Deck 13: Entry Modes

Question 1

Sales companies will import in their own name from the parent and will invoice in the currency of the parent company.

Answer 1

False

Question 2

One way in which contract manufacturing is used is to subcontract assembly work or the production of parts to subsidiaries overseas.

Answer 2

False

Question 3

Direct exporting is simpler than indirect exporting because it requires neither special expertise nor large cash outlays.

Answer 3

False

Question 4

One way in which contract manufacturing is used is for a company to contract with a local manufacturer to produce products for the company,according to the company's specifications.

Question 5

Licensing refers to a contractual agreement in which the licensor grants access to its patents,trade secrets,or technology for a fee paid by the licensee.

Question 6

A sales company is established to market goods or services,not to produce them.

Question 7

A sales company is part of indirect exporting.

Question 8

The Internet has made direct exporting much easier.

Question 9

Research shows that surviving pioneers hold a smaller average market share when their industries reach maturity than firms that were either fast followers or late entrants in the product category.

Question 10

Producing a factory ready to operate is similar to producing a "turnkey project."

Question 11

The licensee generally pays a fix sum when signing a license agreement and then royalties of five to seven percent of sales over the life of the contract.

Question 12

Turnkey projects export technology,management expertise,and capital equipment.

Question 13

Direct exporting is an excellent means of getting a feel for international business without committing a great amount of human or financial resources.

Question 14

The means of supplying overseas markets-exporting to and production in those markets-depend on non-equity modes of entry.

Question 15

Entering foreign markets may be described by two levels of involvement,non-equity and equity-based.

Question 16

Some evidence suggests that pioneers gain and maintain a competitive advantage in new markets.

Question 17

Piracy can refer to both high-sea swashbuckling and the illegal appropriation of software,music,video,and other intellectual property.

Question 18

A follower will most likely succeed when there are few legal,technological,cultural,or financial barriers to inhibit entry,as long as it has sufficient resources or competencies to overwhelm the pioneer's early advantage.

Question 19

Some firms do not grant licenses to other firms because of the fear of having a strong competitor upon the expiration of the license.

Question 20

A management contract is used only by manufacturing companies to earn income by providing expertise for a fee.

Question 21

The existence of two or more partners,which typically have differences in strategies,operating practices,and organizational cultures,is a factor that tends to promote successful management and performance of strategic alliances.

Question 22

If a firm decides to become involved in overseas manufacturing, it has two options: (1) wholly owned subsidiary and (2) joint venture.

Question 23

One benefit of exporting is that it can enable a company to serve markets where the company has no or limited production facilities.

Question 24

Pooling alliances are driven by the logic of contributing dissimilar resources,while trading alliances are driven by similarity and integration.

Question 25

In a joint venture,a management contract is often used as a control mechanism by firms,even if they hold only a minority position in the venture.

Question 26

Lack of control is one of the strongest arguments against a joint venture.

Question 27

In a 12-country study conducted by Ernst & Young,65% of U.S.companies were found to be engaged in a strategic alliance.

Question 28

It is not possible for foreign investors to control a joint venture if the host country's law prevents foreign investors from having more than 49% percent ownership.

Question 29

Strategic alliances take many forms,including licensing,mergers,joint ventures,and joint research and development partnerships.

Question 30

Historically,firms engaged in FDI have generally preferred wholly owned subsidiaries.

Question 31

Trading and pooling alliances are typically different in their goals,optimal structures,and managerial challenges.

Question 32

Alliances can allow a partner to acquire a firm's technological or other competencies,thereby raising important competitive concerns.

Question 33

Exports can help to offset cyclical sales in a firm's domestic market.

Question 34

One type of strategic alliance between competitors is an R&D partnership.

Question 35

In the year 2007,twice as much FDI invested in the U.S.was spent in acquiring established businesses than in setting up new ones.

Question 36

Most of the foreign direct investment in the United States has been spent establishing new companies.

Question 37

Management contracts can enable the global partner to control many aspects of a joint venture even when holding only a minority position.

Question 38

Exporting can extend a product's life cycle by exporting to currently unserved markets where the product will be at the introduction stage of the life cycle.

Question 39

Generally mergers and acquisitions are considered alliances.

Question 40

When the government of a host country requires companies to have some local participation,foreign firms must engage in strategic alliances with local owners.

Question 41

A company can engage in indirect exporting by using which of the following companies in its own country?

A)manufacturers' export agents
B)export merchants
C)sales offices
D)franchisee vendors
E)manufacturers' export agents and export merchants

Question 42

A turnkey project includes all of the following except:

A)plan design.
B)technology supply.
C)supply of raw material.
D)personnel training.
E)export commission agents.

Question 43

Licensing provides income for:

A)fashion designers.
B)computer manufacturers.
C)magazine publishers.
D)fashion designers,computer manufacturers,and magazine publishers.
E)fast-food chains.

Question 44

Companies wishing to export must first choose between

A)exporting directly and using sales companies.
B)exporting indirectly or using joint ventures.
C)exporting directly or indirectly.
D)exporting directly and licensing.
E)wholly owned subsidiaries and virtual ventures.

Question 45

__________ permits a firm to set up an export program with a minimum of cash outlay and little special expertise.

A)joint venture
B)direct exporting
C)franchising
D)indirect exporting
E)licensing

Question 46

A pioneering firm stands the best chance for long term success in market-share leadership and profitability when:

A)there are high entry barriers for competitors.
B)it has strong patent protection.
C)there are substantial investment requirements.
D)there are high entry barriers for competitors,and there is strong patent protection,and when there are substantial investment requirements.
E)there are low entry barriers for competitors.

Question 47

A contractual arrangement in which one firm grants access to its patents,trade secrets,or technology to another for a fee is a(n):

A)exporter.
B)sales company.
C)management contract.
D)joint venture.
E)license.

Question 48

When a licensing agreement is made,

A)the licensee receives expertise from another company.
B)the licensee obtains permission from the government to do business in a foreign country.
C)the licensor is a foreign government which grants the license.
D)the licensor pays to receive assistance from the licensee.
E)the licensee receives expertise from its own company's in-house experts.

Question 49

Which of the following is a form of piracy?

A)licensing.
B)patent infringement.
C)terrorism.
D)forming joint venture.
E)dumping.

Question 50

A disadvantage(s)of indirect exporting is/are that:

A)firms gain little experience from the transaction
B)commissions have to be paid to agents
C)firms are dependent on the agents
D)firms gain little experience from the transaction,commissions have to be paid to agents,and firms are dependent on the agents.
E)firms find it hard to set sales offices in foreign countries

Question 51

Most firms begin their involvement in overseas business by:

A)exporting.
B)licensing.
C)joint ventures.
D)wholly owned subsidiaries.
E)contract ventures

Question 52

A company can engage in indirect exporting by using which of the following in its own country?

A)import merchants
B)sales companies
C)export commission agents
D)overseas merchants
E)franchisee vendors

Question 53

Exporters of a turnkey project may include which of the following?

A)A contractor that specializes in designing and erecting plants in a particular industry.
B)A producer of a factory.
C)A sales company.
D)A virtual venture.
E)Contractors that specialize in designing and erecting plants in a particular industry and producer of a factory.

Question 54

Franchising is a form of:

A)contract management.
B)licensing.
C)contract manufacturing.
D)joint venture.
E)patent infringement.

Question 55

According to the text,licensing agreements usually stipulate that a royalty of __________ be paid to the licensor.

A)2 to 5 percent of profits
B)2 to 5 percent of sales
C)5 to 7 percent of profits
D)5 to 7 percent of sales
E)8 to 10 percent of sales

Question 56

A disadvantage(s)of indirect exporting is:

A)foreign business can be lost if exporter changes supply sources
B)no expertise or large cash outlays are required
C)the firm gains little experience from transactions
D)foreign business can be lost if exporter changes supply sources and the firm gains little experience from transactions
E)firms find it hard to set sales offices in foreign countries

Question 57

By means of a licensing agreement,

A)an international firm receives permission from a foreign government to set up a subsidiary in that country.
B)one firm grants to another the right to use stipulated parts of its expertise.
C)a foreign company receives products made for it by another company.
D)one firm grants to another the right to use all of its expertise.
E)one firm grants to another the right to use its expertise which its researchers may incur in future.

Question 58

A pioneering firm stands the best chance for long term success in market-share leadership and profitability when:

A)there are few cultural barriers to entry.
B)the firm has sufficient size,resources and competencies.
C)there is high potential for imitation.
D)it has strong patent protection.
E)there is low potential for imitation.

Question 59

In many cases,a firm entering international markets becomes a follower because:

A)barriers are high for new entrants.
B)strong patent protection exists.
C)quicker competition beat it.
D)barriers are low for new entrants.
E)there is high potential for imitation.

Question 60

A business established for the purpose of marketing goods and services,not producing them,is a:

A)franchisee
B)direct exporter
C)sales company
D)joint venture
E)corporate venture

Question 61

Foreign direct investment (FDI)includes all of the following except:

A)wholly owned subsidiary
B)joint venture
C)management contract
D)strategic alliance
E)R&D partnership style strategic alliance

Question 62

According to a 12-country study conducted by Ernst & Young,_____ percent of U.S.companies are engaged in some form of strategic alliance.

A)25
B)50
C)65
D)75
E)90

Question 63

The principal ingredient that a franchiser exports is:

A)a brand name.
B)marketing strategy.
C)a set of proven procedures.
D)management contract.
E)a brand name,marketing strategy,and a set of proven procedures.

Question 64

Hilton and Delta provide assistance to other international companies.That is an example of:

A)joint venture.
B)management contract.
C)strategic alliance.
D)contract manufacturing.
E)licensing.

Question 65

Partnerships between or among competitors,customers,or suppliers that may take one or more of various forms,both equity and nonequity,are known as:

A)licenses.
B)joint ventures.
C)wholly owned subsidiaries.
D)strategic alliances.
E)management contracts.

Question 66

International firms employ contract manufacturing

A)as a means of entering a foreign market without investing in plant facilities.
B)to subcontract assembly work or the production of parts to independent companies overseas.
C)as means of entering a foreign market without investing in plant facilities and to subcontract assembly work or independent companies overseas.
D)as a means of direct foreign investment.

Question 67

McDonald's,Kentucky Fried Chicken,and Subway are examples of:

A)joint ventures.
B)licensing.
C)franchising.
D)strategic alliances.
E)management contract.

Question 68

Benefits of joint ventures may include:

A)The ability to respond to strong nationalistic sentiment in the host nation.
B)Access to expertise that the company lacks.
C)Differing strategies and cultures of the partners.
D)The ability to respond to strong nationalistic sentiment in the host nation,and access to expertise that the company lacks
E)purchase of its distributor.

Question 69

An arrangement by which one firm provides management in all or specific areas to another firm is a:

A)license.
B)franchise.
C)management contract.
D)joint ventures.
E)strategic alliances.

Question 70

"Foreign direct investment without investment" is a term sometimes applied to:

A)franchising.
B)exporting.
C)joint venture.
D)management contract.
E)contract manufacturing.

Question 71

According to the text,a management contract is useful for:

A)joint ventures.
B)earning money by providing know-how.
C)direct exporting.
D)wholly owned subsidiaries.
E)joint ventures,wholly owned subsidiaries and involves earning money by providing know-how.

Question 72

According to the text,management contracts usually stipulate that a fee of __________ be paid to the firm providing the management expertise.

A)2 to 5 percent of sales
B)30 to 50 percent of sales
C)2 to 5 percent of profits
D)30 to 50 percent of profits
E)5 to 7 percent of profits

Question 73

According to the text,a company that wishes to own a foreign subsidiary outright may:

A)make a greenfield investment.
B)purchase its distributor.
C)acquire part of a going concern.
D)purchase a competitor exporter
E)make a greenfield investment or purchase its distributor or even acquire part of a going concern.

Question 74

________ alliances are driven by similarity and integration.

A)strategic
B)trading
C)pooling
D)equity-based
E)arbitration

Question 75

Historically,firms making a foreign direct investment have generally preferred:

A)direct exporting
B)joint ventures
C)strategic alliances
D)wholly owned subsidiaries
E)contract manufacturing

Question 76

A joint venture may be:

A)a corporate entity formed between an international firm and local owners.
B)a corporate entity formed between two or more international firms.
C)a corporate undertaking between two or more firms of a limited-duration project.
D)a non-profit entity formed between an international firm and local owners.
E)corporate entity formed between an international firm and local owners,formed between two or more international firms,or may be an undertaking between two or more firms of a limited-duration project.

Question 77

In 2007,foreign firms investing in the United States spent about ____________ on establishing new firms as they did on acquiring going firms.

A)twice as much
B)25 percent as much
C)nine times as much
D)one-eleventh as much
E)the same amount

Question 78

Strategic alliances are

A)partnerships between competitors,customers,or suppliers that may take various forms.
B)another name for a growth triangle.
C)arbitration.
D)is another name for management contracts.
E)wholly owned subsidiaries.

Question 79

Although there are many forms of strategic alliances or competitive alliances,the alliances are often between:

A)customers.
B)competitors.
C)suppliers.
D)investors.
E)government delegates.

Question 80

An arrangement in which one firm contracts with another firm to produce products to its specifications but assumes responsibility for marketing is:

A)a license.
B)a franchise.
C)a management contract.
D)contract manufacturing.
E)a turnkey project.