Silca Electronics Inc.is a consumer-electronics company based in the country of Pelo.It has approximately 300 stores across the country and is already active in three foreign countries.It attempts to establish itself successfully in the country of Zevar,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,Silca Electronics Inc.incurs huge financial losses in Zevar.In this scenario,Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because
A) it overestimates its need to protect its intellectual property.
B) it underestimates its liability of foreignness when entering the Zevar market.
C) it underestimates its dwindling reputation before it enters the Zevar market.
D) it overestimates the geographic and cultural distance between Pelo and Zevar.

Question

Quizplus · Accepted Answer

In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because it underestimates its liability of foreignness when entering the Zevar 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.