Exam 15: Foreign Direct Investment and Collaborative Ventures

Compared to small firms, large companies usually can access capital at lower cost.

International portfolio investment refers to passive ownership of foreign securities.

Ciao Manufacturing Location (Scenario) An Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in Italy and Spain, and firm managers believe that Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility. -Which of the following should be considered in the decision regarding where to build a new Ciao plant?

FDI is the most advanced and complex foreign market entry strategy.

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

A(n) ________ is the purchase of an existing company or facility.

International portfolio investment is characterized by ________.

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

The challenges faced due to FDI are the same all over the world.

While franchising facilitates rapid internationalization, compared to FDI, it affords the firm less control over its foreign operations.

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

FDI is also known as international portfolio investment.

FDI is the least taxing entry strategy that a firm can choose.

The rate of inflation is a(n) ________ factor to be considered while selecting the location for FDI.

The strategic purpose behind firms competing with rivals in their own market is to force them to expend resources and thus, defend the firm's own market.

Firms that anticipate close public scrutiny of their foreign operations often avoid potential difficulties by ________.

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

The failure rate of collaborative ventures is higher in developing economies than in advanced economies.

ABC Appliance (Scenario) The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. -Which of the following questions would most likely be important for ABC managers to evaluate as they consider expanding into the Asian market?

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.