Question 1

Turnkey projects are most common in industries that use complex, expensive production technologies.

Accepted Answer

Turnkey projects are prevalent in industries that require complex and expensive production technologies because these projects involve delivering fully operational facilities or systems to the client, which is particularly beneficial in sectors where the technology and expertise needed for setup are highly specialized.

Question 2

Every export is an import in the home country.

Accepted Answer

Exports are goods or services sold by one country to another, not imports into the country that is selling them. Imports are goods or services bought by a country from another.

Question 3

Intangible property includes patents, inventions, designs, copyrights, visas and licences.

Accepted Answer

Visas are not considered intangible property; they are permissions granted by a country to a foreigner, allowing entry, stay, or leave. Intangible property typically includes patents, inventions, designs, copyrights, and licenses, which are creations of the mind or legal rights over the use of creations.

Question 4

Cross-licensing agreements enable firms to hold each other hostage, which reduces the probability that they will behave opportunistically towards each other.

Accepted Answer

Cross-licensing agreements involve the mutual granting of rights to use certain technologies or intellectual property between two firms. This mutual dependency reduces the incentive for opportunistic behavior since each party has leverage over the other, encouraging cooperation and reducing the likelihood of hostile actions.

Question 5

Franchising is basically a specialised form of licensing in which the franchiser sells not only intangible property to the franchisee but also tangible property.

Accepted Answer

Franchising typically involves the franchiser providing intangible property, such as trademarks and business systems, while the franchisee operates under the franchiser's brand, but it does not necessarily involve selling tangible property.

Question 6

Governments discourage companies from exporting their goods and services, because exporting results in the loss of jobs and has a negative effect on trade balance.

Accepted Answer

Governments often encourage companies to export their goods and services because exporting can lead to job creation and improve the trade balance by increasing the value of exports relative to imports.

Question 7

Some novice exporters run into significant problems when first trying to do business abroad because of problems securing financing.

Accepted Answer

Novice exporters often face challenges in securing financing due to their lack of experience, limited financial history, and the perceived risk by financial institutions of doing business in foreign markets.

Question 8

The two main advantages of exporting are that it avoids the often substantial costs of establishing manufacturing operations overseas, and that it may help a firm to achieve experience curve and location economies.

Accepted Answer

Exporting allows a company to enter foreign markets without the heavy investment required for setting up local manufacturing, and it can also leverage economies of scale and cost advantages from operating in its home country.

Question 9

Franchising is similar to ______________ , although franchising tends to involve ______________ commitments.

Accepted Answer

Franchising is similar to licensing in that both involve a company allowing another party to use its brand, product, or business model. However, franchising typically involves longer-term commitments and more extensive support and control by the franchisor compared to licensing agreements.

Question 10

In many countries, political considerations make _______________ the only feasible entry mode. Research suggests that this form of entry lowers the risk of being subject to nationalisation or other forms of adverse government interference.

Accepted Answer

Joint ventures can lower the risk of adverse government interference by involving local partners, which can help navigate political and regulatory environments more effectively. This collaboration can make joint ventures a more feasible entry mode in countries where political considerations are significant.

Question 11

Firms can use any of six different modes to enter foreign markets. These six modes include:

Accepted Answer

The six modes of entering foreign markets typically include exporting, licensing, franchising, joint ventures, wholly owned subsidiaries, and turnkey projects.

Question 12

__________________ is/are frequently used when a firm possesses some intangible property that might have business applications, but it does not want to develop those applications itself.

Accepted Answer

Licensing is commonly used when a company has an intangible asset, such as a patent or trademark, that could be commercially exploited but the company prefers not to develop those applications on its own. Through licensing, the company allows another party to use its property in exchange for a fee or royalty, enabling the property to be developed and commercialized by others who may have the necessary resources or expertise.

Question 13

The most typical joint venture involves the following percentages of ownership stake and a team of managers who share operating control:

Accepted Answer

The most typical joint venture involves a 50/50 ownership stake, with both parties having equal shares and shared operating control, promoting collaboration and shared decision-making.

Question 14

Many high-tech firms prefer ________________ as their entry mode for overseas expansion, because it reduces the risk of losing control over their technological competence.

Accepted Answer

A wholly owned subsidiary allows a firm to maintain complete control over its operations and technology abroad, reducing the risk of losing control over its technological competence.

Question 15

The term 'indirect exporting' refers to the use of an agent located within the home country. This approach is best suited to ____________________, as it allows them to avoid or minimise the need to manage export documentation and procedures.

Accepted Answer

Indirect exporting is ideal for novice, small exporters as it allows them to leverage the expertise of an agent to handle export documentation and procedures, which they may not be familiar with or have the resources to manage.

Question 16

The main advantage of establishing a greenfield venture in a foreign country is that it:

Accepted Answer

The main advantage of establishing a greenfield venture in a foreign country is that it allows a firm to start from scratch, giving it the freedom to design and build the subsidiary exactly as it wants, without the constraints of pre-existing structures or practices. This enables the firm to implement its own technology, culture, and processes right from the beginning.

Question 17

Acquisitions have the following three main points in their favour:

Accepted Answer

Acquisitions are favored for their speed of execution, the strategic advantage of outpacing competitors, and the general perception of lower risk compared to other growth strategies like organic expansion. These factors make acquisitions an attractive option for companies looking to grow quickly and secure a competitive edge in the market.

Question 18

One of the disadvantages of joint venture agreements is that:

Accepted Answer

Joint ventures often involve shared control, which can limit a firm's ability to fully implement strategies and realize experience curve economies as it might with wholly-owned subsidiaries.

Question 19

One of the principal risks of franchising relates to:

Accepted Answer

Franchising involves allowing another party to operate a business using the franchisor's brand and systems, which can lead to challenges in maintaining consistent quality across different locations.

Question 20

The risks associated with learning to do business in a new culture are reduced if the firm acquires an established host-country enterprise. However, acquisitions raise additional problems, including:

Accepted Answer

Acquiring an established host-country enterprise indeed reduces the risks associated with learning to do business in a new culture, but it introduces the challenge of integrating potentially divergent corporate cultures. This cultural integration can be complex and difficult, impacting employee morale, corporate identity, and operational efficiency.

Quiz 11: Entering Foreign Markets