Question 1

What dictates the choice of a multinational entry-mode strategy?
A)Strategic competition
B)Strategic reason to be in the market
C)Companies want to share risks and costs of developing technology
D)Companies want to achieve economies of scale

Accepted Answer

The choice of a multinational entry-mode strategy is primarily dictated by the strategic reason to be in the market, as it aligns with the company's overall objectives and goals for entering a new market.

Question 2

A company pursuing a regional strategy
A)Has worldwide products and a worldwide value chain.
B)Sells the same product using only minor modification in marketing and product offerings.
C)Is similar to a company pursuing an international strategy.
D)Attempt to gain location advantages of more global transnational combined with some of the local-adaptation advantages of the multidomestic company.

Accepted Answer

A company pursuing a regional strategy attempts to gain location advantages of a more global transnational combined with some of the local-adaptation advantages of the multidomestic company. This means that the company targets a specific region or group of countries, and it adapts its products, marketing, and operations to fit the local needs and preferences. However, it may still have a global value chain and sell worldwide products with minor modifications. A regional strategy is different from an international strategy because it focuses on a specific region rather than the entire world.

Question 3

If strategists in a firm believe that centralizing key activities such as R&D is necessary to reduce coordination costs and to achieve economies of scale,they are more likely to choose
A)An international strategy.
B)A transnational strategy.
C)A local strategy.
D)None of the above

Accepted Answer

Centralizing key activities such as R&D to reduce coordination costs and achieve economies of scale is characteristic of an international strategy, where a firm leverages its home-based advantages in foreign markets with minimal local adaptation.

Question 4

As entry-mode strategies,direct and indirect exporting have
A)High levels of control and low levels of risk.
B)Similar levels of risk and control as FDI.
C)Low levels of risk and control.
D)Are among the most risky.

Accepted Answer

Direct and indirect exporting involve lower levels of risk compared to other international market entry strategies because the company does not need to invest in new production facilities or operations in the foreign market. They also offer lower levels of control over the marketing and distribution of products, as these functions are often handled by local partners or intermediaries.

Question 5

Which of the following refers to the negative impact of political decisions or events on a multinational's profitability?
A)Economic risk
B)Local government risk
C)Political risk
D)Control risk

Accepted Answer

Political risk refers specifically to the negative impact of political decisions or events on a multinational's profitability. Economic risk relates to the possibility of economic conditions affecting the financial performance of a company. Local government risk relates to the possibility of political and economic intervention by local governments in the operations of a multinational company. Control risk pertains to the possibility of a company being unable to control its operations or prevent losses due to fraudulent or illegal activities.

Question 6

Which of the following statements regarding exporting is FALSE?
A)Exporting is the easiest of entry-mode strategies.
B)Export can be of the passive form where overseas orders are treated like domestic orders.
C)Export can be indirect where companies rely on intermediaries to sell overseas.
D)Because it is the easiest form of going international, exports are not as important to the US economy.

Accepted Answer

The statement "Because it is the easiest form of going international, exports are not as important to the US economy" is false. Exporting is a crucial component of the US economy and accounts for a significant portion of the country's GDP.

Question 7

Major drawbacks of licensing include
A)The risk of losing the capital investment.
B)The risk of the local government changing international trade policies.
C)The loss of control and the possibility of creating a new competitor.
D)All of the above

Accepted Answer

Licensing can lead to a loss of control over how the product is marketed and sold, and there's a risk that the licensee could become a competitor in the future. A) and B) are not directly related to licensing but to foreign direct investments and political risks respectively.

Question 8

Advantages of foreign direct investment include
A)Increased capital investment.
B)Greater control of product and marketing strategy.
C)Greater exposure to financial risks.
D)The lower costs of using expatriates managers.

Accepted Answer

The answer of Advantages of foreign direct investment include
A)Increased capital...

Question 9

Companies should license if
A)They want to control all aspects of operation.
B)Their product is older or a soon-to-be replaced technology.
C)They have the necessary resources to export or invest directly.
D)There are no tariffs or quotas.

Accepted Answer

Licensing is often a strategy used by companies for products that are older or for technologies that are going to be replaced soon. This allows the company to earn revenue from these products or technologies without investing in new production or marketing efforts, especially in markets where they do not have a strong presence or where direct investment is not feasible or desirable.

Question 10

If a company seeks a strategic alliance with another firm,it is a
A)Low cost strategy.
B)Franchising agreement.
C)Competitive agreement.
D)Cooperative agreement.

Accepted Answer

A strategic alliance is a cooperative agreement between two companies where they agree to work together to achieve a specific goal. It often involves sharing resources, knowledge, and expertise to gain mutual benefits. This makes option D, cooperative agreement, the best choice. Option A, low cost strategy, refers to a business strategy that focuses on reducing costs to increase profitability, which is not related to strategic alliances. Option B, franchising agreement, refers to a business model where one company allows another company to use its brand name, products, and services in exchange for a fee or royalty. Option C, competitive agreement, is not a common term used in business and is not related to strategic alliances.

Question 11

When multinationals make a project fully operational and train local managers and workers before the owner takes control,they are using which entry-mode strategy?
A)Licensing
B)Franchising
C)Turnkey
D)Direct export

Accepted Answer

The strategy described in the question is turnkey, where the multinational company sets up a project and makes it fully operational before transferring it to the owner. This strategy is commonly used in industries such as construction and infrastructure, where the local owner may not have the expertise to build and operate the project. Licensing involves giving permission to a foreign company to use intellectual property, while franchising involves granting the right to use a business model and brand name. Direct export involves selling goods directly to a foreign market without any intermediaries.  Therefore, turnkey is the best choice for this scenario.

Question 12

To deal with political risk,various private and government agencies offer
A)Insurance.
B)Assurance.
C)Investment.
D)All of the above are true.

Accepted Answer

Private and government agencies offer political risk insurance to businesses operating in unstable or high-risk environments. This type of insurance can protect against losses related to political violence, expropriation, and currency inconvertibility, among other risks. Other forms of assurance or investment may not adequately protect against political risk.

Question 13

Which of the following strategies gives top priority to seeking location advantages and to gaining operation efficiencies from worldwide operation?
A)Multidomestic strategy
B)Regional strategy
C)Transnational strategy
D)International strategy

Accepted Answer

The transnational strategy involves seeking location advantages and gaining operation efficiencies from worldwide operations. This strategy focuses on integrating global operations and adapting to local markets, and it is suitable for companies that have a decentralized structure and a high level of differentiation in their products and services. The other strategies, such as multidomestic, regional, and international, may not prioritize global operations and location advantages in the same way as the transnational strategy.

Question 14

Foreign direct investment
A)Exists when two or more firms have an ownership position in a separate company.
B)Requires at least three separate companies to combine resources.
C)Exists when two or more companies agree to cooperate in any value-chain activity.
D)The above statements are all true for equity international joint ventures.

Accepted Answer

Foreign direct investment occurs when a company or individual from one country invests in a company in another country and acquires an ownership position. This can be done through the purchase of existing shares or the creation of a new subsidiary. Therefore, choice A is the correct option. Option B is incorrect, as it implies a merger rather than foreign direct investment. Option C is incorrect, as it refers to cooperation rather than ownership. Option D is partially correct, as it refers to equity international joint ventures, but not all joint ventures necessarily involve equity.

Question 15

When deciding on an entry-mode strategy,cultural distance is
A)The physical distance between two countries.
B)Not the distance between an organization's culture and the local national culture.
C)Similar to the geographic distance.
D)None of the above

Accepted Answer

Cultural distance refers to the difference in cultural values, practices, and norms between two entities, such as countries or organizations. It is not merely about physical or geographic distance, nor is it solely about the difference between an organization's culture and the local national culture.

Question 16

Foreign direct investment
A)Is an entry-mode strategy.
B)Means that a multinational owns, in part or in whole, an operation in another country.
C)Symbolizes the highest rate of internationalization.
D)All of the above

Accepted Answer

Foreign direct investment (FDI) is an entry-mode strategy in which a multinational owns, in part or in whole, an operation in another country. It symbolizes the highest rate of internationalization as the multinational has a significant level of control over the foreign operation. Therefore, all of the above options are correct.

Question 17

If management believes that it must control foreign sales,customer credit,and the eventual sale of the product,then the company should choose which of the following entry-mode strategies?
A)Indirect exporting
B)Licensing
C)Direct exporting
D)Franchising

Accepted Answer

Direct exporting allows the company to have complete control over the foreign sales, customer credit, and the eventual sale of the product. Through this mode, the company can create direct relationships with foreign customers and manage the entire export process itself. This ensures that the company retains control over important aspects of the export process and can customize its approach as per its specific needs.

Question 18

Which of the following is NOT a factor considered when assessing political risk?
A)The durability of the political system
B)The role of the government, unions and the media in political stability
C)The profitability
D)The reliability of the rule of law

Accepted Answer

Political risk assessment focuses on factors that affect the stability of a country's political system and economy. This includes the durability of the political system, the role of the government, unions, and media in political stability, and the reliability of the rule of law. Profitability is a factor that is relevant to business decisions but is not considered when assessing political risk.

Question 19

When a firm from another country has an equity (or ownership)position in a separate company,it is engaging in
A)An international cooperative alliance.
B)A turnkey operation.
C)A contract manufacturer.
D)FDI.

Accepted Answer

FDI, or foreign direct investment, is the process by which a firm from one country invests in and acquires an ownership position in a separate company in another country. This differs from international cooperative alliances, turnkey operations, and contract manufacturing, which do not involve the same level of equity ownership.

Question 20

If a company believes that it needs to control foreign sales,customer credit,and sale of product to the customer,it is more likely to choose
A)Indirect exporting.
B)Rely on foreign intermediaries for export purposes.
C)Direct exporting.
D)None of the above

Accepted Answer

Direct exporting allows a company to have full control over foreign sales, customer credit, and the sale of the product to the customer. In direct exporting, the company is responsible for all aspects of exporting and directly deals with foreign customers. This enables the company to have greater control and flexibility in managing the export process. Indirect exporting and relying on foreign intermediaries may result in less control over these important areas.

Quiz 6: Multinational and Entry-Mode Strategies: Content and Formulation

What dictates the choice of a multinational entry-mode strategy?

A company pursuing a regional strategy

If strategists in a firm believe that centralizing key activities such as R&D is necessary to reduce coordination costs and to achieve economies of scale,they are more likely to choose

As entry-mode strategies,direct and indirect exporting have

Which of the following refers to the negative impact of political decisions or events on a multinational's profitability?

Which of the following statements regarding exporting is FALSE?

Major drawbacks of licensing include

Advantages of foreign direct investment include

Companies should license if

If a company seeks a strategic alliance with another firm,it is a

When multinationals make a project fully operational and train local managers and workers before the owner takes control,they are using which entry-mode strategy?

To deal with political risk,various private and government agencies offer

Which of the following strategies gives top priority to seeking location advantages and to gaining operation efficiencies from worldwide operation?

Foreign direct investment

When deciding on an entry-mode strategy,cultural distance is

Foreign direct investment

If management believes that it must control foreign sales,customer credit,and the eventual sale of the product,then the company should choose which of the following entry-mode strategies?

Which of the following is NOT a factor considered when assessing political risk?

When a firm from another country has an equity (or ownership) position in a separate company,it is engaging in

If a company believes that it needs to control foreign sales,customer credit,and sale of product to the customer,it is more likely to choose