Question 1

_________ suggests that in the first stage innovations are produced in the home developed country; in the second stage they are exported to other similarly developed countries; in the third stage, they start being produced in these developed countries; in the fourth stage they start being produced in low-wage developing countries.

Accepted Answer

The description provided matches Vernon's product cycle theory, which proposes that in the first stage innovations are produced in the home developed country; in the second stage they are exported to other similarly developed countries; in the third stage, they start being produced in these developed countries; in the fourth stage they start being produced in low-wage developing countries.

Question 2

A joint venture is a contractual mode of foreign entry involving a high level of resource commitment by all partners.

Accepted Answer

(A JV will not typically require as high a resource commitment as we would see in wholly owned subsidiaries. In addition, there is significant variability in the level of resources contributed by partners.)

Question 3

An MNE with a 'transnational mentality' will typically be managed as an integrated network.

Accepted Answer

An MNE with a transnational mentality views itself as a borderless organization and seeks to integrate its operations across countries to create a cohesive global network. This often involves centralization of some functions and decentralization of others to achieve a balance between local responsiveness and global integration. Therefore, such MNEs are typically managed as integrated networks.

Question 4

HomeAppliances Co. is a new manufacturer of home appliances. HomeAppliances wants to go international. Some of its traditional motivations for pursuing internationalization include:

Accepted Answer

(a, b, and d are incorrect because 'raising global scanning and learning capabilities' and 'improving competitive positioning' are not traditional motivations for pursuing internationalization, they are emerging motivations.)

Question 5

Which of the following constitutes a list of foreign entry modes that involve the MNE to make a foreign investment

Accepted Answer

(Licensing, franchising, and many forms of cooperation may not entail an MNE making an investment.)

Question 6

The largest MNEs are equivalent in their economic importance to less developed economies such as Cameroon, Paraguay, or Barbados.

Accepted Answer

(Sales of the largest MNEs exceed the GDPs of less developed countries.)

Question 7

All companies internationalize in an incremental manner. First, they make an initial commitment of resources to the foreign market in order to secure local market knowledge. Building on this knowledge, they make subsequent resource commitments, eventually leading to higher levels of investment in the foreign market.

Accepted Answer

(There are many exceptions to the incremental approach. Some firms are "born globals". Other firms retain the same mode, including level of subsidiary involvement, in all foreign markets.)

Question 8

An MNE is a(n):

Accepted Answer

(A true MNE is a company that has substantial direct investment in foreign countries, and that actively manages and regards its foreign operations as integral parts of the company, both strategically and organizationally. Companies that either do not hold equity positions or hold minor equity positions in overseas ventures without or with very low management involvement may be viewed as "international" companies but would not be regarded as multinational enterprises.)

Question 9

Three prerequisites that must be satisfied before a national firm can transform itself into a multinational firm include:

Accepted Answer

(a, c, and d are incorrect because scale-based advantages, knowledge-based advantages, and contractual capabilities are, by themselves, insufficient to justify the internationalization of operations. With much less effort a company often can sell or license its technology to foreign producers, franchise its brand name internationally, or sell its products abroad through local distributors, without having to set up its own offshore operations.)

Question 10

The process of internationalization followed by most firms is usually well-thought out in advance and typically builds on a combination of rational analysis, planning and implementation.

Accepted Answer

(It is more likely a combination of rational analysis, opportunism, and luck. In regards to opportunism, several studies have found that most firms begin exporting due to an unsolicited export order.)

Question 11

A joint venture is a _________ mode of foreign entry.

Accepted Answer

(a, b, and c would describe indirect export, franchise, and contract manufacturing foreign modes of entry respectively.)

Question 12

A franchise, such as McDonald's, is a _________ mode of foreign entry.

Accepted Answer

(a, c, and d would describe indirect export, contract manufacturing, and joint venture foreign modes of entry respectively.)

Question 13

One motivation behind internationalization is to sustain the firm's competitive position. To pursue a sustainable competitive position relative to its rivals in the athletic clothing industry, Nike attempts to:

Accepted Answer

(a, b, and d are incorrect because 'securing raw materials', 'accessing scarce knowledge', and 'exploiting factor cost differences' may give a company a temporary competitive advantage but not a sustainable competitive advantage.)

Question 14

An MNE with an 'international mentality' will typically be managed as a coordinated federation.

Accepted Answer

An MNE with an 'international mentality' views its subsidiaries as equal and diverse, rather than simply extensions of the parent company. As a result, it is most likely to be managed as a coordinated federation, where power is shared and decision-making is spread out among different units. This allows for greater flexibility and responsiveness to local market conditions, while also ensuring that the organization as a whole remains focused on achieving its goals.

Question 15

Emerging motivations for internationalization include the desire to enhance the firm's competitive position and the desire to develop global scanning capabilities.

Accepted Answer

As firms seek to gain a competitive advantage in the global market, many are opting to expand and establish a presence in international markets. This allows them to access new customers, resources, and business opportunities while also developing a global perspective and enhancing their ability to scan the international environment for new trends and opportunities.

Question 16

An MNE with a 'global mentality' will typically manage its operations centrally.

Accepted Answer

A global mentality implies a centralized approach to management, which allows for a unified strategy across different locations and markets.

Question 17

For an MNE to exist, first foreign countries must provide location-specific advantages to attract the company to invest there, second the company must have ownership-specific advantages that counteract its liability of foreignness, third the company must have the organizational capability to leverage its strategic advantages more effectively internally than externally.

Accepted Answer

This is the basic framework of the eclectic paradigm of international business, which suggests that three specific types of advantages (location-specific, ownership-specific, and internalization-specific) are necessary for an MNE to exist.

Question 18

Which of the following correctly describes the sequential evolution in management thinking with respect to the strategic role of foreign operations in emerging MNEs?

Accepted Answer

(a, b, and c are incorrect because, although they describe the different ways of management thinking regarding the strategic role of foreign operations in emerging MNEs, they do not describe the evolution of this thinking in the correct sequence.)

Question 19

The main advantage multinational mentality has over global mentality is more efficient manufacturing.

Accepted Answer

(it is the other way around)

Question 20

An MNE with a 'multinational mentality' will typically be managed as a coordinated federation.

Accepted Answer

(It will typically be managed as a decentralized federation.)

Quiz 1: Expanding Abroad: Motivations, Means, and Mentalities