ provides technical specifications to a subcontractor or local manufacturer, who then oversees production.

A)A joint venture
B)Contract manufacturing
C)Licensing
D)Exporting
E)A Global strategic alliance

Question 16

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 17

Starbucks founder and Chairman Howard Schultz and his management team have used a variety of market-entry approaches, direct ownership, licensing, and franchising-to create an empire of more than 21,000 coffee cafés in 65 countries.

Question 18

Licensing as a market entry mode has several disadvantages and opportunity costs, which does 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 19

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 20

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 21

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 22

Strictly speaking, a (n)________ is an entry strategy for a single target country in which the partners share ownership of a newly created business entity.

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

Question 23

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 24

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

Question 25

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 26

The Russian market for imported premium vehicles is exploding as the number of households that can afford luxury products exhibit rapid growth. The luxury cars include all of the following except:

A)Porsche.
B)Lexus.
C)BMW.
D)Rolls-Royce.
E)Infiniti.

Question 27

Nike provides technical specifications to a subcontractor or local manufacturer for its products. What is this arrangement called and what are its major benefits and drawbacks?

Question 28

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 29

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 30

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)the only way to enter a country or region.

Question 31

According to the international Licensing Industry Merchandisers Association (LIMA), the United States and Canada account for about 90 percent of licensed goods sales.

Question 32

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 33

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

Question 34

Licensing agreements offer limited market control since the licensee typically does not become involved in the licensor's marketing program.

Question 35

Toyota learned many things from its partnership with GM, however American managers involved in the venture complained that:

A)Toyota learned many things about the U.S. supply system.
B)Toyota learned about the U.S. transport system.
C)Toyota learned about managing American workers.
D)Toyota did not apply manufacturing expertise at GM plant.
E)Toyota applied its expertise at its Camry plant.

Question 36

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 37

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 38

Walt Disney Company has successfully adapted licensing as a market entry mode in different countries. What are the advantages of using licensing as entry mode?

Question 39

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 40

McDonald's and other fast food restaurants have benefitted tremendously by using franchising as a mode of entry into different countries. What are the benefits of franchising and how does it differ from other modes of entry?

Question 41

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

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

Question 42

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 43

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

Question 44

Anheuser-Busch created a joint venture with Kirin Brewery, the market leader. Anheuser-Busch's 90 percent stake in the venture entitled it to market and distribute beer produced in Los Angeles.

Question 45

A dynamic joint venture partner can evolve into a strong competitor.

Question 46

By pursuing a joint venture entry strategy, a company can limit its financial risk as well as its exposure to political uncertainty.

Question 47

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

Question 48

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

Question 49

Foreign investments may take the form of minority or majority shares in joint ventures, minority or majority equity stake in another company, or outright acquisition.

Question 50

The driving force behind many business acquisitions is globalization.

Question 51

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 52

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

Question 53

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

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

Question 54

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

Question 55

Avon Products uses ________ to enter developing markets.

A)franchising and licensing
B)joint venture and licensing
C)acquisition and franchising
D)licensing and franchising
E)acquisition and joint ventures

Question 56

Ford and Mazda have market entry and expansion in a relationship known as:

A)joint venture.
B)licensorship.
C)franchising.
D)contract manufacturing.
E)none of the above

Question 57

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

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

Question 58

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 59

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 60

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

Question 61

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 62

Companies like Anheuser-Busch, Corning Glass, and GM have learned a lot by using joint venture as a mode of entry into a foreign market. Some of their experiences are not very positive. What are the disadvantages of joint venturing?

Question 63

"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 64

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 65

"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 66

A competitive business environment is now characterized by all of the following characteristics except:

A)unprecedented degrees of turbulence.
B)dynamism.
C)unpredictability.
D)inadaptability.
E)environmental responsiveness.

Question 67

An attribute which does not represent true global partnership is:

A)achieving world leadership by differentiation.
B)achieving a reciprocal relationship.
C)relationship is organized vertical lines.
D)continual transfer of resources.
E)retaining national identities.

Question 68

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 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 69

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

Question 70

Having partners from another country can have advantages which include all of the following except:

A)reducing product development costs.
B)securing technology.
C)access to capital.
D)shared risks.
E)increased competition.

Question 71

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.

Question 72

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 73

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

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 74

Licensing, joint ventures, minority or majority equity stake, and ownership are points along a continuum of alternative strategies for global market entry and expansion.

Question 75

"Corporate amnesia" in global partnership is a term which refers to:

A)achieving world leadership by differentiation.
B)short-term goals with no memory on how to compete.
C)a relationship which is short lived.
D)discontinuation of a partnership due to personal chemistry.
E)losing national identity and ideology.

Question 76

Joint ventures are becoming very popular as an entry mode into foreign markets. Why is this strategy so attractive to companies interested in entering other markets in the world?

Question 77

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 78

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 79

Critics warn that employees of a company that become reliant on an outside supplier for critical components will:

A)encourage outsourcing
B)become used to value-added components
C)lose expertise and engineering skills
D)use time for developing other skills
E)look for employment with competitors

Question 80

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.