Question 1

Under management contracting, a domestic firm .

Accepted Answer

Under management contracting, a domestic firm exports management services to a foreign company, providing expertise and management skills without investing capital.

Question 2

PharmaCom serves millions of customers across several Asian countries with the assistance of several pharmaceutical manufacturing sites in China, Japan, and Korea. This is an example of .

Accepted Answer

The answer of PharmaCom serves millions of customers across several...

Question 3

is a method of going global in which a company makes agreements with producers in the foreign market to produce its product or provide its service.

Accepted Answer

Contract manufacturing involves a company making agreements with producers in a foreign market to produce its product or provide its service.

Question 4

Management contracting is an unwise choice if a domestic firm can make greater profits by undertaking a whole venture.

Accepted Answer

Management contracting involves outsourcing the management of a project to a third-party contractor, which may incur additional costs and possibly result in lower profits compared to undertaking the whole venture with a domestic firm. Therefore, if the domestic firm can make greater profits, it would be unwise to choose management contracting.

Question 5

Which of the following is an advantage of management contracting?

Accepted Answer

Management contracting allows a firm to earn income from the start of the contract by managing operations for a foreign company without having to invest in the foreign market directly.

Question 6

Which of the following is most likely a drawback of contract manufacturing?

Accepted Answer

Contract manufacturing often involves outsourcing production to a third-party manufacturer, which can lead to decreased control over the manufacturing process, including quality and production timelines.

Question 7

Exporting involves a company entering foreign markets by partnering with foreign companies to produce or market a product or service.

Accepted Answer

Exporting involves a company selling its products or services to foreign markets, typically without partnering with foreign companies for production or marketing.

Question 8

Which of the following is most likely a benefit of joint ownership?

Accepted Answer

Joint ownership allows firms to pool resources, providing access to financial and managerial resources that they may not have independently.

Question 9

The Dance Company, a renowned dance studio in Manhattan, enters into an agreement with La Danza in Spain to operate several dance studios. La Danza will provide capital for running the dance studios and The Dance Company will contribute its world-renowned expertise about the art of dance. In this case, The Dance Company enters a foreign market through .

Accepted Answer

The answer of The Dance Company, a renowned dance studio...

Question 10

Foreign-based production facilities offer many advantages to an investing company if the foreign market is small.

Accepted Answer

Foreign-based production facilities are typically established to take advantage of lower production costs, access to local markets, or strategic positioning. If the foreign market is small, the advantages might not outweigh the costs and complexities of setting up and managing overseas operations.

Question 11

For a fee or royalty payments, a licensee buys the right to use the company's manufacturing process, trademark, patent, trade secret, or other item of value.

Accepted Answer

A licensee pays a fee or royalty to obtain the rights to use a company's intellectual property or proprietary processes, which can include trademarks, patents, or trade secrets.

Question 12

What is the most likely disadvantage of direct investment for an investing company?

Accepted Answer

Direct investment involves committing capital in a foreign country, which exposes the investing company to risks associated with currency devaluation in that country.

Question 13

Which of the following is a drawback of management contracting?

Accepted Answer

Management contracting can prevent a company from setting up its own operations for a period of time because it involves a foreign company managing the operations, which may limit the domestic firm's ability to establish its own presence.

Question 14

ventures consist of one company collaborating with foreign investors to create a local business in which they share possession and control. For example, Kellogg was able to move strongly and quickly into emerging markets in West Africa by taking this approach.

Accepted Answer

Joint ownership involves a company collaborating with foreign investors to create a local business, sharing both possession and control, as described in the example of Kellogg in West Africa.

Question 15

In addition to joint ownership ventures in China, Intel has made substantial outlays in its own manufacturing and research facilities there. This is an example of .

Accepted Answer

Direct investment involves a company investing in its own facilities in a foreign country, which is what Intel is doing by investing in manufacturing and research facilities in China.

Question 16

Kimlee, a food manufacturer based in China, recognizes the immense demand for noodles in the Australian market. Kimlee forms a new business venture to manufacture instant noodles and decides to share possession and control of the new business with a local food processing company. In this case, Kimlee has entered a foreign market through _ .

Accepted Answer

Kimlee has entered the foreign market through joint ownership, as they are sharing possession and control of the new business with a local company.

Question 17

The Bread Company promotes its brand in new international markets by providing rights to local bakeries and bistros to use its recipes and brand name. In this case, The Bread Company's market-entry strategy is referred to as .

Accepted Answer

Licensing is a market-entry strategy where a company allows another company to use its brand name, recipes, or other intellectual property in exchange for a fee or royalty.

Question 18

Toyota has manufacturing facilities in Cambridge and Woodstock Ontario. These are wholly-owned subsidiaries of the Japanese based company. Which of the following is an advantage of this direct investment?

Accepted Answer

Direct investment allows a firm to maintain full control over its operations and decisions, which is an advantage for Toyota in managing its facilities in Ontario.

Question 19

Which of the following is a disadvantage of licensing?

Accepted Answer

Licensing can create a competitor because the licensee gains access to the licensor's technology and expertise, which they can use to compete against the licensor in the future.

Question 20

Companies often form ventures to merge their complementary strengths in developing a global marketing opportunity.

Accepted Answer

Joint ownership involves two or more companies sharing resources, risks, and profits to develop a global marketing opportunity, leveraging their complementary strengths.

Quiz 15: The Global Marketplace