Question 1

Lower costs in the form of cheaper labor or raw materials, foreign government investment incentives, freight savings, and the opportunity to improve the company image are the factors that would most likely lead a company to enter a foreign market using the market entry strategy of ________.

Accepted Answer

Direct investment involves establishing a subsidiary or affiliate in a foreign country, which allows a company to have complete control over its operations, including sourcing raw materials and hiring local labor. This strategy can help a company take advantage of lower costs and government incentives, as well as improve its image by showing a commitment to the local market. Direct exporting (A) and indirect exporting (D) do not involve establishing a physical presence in the foreign market, and therefore may not provide the same cost-saving and image-building benefits. Licensing (B) and management contracting (C) involve granting another company the rights to use intellectual property or manage operations in a foreign market, but may not provide the same level of control or cost savings as direct investment.

Question 2

Which of the following is true of contract manufacturing?

Accepted Answer

Contract manufacturing involves outsourcing the manufacturing process to a third-party, which means the company has decreased control over the process. The other options are not necessarily true of contract manufacturing.

Question 3

When entering a foreign market, companies typically start with ________, working through independent intermediaries to sell products produced in the home country.

Accepted Answer

When entering a foreign market, companies typically start with indirect exporting, which involves working through independent intermediaries to sell products produced in the home country. This allows companies to test the waters in a new market without committing significant resources to establishing a physical presence or adapting products to local preferences. Direct exporting, product adaptation, and licensing are all more involved and would typically come later in the process of expanding into a new market. An embargo is a government-imposed restriction on trade with a particular country or region and is not a strategy that companies would use to enter a new market.

Question 4

Which of the following characterizes indirect exporting?

Accepted Answer

Indirect exporting involves selling goods or services to a buyer in the home country who then exports the product to another country. This method involves lower risk and investment compared to other entry methods like joint venturing or direct investment in the foreign market. It does not require an overseas marketing organization or network, and the potential returns may not be greater than direct exporting.

Question 5

Sears opened up department stores in Mexico and Spain, where it found qualified local manufacturers to produce many of the products it sells. This type of joint venture is known as ________.

Accepted Answer

The joint venture described in the scenario, where Sears found local manufacturers to produce its products, is an example of contract manufacturing. Contract manufacturing is a type of joint venture where a company enters into an agreement with a local manufacturer to produce its products. Option A (joint ownership) refers to a joint venture where two or more companies own and operate a business together, option B (licensing) refers to a type of agreement where a company allows another company to use its intellectual property in exchange for royalties, option C (management contracting) refers to a type of arrangement where a company contracts with another company to manage its operations, and option D (indirect exporting) refers to a type of exporting where a company sells its products to an intermediary, who then exports them to another country.

Question 6

Which of the following is NOT a type of joint venturing?

Accepted Answer

Direct export is not a type of joint venturing. The other options - joint ownership, management contracting, licensing, and contract manufacturing - all involve partnerships and cooperation between two or more companies. Direct export refers to a situation where a company sells its products directly to customers in another country, without any involvement or cooperation with local partners.

Question 7

In the case of ________ exporting, sellers handle their own exports.

Accepted Answer

In direct exporting, the seller is responsible for handling their own exports, including distribution, warehousing, shipping, receiving payment, and handling legal issues. This differs from indirect exporting, where the seller uses intermediaries such as trading companies or agents to handle the exporting process, or licensed exporting, where the seller licenses the right to use their product to a foreign company. Countervailing and multilateral are not types of exporting.

Question 8

Think Ink is a growing company that sells a variety of inks for home and business printers. Management at Think Ink has decided to open a sales branch overseas to handle sales and distribution abroad. Think Ink is engaging in ________.

Accepted Answer

Direct exporting refers to a company selling its products directly to customers in another country. Since Think Ink is setting up a sales branch to handle sales and distribution abroad, it is engaging in direct exporting. Indirect exporting would involve using intermediaries like agents or distributors to sell products in foreign markets. Licensing, joint ownership, and management contracting involve partnering with other companies or individuals to operate in foreign markets, which is not the case here.

Question 9

________ ventures consist of one company joining forces with foreign investors to create a local business in which they share ownership and control.

Accepted Answer

Joint ownership ventures involve two or more companies creating a local business in which they share ownership and control. This allows for both companies to contribute resources and knowledge to the new venture and benefit from the opportunities available in the foreign market. The other options listed involve different types of international business arrangements, but do not involve the same level of shared ownership and control as joint ownership ventures.

Question 10

An advantage of licensing to a company is that it ________, while the licensee gains production expertise or a well-known product without having to start from scratch.

Accepted Answer

Licensing allows a company to gain entry into a foreign market with relatively little risk or investment. The licensee also gains production expertise or a well-known product without having to start from scratch. Option A is incorrect because licensors do maintain a level of control over product quality through licensing agreements. Option B is incorrect because sending employees to work with the licensee is not a requirement for licensing. Option C is incorrect because creating a competitor is a risk with any type of business arrangement, not just licensing. Option E is also incorrect because licensing typically requires less financial investment than other market entry strategies.

Question 11

Hilton helps others run their hotels by providing the management know-how. This type of joint venture is known as ________.

Accepted Answer

Hilton's involvement in helping others run their hotels by providing management knowledge is known as management contracting. In this type of joint venture, a company such as Hilton provides management services to another company that operates the physical assets, and in this case, the hotels. Contract manufacturing refers to businesses that outsource their manufacturing processes, licensing involves allowing another company to use your intellectual property, joint ownership involves two or more entities sharing ownership of a business, and direct investment refers to a company investing in a foreign business and maintaining full control over its operations.

Question 12

Members of management at Growing Green, a company that markets organic and environmentally friendly gardening and landscaping supplies and equipment, are evaluating the benefits and disadvantages of indirect exporting, direct exporting, and licensing. In which stage of the international marketing process is Growing Green?

Accepted Answer

Growing Green is in the stage of deciding how to enter the market, as they are considering the different methods of exporting and licensing. The other options presented in the question refer to later stages in the international marketing process, such as deciding on the global advertising strategy or marketing program, or the global marketing organization, which come after the decision of how to enter the market has been made.

Question 13

Working with foreign companies to produce or market products or services is known as ________.

Accepted Answer

Joint venturing involves working with foreign companies to produce or market products or services together. Direct export refers to selling directly to customers in foreign markets, global distribution involves distributing products or services on a global level, direct investment involves setting up a foreign-based operation, and indirect export involves using intermediaries to sell products in foreign markets.

Question 14

________ involves entering a foreign market by developing foreign-based assembly or manufacturing facilities.

Accepted Answer

Direct investment involves establishing and operating foreign-based facilities, such as assembly or manufacturing plants, to produce goods locally. This allows a company to have greater control over its operations and potentially reduce costs by sourcing materials and labor locally.

Question 15

Through ________, an organization in the foreign market buys the right to use a company's manufacturing process, trademark, patent, trade secret, or other item of value.

Accepted Answer

Licensing occurs when an organization in a foreign market buys the right to use a company's manufacturing process, trademark, patent, trade secret, or other item of value. Indirect exporting involves intermediaries selling a company's products in a foreign market. Contract manufacturing is when a company hires a foreign firm to manufacture their products. Management contracting is when a company provides management services to a foreign firm. Joint ownership is when two or more entities share ownership of a business venture.

Question 16

Potential advantages of contract manufacturing include all of the following EXCEPT ________.

Accepted Answer

Contract manufacturing involves outsourcing the manufacturing process to a third-party manufacturer, which reduces plant investment, enables a faster start with less risk, and can help decrease tariff costs and meet local manufacturing regulations. It may also provide an opportunity to form a partnership with the local manufacturer. However, one disadvantage of contract manufacturing is the loss of potential profits from the manufacturing process, which is not listed as an advantage. Therefore, the correct answer is E.

Question 17

Which of the following is a type of joint venturing?

Accepted Answer

Licensing is a type of joint venturing where a company provides the right to use its intellectual property (such as patents, trademarks, or technology) to another company in exchange for royalties or other forms of compensation. This allows the licensee to produce and sell products using the licensor's intellectual property without incurring the high costs of developing it themselves.

Question 18

In Japan, Budweiser beer flows from Kirin breweries, and Moringa Milk Company produces Sunkist fruit juice. These are examples of ________.

Accepted Answer

These are examples of licensing, where a company grants another company the right to use its trademark, brand name, or technology in exchange for fees. Kirin breweries is licensed to produce Budweiser beer in Japan, and Moringa Milk Company is licensed to produce Sunkist fruit juice.

Question 19

The simplest way to enter a foreign market is through ________.

Accepted Answer

Exporting is the simplest way to enter a foreign market as it involves the least amount of investment and risk compared to other options. It involves selling products or services to customers in another country from the home country. This allows the company to test the waters and evaluate the market demand before deciding on more significant investments such as joint ventures or direct investment.

Question 20

Campbell Soup recently joined forces with Hong Kong-based Swire Pacific to form an entity called Campbell Swire to better distribute the company's soups in China. This is an example of ________.

Accepted Answer

Campbell Soup formed a joint ownership entity with Swire Pacific to distribute its products in China.

Quiz 19: The Global Marketplace