Question 1

In some cases, a firm will buy the rights to produce, promote, and use the domestic firm's trademark/patents in a defined geographical area with an agreement on specific operating procedures. What is this practice called?

Accepted Answer

Franchising is the practice of a firm buying the rights to produce, promote, and use the domestic firm's trademark/patents in a defined geographical area with an agreement on specific operating procedures. This allows the franchisor to expand their business without the upfront costs and risks of opening new locations themselves.

Question 2

When the American dollar began to show strength against a variety of world currencies, what effect did it have on American companies with a strong international presence?

Accepted Answer

When the American dollar strengthens against other currencies, it makes American goods more expensive abroad, potentially reducing international sales and earnings for American companies with a strong international presence.

Question 3

McDonald's is recognized as a universal brand having worldwide appeal. Which statement best describes how their franchises operate in different countries?

Accepted Answer

McDonald's franchises operate differently in different countries, taking local cultural differences into account in terms of their menu and other aspects of their operations. For example, in India, McDonald's restaurants do not serve beef or pork to accommodate the local cultural and religious dietary preferences. Similarly, McDonald's menus in other countries may include items that are popular within that country's cuisine.

Question 4

Which of the following has the highest cost and risk, but offers the most control in operating a business overseas?

Accepted Answer

Foreign direct investment involves establishing a wholly-owned subsidiary, joint venture, or acquiring an existing company in a foreign market. This has the highest cost and risk as it involves significant capital investments, regulatory compliance, and operational risks. However, it offers the most control in operating a business overseas as the company has complete ownership and management control over the foreign venture.

Question 5

What is the term for a domestic firm granting a foreign firm the rights to produce, promote, and use its trademark/patents in a defined geographical area?

Accepted Answer

The term for a domestic firm granting a foreign firm the rights to produce, promote, and use its trademark/patents in a defined geographical area is called licensing. Exporting refers to sending goods or services produced in one country to another country, direct investment involves establishing operations in a foreign country, and outsourcing involves contracting work to a third party in a different location.

Question 6

Which of the following is the most basic level of international market development that involves shipping domestically produced products overseas?

Accepted Answer

Exporting is the most basic level of international market development, where domestic products are shipped overseas. Franchising, licensing, and importing all involve more complex business arrangements and strategies for international expansion.

Question 7

In late 2012 a euro cost $1.30 of Canadian currency, and in late 2016 a euro cost $1.50. What can we say about this change?

Accepted Answer

The cost of one euro in Canadian dollars increased from $1.30 to $1.50, meaning that the Canadian dollar took more Canadian currency to buy one euro. Therefore, the Canadian dollar became weaker relative to the euro.

Question 8

Which of the following groups does NOT benefit when a nation has a weak currency?

Accepted Answer

Domestic firms with operations in foreign countries will benefit from a weak currency because it makes their products cheaper to produce and hence more competitive in the foreign markets. A weak currency, however, hurts foreign tourists who are visiting the country because their currency has more purchasing power, foreign firms that operate facilities within the nation because their profits will be worth less in their home currency, and domestic firms that want to export goods to foreign markets because their goods will be more expensive in the foreign markets.

Question 9

Which of the following terms refers to buying products that are manufactured overseas from overseas markets?

Accepted Answer

Importing refers to buying products that are manufactured overseas from overseas markets. A) Outsourcing refers to contracting work or services to outside suppliers or manufacturers. C) Exporting refers to selling products to overseas markets. D) Dumping refers to selling products at a lower price in a foreign market than the price charged in the home market.

Question 10

According to the textbook, what are the key infrastructure challenges to consider when entering a foreign market?

Accepted Answer

The textbook states that key infrastructure challenges to consider when entering a foreign market include transportation (e.g. roads, ports, airports), communication (e.g. internet, phone lines), and finance (e.g. availability of credit, currency stability). Language, attitudes, and values may also be important to consider, but are not considered infrastructure challenges. Civil war, riots, and economic viability are more external factors that may affect market entry, but are not necessarily infrastructure challenges. Laws and regulations are important to consider, but are not solely infrastructure challenges.

Question 11

What is the term for contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production?

Accepted Answer

Contracting with foreign suppliers to produce products at a lower cost is known as outsourcing. This allows companies to take advantage of lower labor and manufacturing costs in foreign countries, resulting in a higher profit margin for the company.

Question 12

Uberholtz, a German company, has granted Sistec, a Canadian company, the right to manufacture Uberholtz's product and use the Uberholtz trademark in return for a fee. What are the roles of the two companies?

Accepted Answer

Sistec, by obtaining the right to manufacture Uberholtz's product and use its trademark for a fee, becomes the licensee. Uberholtz, which grants these rights, acts as the licensor.

Question 13

How does international trade provide businesses with access to new customers?

Accepted Answer

International trade provides businesses with access to new customers through outsourcing, exporting, and licensing. Outsourcing allows businesses to establish operations in other countries, while exporting allows businesses to sell their products and services to customers in other countries. Licensing allows businesses to grant other companies the right to use their intellectual property, such as trademarks and patents, in exchange for royalties. All of these strategies allow businesses to reach new customers and expand their global market reach. Embargoes and protectionism, such as on-shoring, are strategies that limit international trade and do not provide businesses with access to new customers. Networks of global franchising organizations and global supply chains may also enable access to new customers. However, this is not mentioned in the given answer choices.

Question 14

Which of the following strategies does McDonald's use to build its corporate presence worldwide?

Accepted Answer

McDonald's uses franchising as a strategy to build its corporate presence worldwide. Franchising allows McDonald's to expand rapidly with minimal capital investment and also allows local entrepreneurs to use the established brand and business model of McDonald's to operate their own restaurants.

Question 15

Toyota's construction of automobile assembly plants in Canada is an example of what type of investment?

Accepted Answer

Toyota's construction of automobile assembly plants in Canada is an example of foreign direct investment, which refers to a company investing in and managing operations in a foreign country. This is different from outsourcing, licensing, or importing.

Question 16

According to the textbook, which of the following are key economic factors to consider when entering a foreign market?

Accepted Answer

Per capita income, economic growth rate, and currency exchange rate are all key economic factors to consider when entering a foreign market as they can greatly impact the success of a business in that market. While the other options mentioned (laws and regulations, language, attitudes, values, political stability, and a fair and uncorrupt judicial system) are also important considerations, they do not fall under the key economic factors category.

Question 17

According to the textbook, what are the sociocultural differences to consider when entering a foreign market?

Accepted Answer

The sociocultural differences to consider when entering a foreign market include language, attitudes, and values. These factors can greatly impact the success of a company's marketing and advertising strategies in a foreign country. It is important to understand the cultural norms and preferences of the target market to effectively communicate and connect with consumers. Factors such as per capita income, population, economic growth rate, and currency exchange rate (A) are important for understanding the market size and potential profitability, while political stability and a fair judicial system (B) are important for ensuring a stable business environment. Laws and regulations (C) are also important to understand, but do not necessarily fall under sociocultural differences.

Question 18

Which of the following is the best example of foreign direct investment that would involve the Honda Corporation, which has its headquarters in Tokyo, Japan?

Accepted Answer

Building a manufacturing plant in Canada by the Honda Corporation, which is headquartered in Tokyo, Japan, is an example of foreign direct investment because it involves the company investing in physical assets in another country, thereby establishing business operations or acquiring business assets in that foreign country.

Question 19

Two or more companies will sometimes agree to join forces to pursue specific opportunities without actually merging their operations. What do we call this practice?

Accepted Answer

A joint venture is a strategic alliance between two or more companies, where they agree to pool their resources and expertise to pursue a specific project or goal. It allows companies to share risks and costs while achieving mutual benefits, without the complexity and legal requirements of a full merger or acquisition. A collusive alliance implies unethical behavior, while an acquisition involves one company buying another. Limited venture is not a commonly used term in this context.

Question 20

Pandy's, a Canadian restaurant chain, promotes its business in Latin America with the hopes of offering prospective buyers the opportunity to open and operate Pandy's restaurants in their countries. Pandy's corporate management offers financial and marketing assistance to ensure success within established guidelines. How would you classify Pandy's and the prospective buyer?

Accepted Answer

Pandy's is offering a business opportunity for prospective buyers to open and operate Pandy's restaurants in their countries. The fact that Pandy's is offering financial and marketing assistance and established guidelines indicates that they are a franchisor. The prospective buyer would be the franchisee. Therefore, the correct choice is D.

Quiz 4: The World Market-Place: Business Without Borders