Q&A Hero

Q: An advantage of establishing a greenfield venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

Q: According to David Ravenscraft and Mike Scherer's study, many acquisitions destroy rather than create value.

Q: When an international firm makes an acquisition in a foreign market, it acquires valuable intangible as well as tangible assets.

Q: Acquiring firms often overpay for the assets of the acquired firms.

Q: Firms pursuing global standardization or transnational strategies tend to prefer setting up wholly owned marketing subsidiaries.

Q: An international firm that perceives its technological advantage to be transitory and susceptive to rapid imitation might want to license its technology to foreign firms.

Q: Licensing increases the risk of losing control over a firm's proprietary technological know-how.

Q: If an international firm's core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology to the joint-venture partner.

Q: Shared ownership agreements can lead to conflicts and battles for control between investing firms.

Q: Establishing a wholly owned subsidiary gives an international firm a 100 percent share in the profits generated in a foreign market.

Q: The need for preempting competitors is particularly great in the telecommunications market.

Q: When a firm's competitive advantage is based on technological competence, a joint venture is the preferred mode of entry into a foreign market because it reduces the risk of losing control over that competence.

Q: In terms of the entry modes into a foreign market, a joint venture does not give an international firm the tight control over subsidiaries that might be required to realize experience curve or location economies.

Q: In international business, joint ventures with local partners face a significantly higher risk of being subject to nationalization.

Q: In a joint venture, a firm benefits from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems.

Q: The most typical joint venture is a 50/50 venture, in which there are two parties, each of which holds a 50 percent ownership stake and contributes a team of managers to share operating control.

Q: Franchising, a mode of entry into a foreign market, helps firms exert greater quality control over franchises in foreign locations.

Q: In terms of the various modes of entry into a foreign market, franchising is employed primarily by service firms, whereas licensing is pursued primarily by manufacturing firms.

Q: Under a cross-licensing agreement, a firm can either request a royalty payment or license some valuable intangible property to a foreign partner.

Q: In a typical international licensing deal, a licensor puts up most of the capital necessary to get an overseas operation going.

Q: Licensing, a mode of entry into a foreign market, gives an international firm tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies.

Q: An international firm that enters into a turnkey deal has a long-term interest in the foreign country.

Q: A drawback of exporting is that tariff barriers can make it uneconomical as a mode of entry into a foreign market.

Q: Exporting, as a mode of entry into foreign markets, does not help a firm achieve experience curve and location economies.

Q: According to Christopher Bartlett and Sumantra Ghoshal, firms from developing countries cannot succeed in foreign markets in the presence of other established global competitors.

Q: A risk-averse international firm that enters a foreign market on a small scale will increase its potential losses.

Q: Large-scale entry allows an international firm to learn about a foreign market while limiting the firm's exposure to that market.

Q: In international business, an early entrant to a foreign market may be at a disadvantage relative to a later entrant, if regulations change in a way that diminishes the value of an early entrant's investments.

Q: In international business, a strategic commitment has a short-term impact and is easily reversible.

Q: The probability of survival decreases if an international business enters a national market after several other foreign firms have already done so.

Q: By considering advantages and disadvantages, trade-offs can often be avoided when selecting an entry mode.

Q: If an international business can offer a product that has been widely available in that market, the value of that product to consumers is likely to be much greater than if the international business offers a product that has not been widely available in that market.

Q: Small-scale entrants are more likely to capture first-mover advantages associated with switching costs.

Q: The attractiveness of a country as a potential market for an international business depends solely on the size of its consumer market.

Q: A firm contemplating expansion should choose a foreign market based on an assessment of the nation's long-run profit potential.

Q: How should a firm choose between a greenfield venture and an acquisition?

Q: Describe the pros and cons of greenfield ventures.

Q: Describe the advantages and disadvantages of acquisitions.

Q: Describe the advantages of turnkey projects as a mode of entry into a foreign market.

Q: What is a wholly owned subsidiary?List its advantages.

Q: Which types of firms do NOT risk the loss of management control? What entry modes should such firms employ?

Q: Describe the disadvantages of licensing as a mode of entry into the foreign market.

Q: What are some of the ways in which a firm can reduce the risk of losing its proprietary know-how to foreign companies through licensing agreements?

Q: Describe how pressures for cost reductions affect the choice of entry mode.

Q: What are the advantages and disadvantages of exporting as a mode of entry into foreign markets?

Q: Describe the entry modes that a firm with core competency in technological know-how can choose.

Q: What are the consequences of an international firm entering a foreign market on a significant scale?

Q: In terms of international business, briefly describe pioneering costs.

Q: What are first-mover advantages?

Q: Briefly describe the value that an international business can create in a foreign market.

Q: If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, what would be the preferable mode of entry? A.Greenfield venture B.Joint venture C.Licensing agreement D.Franchising deal E.Turnkey project

Q: If a firm is seeking to enter a market via a wholly owned subsidiary where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, a suitable mode of entry is a(n): A.acquisition. B.licensing deal. C.greenfield venture. D.turnkey project. E.exporting deal.

Q: Which of the following is a disadvantage of greenfield ventures? A.They have a higher potential for throwing up unpleasant surprises. B.It is much more difficult to build an organizational culture from scratch than to change the culture of an existing unit. C.Companies find it difficult to avoid falling into the trap of the hubris hypothesis. D.It is slower to establish than acquisitions. E.A firm does not have the freedom to build the kind of subsidiary that it wants.

Q: To reduce the risks of failure of an acquisition, managers must: A.pay more for the acquired unit to please its existing employees. B.encourage and facilitate management turnover. C.acquire a firm without wasting time on screening. D.move rapidly after an acquisition to put an integration plan in place. E.ensure that the work cultures are significantly different from each other.

Q: The risk of failure of an acquisition can be reduced by: A.undervaluing the assets of an acquired firm. B.ensuring that firms are acquired in the home country. C.replacing high-level managers of an acquired firm. D.a detailed auditing of operations, financial position, and management culture. E.investing only in a firm that is managing to break even.

Q: Spring, an American firm, recently acquired another company, Tazel Inc., in Indonesia. The high-level managers at Tazel quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because: A.managers overestimate their ability to create value from an acquisition. B.integration of operations between the two firms takes longer than forecasted. C.there is a clash between the cultures of the acquired and the acquiring firm. D.an acquiring firm overpays for the assets of an acquired firm. E.inadequate pre-acquisition screening has been done.

Q: Why do acquisitions fail sometimes? A.There is a clash between the cultures of the acquiring and acquired firm. B.Acquisitions take a long time to execute. C.Acquisitions are easily preempted by making greenfield investments. D.The revenue and profit stream generated by an acquisition's resources is usually unknown. E.Losses produced by intangible assets outweigh profits from acquired tangible assets.

Q: Which of the following is a reason why firms often overpay for the assets of an acquired firm? A.Studies supporting the rise of failed companies post acquisitions B.Evidence of high management turnover post acquisitions C.The success rate of acquisitions exceeding that of failures D.Interest of more than one party in acquiring a particular firm E.Inevitable clash between cultures of acquiring and acquired firms

Q: Which of the following postulates that top managers typically overestimate their ability to create value from an acquisition? A.Bandwagon effect B.Fisher effect C.Hubris hypothesis D.International Fisher effect E.Learning effect

Q: What are the disadvantages of strategic alliances?

Q: What are the advantages of strategic alliances?

Q: What are strategic alliances?

Q: How do firms respond to low cost pressures and low pressures for local responsiveness?

Q: Describe the localization strategy.

Q: Describe the global standardization strategy.

Q: What are the sources of pressures for local responsiveness?

Q: What are the different types of competitive pressures that firms competing in a global marketplace face? How can firms respond to such pressures?

Q: What are the sources of economies of scales?

Q: What is an experience curve? What is its strategic significance?

Q: What are core competencies? What are their advantages?

Q: What are the different ways in which a firm can benefit from global expansion?

Q: What constitutes an organizational structure?

Q: What are operations of a firm? How can operations be categorized?

Q: Discuss the significance of value creation. According to Michael Porter, what are the two primary strategies for creating value?

Q: Managing an alliance successfully requires building interpersonal relationships between the firms' managers, or what is sometimes referred to as: A.relational capital. B.interorganizational synergy. C.power equilibrium. D.symbiotics. E.intraorganizational coordination.

Q: One of the principal risks associated with a strategic alliance is that: A.it brings together the complementary skills of alliance partners. B.it makes it difficult for the partner firms to enter into a foreign market. C.a firm can give away more than it receives. D.it does not allow firms to share fixed costs. E.it almost always fails.

Q: Which of the following is a disadvantage of a strategic alliance? A.Entering into a strategic alliance makes it difficult for a firm to enter into a foreign market. B.As a result of strategic alliance, fixed costs of developing new products tend to increase. C.Strategic alliance gives competitors a low-cost route to new technology and markets. D.Firms that enter into a strategic alliance with a foreign firm tend to face higher trade barriers. E.Strategic alliance always leads to a loss to either of the firms involved.

Q: Which of the following allows two or more firms to share the fixed costs (and associated risks) of developing new products or processes? A.Franchising agreement B.Global web C.Free trade agreement D.Strategic alliance E.Dispersion linkage

Q: Which of the following refers to a cooperative agreement between potential or actual competitors? A.Tactical union B.Strategic alliance C.Political affiliation D.Economic association E.Nationalization

Q: Which of the following statements is true about an international strategy? A.International strategy typically involves taking products first produced for foreign markets and then customizing them for domestic markets. B.International strategy should be pursued by a firm if it manufactures a product that satisfies local, rather than universal, needs. C.When a firm pursues an international strategy, the head office of the firm retains fairly tight control over marketing and product strategy. D.Firms pursuing the international strategy tend to outsource their development functions such as R&D. E.International strategy should be pursued by a firm only if it faces strong competition in foreign markets.