Culinary Solutions Inc. manufactures cooking and baking equipment and has its base in the country of Vandevar. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself in the country of Balalaika, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Culinary Solutions Inc. incurs huge financial losses in Balalaika. In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because

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In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because it underestimated its liability of foreignness when entering the Balalaika market. Liability of foreignness consists of the additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances.