Question 1

Jimpeg, a manufacturer of imaging and optical products based in the U.S., operates under the name of Pixpem and SetJpeg in six different countries. The company operates using different names, but it sells the same products in every country. The revenue generated in the different countries goes back to the parent company. Which of the following methods for conducting global business has Jimpeg used in this scenario?

Accepted Answer

Jimpeg has established wholly owned affiliates in different countries, as it operates under different names but sells the same products and the revenue generated goes back to the parent company. A joint venture involves forming a new separate entity with a partner in a foreign country, while a strategic alliance is a partnership where two companies share resources and expertise, but do not form a separate entity. A cooperative contract involves sharing costs and risks with foreign partners to develop new products or enter new markets.

Question 2

Petnro, a bike manufacturing firm based in the U.S., operates bike manufacturing plants in China, Japan, Taiwan, and Singapore under the name of BikMe. The parent company receives all the profits made by these facilities, and it has complete control over all the different segments of the plants. Which of the following methods for conducting global business has Petnro used in this scenario?

Accepted Answer

Petnro, as the parent company, has complete control over all segments of the manufacturing plants in different countries, and receives all the profits made by these facilities. This is indicative of the formation of wholly owned affiliates, where the parent company has complete ownership and control over its operations in foreign countries. A joint venture would involve shared ownership and control with a local partner, while a strategic alliance would involve collaboration between two or more companies on a specific project or area of expertise. A cooperative contract involves less ownership and control by the parent company than wholly owned subsidiaries, and typically involves a short-term partnership focused on a specific project or set of activities.

Question 3

Cad Cream Inc., an ice cream company, has collaborated with Bite Snack Inc., a food manufacturing company, to come up with a third company, Cream Bite Inc. This new company manufactures energy bars with a variety of flavors. In this context, Cream Bite Inc. is a _____.

Accepted Answer

Cream Bite Inc. is a joint venture, which is a type of business partnership where two or more companies collaborate to create and operate a separate entity.

Question 4

One of the advantages of _____ is that the founding companies bear only part of the costs and the risks of that business.

Accepted Answer

In a joint venture, multiple companies come together to form a new business entity and share the costs and risks associated with the venture. This means that the founding companies do not bear the full burden of the costs and risks, making it an advantageous option for international expansion. Business acquisition involves purchasing an existing company, which can be expensive and risky. Direct foreign investment involves the company fully owning and operating a subsidiary in a foreign country, which can also be expensive and risky. Direct exporting involves the company selling its products directly to customers in a foreign country, which does not involve sharing costs and risks with other companies but may involve high transportation costs and other expenses.

Question 5

Which of the following is an advantage of joint ventures?

Accepted Answer

Joint ventures help companies avoid tariff and nontariff barriers to entry by partnering with local firms, which can facilitate easier access to foreign markets and compliance with local regulations.

Question 6

_____ are foreign offices, facilities, and manufacturing plants that are 100 percent possessed by the parent company.

Accepted Answer

Wholly owned affiliates refer to foreign offices, facilities, and manufacturing plants that are completely owned by the parent company. Joint ventures are owned by two or more companies, strategic alliances are partnerships for a specific purpose or project, and business acquisitions involve purchasing another company's assets or shares.

Question 7

Unlike joint ventures, wholly owned affiliates are:

Accepted Answer

Wholly owned affiliates are entities that are fully owned and controlled by their parent company. This means that the parent company has full control over the operations of the affiliate and can make decisions without the need for consensus or agreement with another company. This can be advantageous because it allows for greater control over the quality of products and services, as well as the ability to fully capture profits. However, the parent company also takes on all the liability for any losses incurred by the affiliate.

Question 8

Ingente Corp. and Ventruni Corp. will be combining their resources to build the largest railway system in the world. Both companies will equally share costs and profits from this venture. This form of global business is an example of a _____.

Accepted Answer

The combination of resources and shared costs/profits indicates that this is a strategic alliance, which is a partnership between two or more companies to combine their resources and achieve a common goal. Wholly owned affiliates involve one company fully acquiring another, while conglomerates involve a company operating in multiple unrelated industries. Franchises involve a company granting the right to another party to use their brand and business model in exchange for royalties or fees.

Question 9

Which of the following trends has allowed companies to skip the phase model of globalization when going global?

Accepted Answer

Low-cost communication technologies have enabled companies to reach and communicate with global customers more easily, allowing them to bypass traditional, sequential phase models of globalization.

Question 10

Primo Call Inc., a cell phone manufacturing company, has collaborated with Tech Friend Inc., a computer manufacturing company, to start a third company under the name of Primo Tech Inc. This new company will manufacture mobile devices such as tablets, smart watches, and handheld video game consoles. In this context, Primo Tech Inc. is a _____.

Accepted Answer

Primo Tech Inc. is a joint venture because it is a new company formed by the collaboration of two separate companies, namely Primo Call Inc. and Tech Friend Inc.

Question 11

A _____ is an agreement in which companies combine key resources, costs, risks, technology, and people.

Accepted Answer

A strategic alliance is a partnership between companies where they combine resources, costs, risks, technology, and people for a common objective. It is less binding than a merger or acquisition and allows companies to share knowledge and resources while maintaining their independence. Business acquisition refers to one company buying another. Merger refers to two companies joining together and forming a new entity. Divestiture is the opposite of an acquisition, where a company sells or spins off a part of their business.

Question 12

Riytiz Corp. and Tenkriz Corp. are two industrial developers. They plan to combine their funds, finances, risks, and expertise to build the Opobip Bridge. This bridge is said to connect two states that are not connected by a highway. In this scenario, the venture between Riytiz Corp. and Tenkriz Corp. would be called a _____.

Accepted Answer

A strategic alliance is a business relationship between two or more companies to achieve a shared goal, such as building the Opobip Bridge. The companies involved remain separate legal entities but work together to pool resources and expertise. This is the most appropriate option for the scenario described. A wholly owned affiliate would involve one company owning another, which is not the case here. A conglomerate is a group of companies with diverse business interests, which does not apply to this situation. Franchising involves a business owner licensing their operation to another party, which is also not relevant here.

Question 13

For initial fee plus royalties, Inding Inc., a U.S.-based firm, will provide Caliste Works, a firm based in Singapore, with an exclusive right to conduct Inding's business in its country. This form of global business is an example of a _____.

Accepted Answer

This scenario describes a franchise agreement where one company (Inding Inc.) grants another company (Caliste Works) the exclusive right to use its business model and trademarks in a specific geographic area (Singapore) for an initial fee and ongoing royalties. Wholly owned affiliates involve a company setting up and operating its own subsidiary in a foreign market, while conglomerates involve unrelated businesses under one corporate umbrella. Joint ventures involve two or more companies sharing ownership and control of a new venture.

Question 14

Leodan, a glass manufacturing firm based in the U.S., has sole control over several glass manufacturing facilities located all over the world. The company assumes the entire risk if any of the facilities undergoes losses, and it enjoys all the profits if the facilities do well. Which of the following methods has Leodan used to conduct business globally in this scenario?

Accepted Answer

Leodan has used the method of forming wholly owned affiliates to conduct business globally. Wholly owned affiliates are subsidiaries in which a firm owns 100% of the stock, and as per the scenario, Leodan has sole control over multiple glass manufacturing facilities located all over the world. Hence, Leodan assumes the entire risk and enjoys all the profits, making it a wholly owned subsidiary.

Question 15

Opep Corp. received a new building project that had very short turnover and very high resource cost. The company decided to ask Imog Corp., another builder, to aid them in this project, and the two companies together formed a third company by combining their resources. This third company was formed for the duration of the project and received equal credit after completion. In this scenario, Opep Corp. and Imog Corp. are forming a _____.

Accepted Answer

A joint venture is a partnership between two or more companies that combines their resources and expertise to achieve a specific goal or complete a specific project. In this scenario, Opep Corp. and Imog Corp. are forming a joint venture to undertake the new building project. The third company they form will likely be dissolved once the project is complete, and each parent company will receive equal credit for their contribution to the project.

Question 16

Rinsen Corp., a U.S.-based firm, is allowing Blink Traders, a firm based in Ireland, to conduct Rinsen's business in its country. Rinsen Corp. is going to provide training, equipment, and advertising assistance to Blink Traders for initial fee plus royalties. This form of global business is an example of a _____.

Accepted Answer

The scenario describes a franchising business model, where Rinsen Corp allows a foreign-based firm, Blink Traders, to conduct their business in another country using their brand and providing training and support for a fee and royalties.

Question 17

Unlike a licensing arrangement, the parent company of a wholly owned business:

Accepted Answer

Unlike in a licensing arrangement, where the parent company grants a license to a foreign company to produce and sell its products or services, in a wholly owned business, the parent company has complete control over the foreign facilities. This allows the parent company to maintain the quality of its products or services and control the operations of the foreign business. The parent company would also receive all of the profits rather than just a percentage.

Question 18

Which of the following is a disadvantage of wholly owned affiliates?

Accepted Answer

Wholly owned affiliates require significant investment to establish new operations, making them expensive to build.

Question 19

The most common _____ is a joint venture, which occurs when two existing companies collaborate to form a third company.

Accepted Answer

The statement mentions that two existing companies collaborate to form a third company. This is a typical characteristic of a strategic alliance, which is a type of partnership where two or more companies enter into a mutually beneficial agreement to achieve a common goal. A joint venture is a specific type of strategic alliance where a new company is created as a result of the partnership. The other options mentioned (business acquisition, licensing agreement, franchising agreement) involve different types of transactions between companies and do not necessarily result in the creation of a new entity.

Question 20

Upstart Corp. was formed when Bencanc Corp. and Torperd Corp. pooled their resources to work on a construction project for the government. The project had a short turnaround time along with intensive requirements that could not be fulfilled by one company alone. In this context, Upstart Corp. is a _____.

Accepted Answer

Upstart Corp. was formed when two companies pooled their resources for a specific project, indicating that this is a joint venture. A global new venture involves a new business that operates globally from its inception, while a multinational franchise involves a company that grants the right to use its brand and business model to other entities in different countries. A wholly owned affiliate would mean one company had complete ownership of another company, which is not the case in this scenario.

Quiz 8: Global Management