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International Business
Q:
Which of the following is a course of action suggested by Christopher Bartlett and Sumantra Ghoshal for companies based in developing nations?
A.Build up financial resources to match those of the largest global competitors.
B.Enter foreign markets at a similar time and scale as multinational companies.
C.Enter markets rapidly and exit at an equally rapid pace to avoid heavy losses.
D.Benchmark one's operations and performance against foreign multinationals.
E.Do not focus on market niches that multinational companies ignore.
Q:
Which of the following is the most likely outcome of a foreign firm entering a developed nation on a small scale after other international businesses in the firm's industry?
A.Capturing first-mover advantages
B.Higher pioneering costs
C.Rapid increase in market share
D.Limited future growth potential
E.Increase in sales volume
Q:
Small-scale entry into a foreign market makes it difficult to build market share because it:
A.necessitates rapid entry into a foreign market.
B.is associated with a lack of commitment demonstrated by the foreign firm.
C.leads to escalating strategic commitments.
D.requires that extra time be spent in analyzing a foreign market.
E.leads to increased exposure to a foreign market.
Q:
Which of the following is a disadvantage of small-scale entry for an international firm considering foreign expansion?
A.The possibility of escalating commitment leading to major financial losses
B.The limited availability of resources for use in other markets
C.The lack of flexibility associated with strategic commitments
D.The increase in economic exposure due to minimal time spent in evaluating a foreign market
E.The difficulty of building market share and capturing first-mover advantages
Q:
Which of the following types of entry into a foreign market allows a firm to learn about the foreign market while limiting the firm's exposure to that market?
A.Early entry
B.Small-scale entry
C.Large-scale entry
D.Late entry
E.Rapid entry
Q:
Which of the following is a disadvantage of large-scale entry into a foreign market?
A.Decrease in a firm's exposure to the foreign market
B.Difficulty attracting customers and distributors for the product
C.Inability to build rapid market-share irrespective of the scale of entry
D.Limited product acceptance due to the avoidance of potential losses
E.Availability of fewer resources to support expansion in other desirable markets
Q:
According to Christopher Bartlett and Sumantra Ghoshal, how can local companies differentiate themselves from foreign multinationals?
A.By licensing their core technologies
B.By entering into turnkey projects
C.By standardizing their product offerings
D.By focusing on market niches
E.By raising trade barriers
Q:
In international business, an advantage of being a late entrant in a foreign market is the ability to:
A.create switching costs that tie customers into products or services.
B.capture demand by establishing a strong brand name.
C.build sales volume and ride down the experience curve before early entrants.
D.ride on an early entrant's investments in learning and customer education.
E.create a cost advantage over first movers.
Q:
Which of the following is a risk of entering developing nations like India and China on a large scale?
A.Lower potential for long-term rewards
B.Absence of prior foreign entrants
C.Lack of control over quality
D.Fear of rapid imitation of technology
E.High management turnover
Q:
The probability of survival for an international business increases if it:
A.enters a national market after several other foreign firms have already done so.
B.avoids the use of countertrade agreements.
C.enters a national market early.
D.enters a foreign market via turnkey projects.
E.avoids engaging in joint ventures.
Q:
The liability associated with foreign expansion is greater for foreign firms that:
A.choose to ride on an early entrant's investments.
B.use countertrade agreements.
C.enter a national market early.
D.ride down the experience curve behind their rivals.
E.avoid pioneering costs.
Q:
An early entrant find may find itself at a disadvantage if it:
A.is trying to realize location and experience curve economies.
B.incurs low development costs.
C.faces a subsequent change in business regulations in the host-country.
D.has a core competence based on control over technological know-how.
E.considers a greenfield strategy.
Q:
Which of the following is true of the costs and risks associated with doing business in a foreign country?
A.They are greater for late entrants.
B.They are higher in politically democratic nations.
C.They are less pronounced in the case of licensing.
D.They are lower in economically advanced nations.
E.They are called opportunity costs.
Q:
First-mover disadvantages refer to:
A.disadvantages associated with entering a foreign market before other international businesses.
B.costs that a late entrant to a foreign market has to bear.
C.a direct restriction on the quantity of a good that can be imported into a country.
D.imperfections in the operation of the market mechanism.
E.disadvantages experienced by being a late entrant in a foreign market.
Q:
Which of the following is an example of a first-mover advantage?
A.The ability to create switching costs that tie customers into one's products or services
B.The avoidance of pioneering costs that a later entrant into the foreign market has to bear
C.The increased probability of surviving in a foreign market
D.The opportunity to observe and learn from the mistakes of other entrants
E.The ability to let later entrants ride ahead on the experience curve
Q:
In which of the following situations can an international business command higher prices for a particular product in a foreign market?
A.When the product is widely available in the foreign market
B.When sales volumes is relatively low in the foreign market
C.When the product offers greater value to customers in the foreign market
D.When the product is more suitable to other foreign markets
E.When domestic competitors are selling alternatives at reduced prices
Q:
In international business, a product that is not widely available in a foreign market and satisfies an unmet need:
A.is likely to have greater value.
B.will have to be priced relatively low.
C.will see a decrease in sales volume.
D.is not suited to that particular market.
E.will fail to make a profit.
Q:
Which of the following factors determines the value that an international business can create in a foreign market?
A.Population density in the foreign market
B.Political stability of the foreign market
C.Nature of indigenous competition
D.Per capita income in the foreign market
E.Type of political system in the foreign market
Q:
Which of the following countries presents a favorable benefit-cost-risk trade-off scenario for foreign expansion?
A.A country ridden by private-sector debt
B.A country with a free market system
C.A country experiencing a dramatic upsurge in inflation rates
D.A country that is heavily populated
E.A country that is less developed and politically unstable
Q:
Which of the following is a reason why a relatively poor country may be an attractive target for inward investment?
A.Rapid economic growth
B.Political instability
C.Currency depreciation
D.High cost of living
E.Less developed infrastructure
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? Give examples.
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? Describe three first-mover advantages for international businesses.
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:
Which of the following is an advantage of acquisitions as a means of entering foreign markets?
A.They are quick to execute and help firms to rapidly build their presence in the target foreign market.
B.It is much easier to change the culture of an existing organization than build a new organization.
C.It is easier to convert the operating routines of acquired units than establish routines in new subsidiaries.
D.They give firms access to valuable intangible assets while minimizing a pileup of tangible assets.
E.Acquired firms are often undervalued and hence assets can be purchased at minimal prices.