Question 1

During his presentation, Manu describes how a large U.S. retailer entered the Mexican market by purchasing the stores and assets of a Mexican retailer. Which of the following topics was most likely assigned to Group B?
A)merger
B)turnkey operation
C)acquisition
D)collaborative venture

Accepted Answer

The topic most likely assigned to Group B is "acquisition" because the U.S. retailer purchased the stores and assets of the Mexican retailer, which is a clear example of an acquisition.

Question 2

Vertical integration is an arrangement in which the firm owns, or seeks to own, the activities performed in a single stage of its value chain.

Accepted Answer

Vertical integration involves a firm owning or controlling multiple stages of its value chain, not just a single stage.

Question 3

Explain why MNEs prefer acquisition instead of greenfield FDI. Why do foreign governments encourage greenfield FDI?

Accepted Answer

The answer of Explain why MNEs prefer acquisition instead of...

Question 4

One of the key advantages to an equity joint venture is that the management structure is very simple which allows for easy adjustments and modifications.

Accepted Answer

One of the disadvantages of an equity joint venture is that the management structure can be complex and may require extensive negotiation and agreement between partners.

Question 5

During his presentation, Mario describes how a large Japanese automaker built a factory in Kentucky. Which of the following topics was most likely assigned to Group C?
A)horizontal integration
B)equity joint venture
C)greenfield investment
D)consortium

Accepted Answer

Group C likely discussed greenfield investment, which involves building a new facility in a foreign country rather than acquiring an existing one. The example given by Mario of the Japanese automaker building a new factory in Kentucky fits this description. The other answer choices do not relate as directly to this topic.

Question 6

A firm that owns the activities performed in a single stage of its value chain is demonstrating ________.
A)centralization
B)decentralization
C)horizontal integration
D)reverse integration

Accepted Answer

Horizontal integration occurs when a firm owns multiple entities at the same stage of the production process, thereby consolidating activities within the same level of its value chain. This strategy can lead to increased market power and efficiencies.

Question 7

A consortium is defined as ________.
A)the purchase of an existing company or facility
B)two partners forming a new legal entity
C)an equity venture to consolidate the value chain
D)multiple partners participating on a large-scale project

Accepted Answer

A consortium is a group of multiple partners or entities that come together to participate in a large project or initiative. It is often formed to consolidate resources, expertise, and funding to achieve a common goal. Therefore, option D, "multiple partners participating on a large-scale project," is the best choice. Options A, B, and C do not accurately define a consortium.

Question 8

A greenfield investment is a direct investment to purchase an existing company or facility.

Accepted Answer

A greenfield investment refers to building a new facility or starting a new operation from scratch, rather than purchasing an existing one.

Question 9

Which of the following is a key reason that a focal firm would most likely enter a collaborative venture with a foreign firm?
A)the foreign firm can fill an important gap in the focal firm's value chain
B)the foreign firm requires the focal firm's financial resources to compete locally as well
C)the focal firm wants to duplicate a competitor's marketing strategies abroad
D)the market abroad is saturated; there is no scope for the focal firm's products or services

Accepted Answer

Collaboration with a foreign firm is most likely to be pursued if the foreign firm can help the focal firm fill an important gap in its value chain, such as providing access to new markets, technology, or skills that are not available in-house. The other options (B, C, D) are unlikely to be key reasons for pursuing a collaborative venture with a foreign firm.

Question 10

A merger is a special type of acquisition.

Accepted Answer

A merger is a type of acquisition where two companies combine to form a new entity. In an acquisition, one company buys another company, but they may continue to operate as separate entities.

Question 11

A new legal entity is created during the formation of a project-based, nonequity venture.

Accepted Answer

In a project-based, nonequity venture, the parties collaborate on a specific project without forming a new legal entity; instead, they maintain their separate legal statuses.

Question 12

Home Depot made a greenfield investment when it entered the Mexican market by purchasing Home Mart, a domestic store chain.

Accepted Answer

A greenfield investment involves building new facilities from the ground up, whereas purchasing an existing company, like Home Mart, is considered a brownfield investment or acquisition.

Question 13

Which of the following is a disadvantage of equity joint ventures?
A)termination difficulties
B)lesser control over future directions
C)imbalanced relationship
D)vague contractual partnership

Accepted Answer

Equity joint ventures can have termination difficulties if the parties involved have differing opinions on the future direction of the venture. This can lead to disagreements and difficulties in terminating the joint venture agreement.

Question 14

A firm that develops the capacity to sell its products by investing in marketing and selling operations is ________.
A)acquiring downstream value-chain facilities
B)acquiring upstream value-chain facilities
C)engaging in centralization
D)engaging in decentralization

Accepted Answer

Investing in marketing and selling operations to sell products is an example of acquiring downstream value-chain facilities, as it involves activities that bring the product closer to the end consumer.

Question 15

During her presentation, Jessica describes how two automakers joined forces and formed a separate firm by pooling their assets. Which of the following topics was most likely assigned to Group A?
A)equity joint venture
B)acquisition
C)greenfield investment
D)vertical integration

Accepted Answer

Group A was most likely assigned the topic of equity joint venture, as this involves two companies pooling their assets to form a separate entity. The other options – acquisition, greenfield investment, and vertical integration – do not describe this specific type of partnership.

Question 16

Host-country governments often pressure MNEs to undertake acquisition over greenfield investments.

Accepted Answer

Host-country governments usually prefer greenfield investments over acquisitions because greenfield projects often bring more economic benefits such as new employment opportunities and technology transfer, whereas acquisitions may not create new jobs and can sometimes lead to monopolistic market structures.

Question 17

Which of the following is a characteristic of an equity joint venture?
A)simple management structure
B)facilitates knowledge transfer between partners
C)easy to terminate
D)lesser exposure to political risk

Accepted Answer

One of the main advantages of an equity joint venture is that it facilitates knowledge transfer between partners, which is not found in the other options. Equity joint ventures tend to have a more complex management structure, are often difficult to terminate, and still carry some level of political risk.

Question 18

A(n)________ is a project-based, usually nonequity venture initiated by multiple partners to fulfill a large-scale project.
A)greenfield investment
B)acquisition
C)merger
D)consortium

Accepted Answer

A consortium is a joint venture where multiple partners collaborate on a large-scale project, typically without merging their companies or sharing equity. Greenfield investments involve building new operations from scratch, acquisitions involve purchasing another company, and mergers involve combining two companies into one. None of these options accurately describe a consortium.

Question 19

Explain the difference between vertical FDI and horizontal FDI. Provide an example that illustrates the difference between vertical and horizontal integration

Accepted Answer

The answer of Explain the difference between vertical FDI and...

Question 20

Which of the following is a characteristic of project-based, non-equity ventures?
A)a broad scope of product development
B)a specific agenda and timeframe
C)long-term sharing of resources
D)formation of a new legal entity

Accepted Answer

Project-based, non-equity ventures typically have a specific agenda and timeframe, which is one of their defining characteristics. The other options are not necessarily characteristic of this type of venture.

Quiz 14: Foreign Direct Investment and Collaborative Ventures

During his presentation, Manu describes how a large U.S. retailer entered the Mexican market by purchasing the stores and assets of a Mexican retailer. Which of the following topics was most likely assigned to Group B?

Vertical integration is an arrangement in which the firm owns, or seeks to own, the activities performed in a single stage of its value chain.

Explain why MNEs prefer acquisition instead of greenfield FDI. Why do foreign governments encourage greenfield FDI?

One of the key advantages to an equity joint venture is that the management structure is very simple which allows for easy adjustments and modifications.

During his presentation, Mario describes how a large Japanese automaker built a factory in Kentucky. Which of the following topics was most likely assigned to Group C?

A firm that owns the activities performed in a single stage of its value chain is demonstrating ________.

A consortium is defined as ________.

A greenfield investment is a direct investment to purchase an existing company or facility.

Which of the following is a key reason that a focal firm would most likely enter a collaborative venture with a foreign firm?

A merger is a special type of acquisition.

A new legal entity is created during the formation of a project-based, nonequity venture.

Home Depot made a greenfield investment when it entered the Mexican market by purchasing Home Mart, a domestic store chain.

Which of the following is a disadvantage of equity joint ventures?

A firm that develops the capacity to sell its products by investing in marketing and selling operations is ________.

During her presentation, Jessica describes how two automakers joined forces and formed a separate firm by pooling their assets. Which of the following topics was most likely assigned to Group A?

Host-country governments often pressure MNEs to undertake acquisition over greenfield investments.

Which of the following is a characteristic of an equity joint venture?

A(n) ________ is a project-based, usually nonequity venture initiated by multiple partners to fulfill a large-scale project.

Explain the difference between vertical FDI and horizontal FDI. Provide an example that illustrates the difference between vertical and horizontal integration

Which of the following is a characteristic of project-based, non-equity ventures?