Question 1

Select Service Partner (SSP) Group has operations in 30 countries involving food and beverage establishments, often in transit hubs such as airports and railway stations. SSP also operates Starbucks locations in airports in Finland, Sweden, and Norway. SSP pays Starbucks a royalty based on sales, as well as a fee for each store. In these instances, Starbucks is engaged in

Accepted Answer

SSP operates Starbucks locations and pays royalties and fees, which is characteristic of a franchising agreement where a company allows another to operate its brand in exchange for fees and royalties.

Question 2

Yum! Brands, the parent company of KFC, has pursued an aggressive growth strategy in China. There are now more than 3,700 restaurants in 650 Chinese cities, and KFC has a 40 percent market share of the entire fast-food industry there. Yum! Brands China owns and directly manages about 90 percent of its Chinese stores, so it appears that the company prefers ________ in this market.

Accepted Answer

Yum! Brands China owns and directly manages about 90 percent of its Chinese stores, indicating a preference for direct investment in this market.

Question 3

A global market entry strategy that entails a domestic firm investing in and owning a foreign subsidiary or division is referred to as

Accepted Answer

Direct investment involves a domestic firm investing in and owning a foreign subsidiary or division, giving it full control over its operations abroad.

Question 4

One disadvantage of direct investment when entering a new global market is

Accepted Answer

Direct investment involves significant financial commitments, including setting up operations, infrastructure, and hiring local staff, which can be a disadvantage due to the high costs and risks involved.

Question 5

European car companies Volkswagen and BMW own and operate car-manufacturing facilities in South Carolina and Alabama respectively that use American labor. This illustrates their use of

Accepted Answer

Volkswagen and BMW owning and operating manufacturing facilities in the U.S. is an example of direct investment, where a company invests directly in facilities to produce or market a product in a foreign country.

Question 6

One advantage of direct investment when entering a new global market is that

Accepted Answer

Direct investment allows a firm to have a physical presence in the foreign market, which helps it gain a deeper understanding of local market conditions and consumer behavior, leading to better strategic decisions.

Question 7

One variation of licensing is referred to as

Accepted Answer

Franchising is a type of licensing where a franchisor grants the franchisee the right to use its trademark and business model.

Question 8

When German car maker Mercedes-Benz owns and operates a factory in Vance, Alabama, that makes the M-Class sport-utility vehicle, this global market entry strategy is known as ________ and represents the greatest commitment a company can make to international sales.

Accepted Answer

Direct investment involves a company owning and operating facilities in a foreign country, representing the highest level of commitment to international markets.

Question 9

The ________ arrangement between Ericsson, a Swedish telecommunications firm, and CGCT, a French switch maker, enabled them together to beat out AT&T for a $100 million French contract.

Accepted Answer

A joint venture is a business arrangement where two or more parties agree to pool their resources for a specific task, which in this case enabled Ericsson and CGCT to collaborate and win the contract.

Question 10

Yum! Brands, the restaurant division of PepsiCo, has 12,600 KFC restaurants abroad, with more than 3,700 restaurants in China. Many of the latter are locally owned and subject to a contractual agreement that allows the owners to operate the business under the established KFC brand name and according to specific rules. Yum! Brands is engaged in

Accepted Answer

Yum! Brands is engaged in franchising, where local owners operate KFC restaurants under the brand name and follow specific rules set by Yum! Brands.

Question 11

Which form of entry into a foreign market requires the greatest commitment?

Accepted Answer

Direct investment requires the greatest commitment as it involves establishing a physical presence in the foreign market, such as building or acquiring facilities, which requires significant resources and long-term commitment.

Question 12

Starbucks and TATA Global Beverage have together formed TATA Starbucks Limited in order to bring Starbucks to India. The global market entry strategy is known as

Accepted Answer

Starbucks and TATA Global Beverage have formed a joint venture, TATA Starbucks Limited, to bring Starbucks to India. A joint venture is a strategic alliance between two or more companies that share a common goal.

Question 13

Global companies have five strategies for matching products and their promotion efforts to global markets. The strategy of selling virtually the same product in other countries is referred to as

Accepted Answer

Product extension refers to selling the same product in other countries without significant changes.

Question 14

PepsiCo and the Strauss Group have together formed an Israeli business to market Frito-Lay's, Cheetos, Ruffles, and Doritos in Israel. This global market entry strategy is known as

Accepted Answer

A joint venture is a business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task, such as entering a new market. In this case, PepsiCo and the Strauss Group have formed a joint venture to market products in Israel.

Question 15

A form of low-risk and capital-free entry into international markets that includes local manufacturing is referred to as

Accepted Answer

Licensing is a low-risk and capital-free entry strategy where a company allows a foreign company to produce its product in exchange for a fee or royalty, often involving local manufacturing.

Question 16

Yogen Früz is a successful chain of frozen yogurt shops originating in Canada. Archeology Investments has an agreement with the Canadian firm that grants rights to its company to open and operate Yogen Früz shops in Dubai, Oman, Qatar, Bahrain, and Kuwait. Yogen Früz is engaged in

Accepted Answer

Yogen Früz is engaged in franchising, as it grants rights to another company (Archeology Investments) to open and operate its shops in specific locations.

Question 17

A joint venture entails

Accepted Answer

A joint venture involves a foreign company and a local firm investing together to create a local business, sharing ownership, control, and profits.

Question 18

A global market entry strategy in which a foreign company and a local firm invest together to create a local business in order to share ownership, control, and profits of the new company is referred to as

Accepted Answer

A joint venture is a global market entry strategy in which a foreign company and a local firm invest together to create a local business in order to share ownership, control, and profits of the new company.

Question 19

Direct investment in as a global market entry strategy refers to

Accepted Answer

Direct investment involves a domestic firm investing in and owning a foreign subsidiary or division, which is a direct form of market entry strategy.

Question 20

A disadvantage of a joint venture arrangement when entering a new global market is that

Accepted Answer

Joint ventures can lead to disagreements between the partnering companies regarding policies, strategies, and management, which can hinder the success of the venture.

Quiz 7: Understanding and Reaching Global Consumers and Markets