Question 1

Licensing is a contractual arrangement that involves a long period of time and includes factors such as monitoring of operations, training, and advertising.

Accepted Answer

Franchising usually involves a longer time period than licensing and includes other factors, such as monitoring of operations, training, and advertising.

Question 2

A franchise generally expires after a few years, whereas a license is designed to last into perpetuity.

Accepted Answer

Licensing enables a company to receive a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable item of intellectual property. Franchising contracts generally include a broader range of factors in an operation and have a longer time period during which the agreement is in effect.

Question 3

Statistics indicate that over half of the world output now comes from emerging markets. This is leading to a(n) ___________ of living standards across the globe and is changing the face of business.

Accepted Answer

Over half of the world output now comes from emerging markets. This is leading to a convergence of living standards across the globe and is changing the face of business.

Question 4

According to the textbook, globalization involves international exchange. Included in this exchange is trade in goods and services as well as the exchange of __________, __________, and _________ across countries.

Accepted Answer

Globalization is a term that has two meanings: (1) the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information; (2) the growing similarity of laws, rules, norms, values, and ideas across countries.

Question 5

Typically, the least risky method of entry into a foreign market is through the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control.

Accepted Answer

Establishing a wholly owned subsidiary is the most expensive and risky of the various entry modes. However, it can also yield the highest returns. In addition, it provides the multinational company with the greatest degree of control of all activities, including manufacturing, marketing, distribution, and technology development. Wholly owned subsidiaries are most appropriate where a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations.

Question 6

Which of the following is not a risk normally associated with Bottom of the Pyramid strategies?

Accepted Answer

In many developing economies, distributions of income remain much wider than they do in the developed world, leaving many impoverished even as the economies grow. The challenge for multinational firms is to tailor their products and services to meet the needs of the bottom of the pyramid. Global corporations are increasingly changing their product offerings to meet the needs of the nearly 5 billion poor people in the world who inhabit developing countries.

Question 7

Multinational firms are constantly faced with the dilemma of choosing between _______ and __________.

Accepted Answer

Some governments make better use of inflows of foreign investment and know-how than others. Explanations include the need of governments to have track records of business-friendly policies to attract multinationals and local entrepreneurs to train workers, invest in modern technology, and nurture local suppliers and managers. Also, it means carefully managing the broader economic factors in an economy, such as interest rates, inflation, and unemployment.

Question 8

The rise of _________ capitalism around the world creates tremendous business opportunities for multinational corporations.

Accepted Answer

The rise of globalization (meaning the rise of market capitalism around the world) has undeniably created tremendous business opportunities for multinational corporations. For example, while smartphone sales declined in Western Europe in the third quarter of 2014, they grew at a 50 percent rate in Eastern Europe, the Middle East, and Africa.

Question 9

According to Exhibit 7.1 in the textbook, the country experiencing the lowest rate of growth in GDP from 2001-2011 was

Accepted Answer

As shown in Exhibit 7.1, the growth experienced by developed economies in the first decade of the 2000s was anemic, while the growth in developing economies was robust. This has resulted in a dramatic shift in the structure of the global economy. Over half of the output of the world now comes from emerging markets. This is leading to a convergence of living standards across the globe and is changing the face of business. One example of this is the shift in the global automobile market. China supplanted the United States as the largest market for automobiles in 2009.

Question 10

When considering the exporting decision, companies should consider that the ability to tailor their products to meet local market needs typically is very limited.

Accepted Answer

Exporting is a relatively inexpensive way to enter foreign markets, but it is not without significant downsides. The ability to tailor company products to meet local market needs typically is very limited.

Question 11

Wholly owned subsidiaries are least appropriate where a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations.

Accepted Answer

Wholly owned subsidiaries are most appropriate where a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations.

Question 12

When the GE wind energy business tapped into world-wide talent, it was able to expand using a(n) _________________ strategy.

Accepted Answer

The importance of international expansion as a viable diversification strategy can be illustrated by GEs wind energy business that benefits by tapping into talent around the world. The firm has built research centers in China, Germany, India, and the U.S. CEO Jeffrey Immelt says that this solution was created in order to access the best brains everywhere in the world. All four centers have played a key role in GEs development of huge 92-ton turbines.

Question 13

In international markets, a disadvantage of licensing is that the firm granting a license incurs little risk, since it does not have to invest any significant resources into the country itself.

Accepted Answer

In international markets, an advantage of licensing is that the firm granting a license incurs little risk, since it does not have to invest any significant resources into the country itself.

Question 14

Globalization opens the doors for companies to attract new customers. One of the challenges is to determine how to meet the needs of these customers who have

Accepted Answer

One of the challenges with globalization is determining how to meet the needs of customers at very different income levels. In many developing economies, distributions of income remain much wider than they do in the developed world, leaving many impoverished even as the economies grow. The challenge for multinational firms is to tailor their products and services to meet the needs of the bottom of the pyramid.

Question 15

The trade among nations has increased dramatically in recent years, and it is estimated that by 2015 the trade ________ nations will exceed the trade _______ nations.

Accepted Answer

The trade among nations has increased dramatically in recent years, and it is estimated that by 2015 the trade across nations will exceed the trade within nations.

Question 16

According to Exhibit 7.1 in the textbook, the country experiencing the highest rate of growth in GDP from 2001-2011 was

Accepted Answer

As shown in Exhibit 7.1, the growth experienced by developed economies in the first decade of the 2000s was anemic, while the growth in developing economies was robust. This has resulted in a dramatic shift in the structure of the global economy. Over half of the output of the world now comes from emerging markets. This is leading to a convergence of living standards across the globe and is changing the face of business. One example of this is the shift in the global automobile market. China supplanted the United States as the largest market for automobiles in 2009.

Question 17

Wholly owned subsidiaries are typically the most expensive and risky entry mode. The risk is shared, however, with the company partners.

Accepted Answer

Wholly owned subsidiaries are typically the most expensive and risky entry mode. With franchising, joint ventures, or strategic alliances, the risk is shared with the firm's partners. With wholly owned subsidiaries, the entire risk is assumed by the parent company. The risks associated with doing business in a new country (e.g., political, cultural, and legal) can be lessened by hiring local talent.

Question 18

When considering the export decision, firms should not partner with local distributors because many foreign markets are nationally regulated.

Accepted Answer

Exporting consists of producing goods in one country to sell in another. The entry strategy enables a firm to invest the least amount of resources in terms of its product, its organization, and it overall corporate strategy. Because many foreign markets are nationally regulated and dominated by networks of local intermediaries, firms need to partner with local distributors to benefit from their valuable expertise and knowledge of their own markets.

Question 19

Exporting is an expensive way to enter foreign markets.

Accepted Answer

Exporting is a relatively inexpensive way to enter foreign markets, but it is not without significant downsides.

Question 20

Typically, joint ventures involve less control and risk than franchising.

Accepted Answer

A joint venture has a higher degree of ownership (both investment and risk) and control than does franchising.

Quiz 7: International Strategy: Creating Value in Global Markets