Question 1

Why should a firm be cautious about entering a licensing agreement?

Accepted Answer

In a licensing agreement, the licensor grants the rights to intangible property to the licensee for a specified period in exchange for royalty payments. Firms considering this type of arrangement should be cautious on three fronts. First, if a firm licenses any of its proprietary know-how (such as its production processes) to another company, it risks losing control over this knowledge by permitting access to it by another firm. Second, licensing is not an effective way of realizing experience curve and location economies by manufacturing a product in a centralized location. If these attributes are important to a firm, licensing may be a poor choice. Finally, competing in a global market may require a firm to coordinate strategic moves across countries by using profits from one country to support competitive attacks in another. Licensing severely limits a firm's ability to do this. A licensee is unlikely to allow a multinational firm to use its profits (beyond the royalty payments) to support a different licensee operating in another country.

Question 2

Discuss the advantages of using a joint venture to enter foreign markets.

Accepted Answer

There are several advantages to expanding into foreign markets via a joint venture. First, firms benefit from a local partner's knowledge of the host market. Second, a firm can share the costs and/or risks of operating in a foreign market. Third, in many countries, political considerations make joint ventures the only feasible entry mode.

Question 3

Imagine that you are meeting with your superiors to discuss entering a foreign market. Your boss has asked you to analyze a joint venture prospect. Why might you tell your boss that the joint venture is not a good idea?

Accepted Answer

There are major disadvantages with joint ventures. A firm that enters into a joint venture risks giving control of its technology to its partner. In addition, a joint venture does not give the firm the tight control over subsidiaries that it might need in order to realize experience curve or location economies. Finally, a joint venture might not be a good strategy because the shared ownership structure can lead to conflicts and battles for control between the investing firms if their goals and objectives change or if they do not share a common vision for the venture.

Question 4

Overpayment for assets of an acquired firm is one reason acquisitions fail.

Accepted Answer

A) True 
 B)False

Question 5

Costs that an early entrant has to bear that a later entrant can avoid are known as first-mover costs.

Accepted Answer

A) True 
 B)False

Question 6

In a ____, the firm owns 100 percent of the stock.

Accepted Answer

A)  joint venture 
B)  wholly owned subsidiary 
C)  turnkey project 
D)  franchising agreement 
A)  joint venture 
B)  wholly owned subsidiary 
C)  turnkey project 
D)  franchising agreement

Question 7

If a firm can realize location economies by moving production elsewhere, it should avoid:

Accepted Answer

A)  exporting. 
B)  turnkey contracts. 
C)  licensing. 
D)  wholly owned subsidiaries. 
A)  exporting. 
B)  turnkey contracts. 
C)  licensing. 
D)  wholly owned subsidiaries.

Question 8

In ____, the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel.

Accepted Answer

A)  exporting 
B)  licensing 
C)  franchising 
D)  turnkey projects 
A)  exporting 
B)  licensing 
C)  franchising 
D)  turnkey projects

Question 9

A strategic commitment can be reversed by the top management according to their convenience.

Accepted Answer

A) True 
 B)False

Question 10

Early entrants to a market that are able to create switching costs that tie the customer to the product are capitalizing on _____.

Accepted Answer

A)  first-mover advantages 
B)  pioneering costs 
C)  economies of scale 
D)  late-mover advantages 
A)  first-mover advantages 
B)  pioneering costs 
C)  economies of scale 
D)  late-mover advantages

Question 11

If a firm's core competency is based on control over proprietary technological know-how, _____ and _____ arrangements should be avoided if possible to minimize the risk of losing control over that technology.

Accepted Answer

A)  licensing; joint-venture 
B)  wholly owned subsidiary; exporting 
C)  turnkey contracts; exporting 
D)  exporting; joint-venture 
A)  licensing; joint-venture 
B)  wholly owned subsidiary; exporting 
C)  turnkey contracts; exporting 
D)  exporting; joint-venture

Question 12

Large strategic commitments increase strategic flexibility.

Accepted Answer

A) True 
 B)False

Question 13

The most typical joint venture is a 25/75 venture.

Accepted Answer

A) True 
 B)False

Question 14

Exporting is advantageous because it avoids the cost of establishing manufacturing operations in the host country and because it may help a firm achieve experience curve and location economies.

Accepted Answer

A) True 
 B)False

Question 15

Many American firms that sold oil-refining technology to firms in the Gulf now find themselves competing with these firms in the world oil market. This is an example of:

Accepted Answer

A)  a firm entering into a turnkey project with a foreign enterprise, inadvertently creating a competitor. 
B)  a firm entering into a turnkey deal having no long-term interest in the foreign country. 
C)  a country subsequently proving to be a major market for the output of the process that has been exported. 
D)  a firm selling its process technology through franchisees in different countries. 
A)  a firm entering into a turnkey project with a foreign enterprise, inadvertently creating a competitor. 
B)  a firm entering into a turnkey deal having no long-term interest in the foreign country. 
C)  a country subsequently proving to be a major market for the output of the process that has been exported. 
D)  a firm selling its process technology through franchisees in different countries.

Question 16

Discuss strategic alliances. How successful are they? Why do firms form strategic alliances?

Accepted Answer

The term strategic alliance refers to co

Question 17

The costs and risks associated with doing business in a foreign country are typically high in an economically advanced and politically stable democratic nation.

Accepted Answer

A) True 
 B)False

Question 18

Relational capital refers to the building of interpersonal relationships between the firms' managers in a strategic alliance.

Accepted Answer

A) True 
 B)False

Question 19

Why should a firm choose exporting as a means of foreign market expansion? Discuss the advantages and disadvantages of exporting.

Accepted Answer

Exporting has two distinct advantages. F

Question 20

An advantage of turnkey projects is that the firm that enters into a turnkey deal will have no long-term interest in the foreign country.

Accepted Answer

A) True 
 B)False

Why should a firm be cautious about entering a licensing agreement?

Discuss the advantages of using a joint venture to enter foreign markets.

Imagine that you are meeting with your superiors to discuss entering a foreign market. Your boss has asked you to analyze a joint venture prospect. Why might you tell your boss that the joint venture is not a good idea?

Overpayment for assets of an acquired firm is one reason acquisitions fail.

Costs that an early entrant has to bear that a later entrant can avoid are known as first-mover costs.

In a ____, the firm owns 100 percent of the stock.

If a firm can realize location economies by moving production elsewhere, it should avoid:

In ____, the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel.

A strategic commitment can be reversed by the top management according to their convenience.

Early entrants to a market that are able to create switching costs that tie the customer to the product are capitalizing on _____.

If a firm's core competency is based on control over proprietary technological know-how, _ and _ arrangements should be avoided if possible to minimize the risk of losing control over that technology.

Large strategic commitments increase strategic flexibility.

The most typical joint venture is a 25/75 venture.

Exporting is advantageous because it avoids the cost of establishing manufacturing operations in the host country and because it may help a firm achieve experience curve and location economies.

Many American firms that sold oil-refining technology to firms in the Gulf now find themselves competing with these firms in the world oil market. This is an example of:

Discuss strategic alliances. How successful are they? Why do firms form strategic alliances?

The costs and risks associated with doing business in a foreign country are typically high in an economically advanced and politically stable democratic nation.

Relational capital refers to the building of interpersonal relationships between the firms' managers in a strategic alliance.

Why should a firm choose exporting as a means of foreign market expansion? Discuss the advantages and disadvantages of exporting.

An advantage of turnkey projects is that the firm that enters into a turnkey deal will have no long-term interest in the foreign country.

Globalization

National Differences in Political Economy

Political Economy and Economic Development

Differences in Culture

Ethics in International Business

International Trade Theory

The Political Economy of International Trade

Foreign Direct Investment

Regional Economic Integration

The Foreign Exchange Market

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Exporting, Importing, and Countertrade

Global Production, Outsourcing, and Logistics

Global Marketing and RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters

Exam 15: Entry Strategy and Strategic Alliances

Why should a firm be cautious about entering a licensing agreement?

Discuss the advantages of using a joint venture to enter foreign markets.

Imagine that you are meeting with your superiors to discuss entering a foreign market. Your boss has asked you to analyze a joint venture prospect. Why might you tell your boss that the joint venture is not a good idea?

Overpayment for assets of an acquired firm is one reason acquisitions fail.

Costs that an early entrant has to bear that a later entrant can avoid are known as first-mover costs.

In a ____, the firm owns 100 percent of the stock.

If a firm can realize location economies by moving production elsewhere, it should avoid:

In ____, the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel.

A strategic commitment can be reversed by the top management according to their convenience.

Early entrants to a market that are able to create switching costs that tie the customer to the product are capitalizing on _____.

If a firm's core competency is based on control over proprietary technological know-how, _____ and _____ arrangements should be avoided if possible to minimize the risk of losing control over that technology.

Large strategic commitments increase strategic flexibility.

The most typical joint venture is a 25/75 venture.

Exporting is advantageous because it avoids the cost of establishing manufacturing operations in the host country and because it may help a firm achieve experience curve and location economies.

Many American firms that sold oil-refining technology to firms in the Gulf now find themselves competing with these firms in the world oil market. This is an example of:

Discuss strategic alliances. How successful are they? Why do firms form strategic alliances?

The costs and risks associated with doing business in a foreign country are typically high in an economically advanced and politically stable democratic nation.

Relational capital refers to the building of interpersonal relationships between the firms' managers in a strategic alliance.

Why should a firm choose exporting as a means of foreign market expansion? Discuss the advantages and disadvantages of exporting.

An advantage of turnkey projects is that the firm that enters into a turnkey deal will have no long-term interest in the foreign country.

Globalization

National Differences in Political Economy

Political Economy and Economic Development

Differences in Culture

Ethics in International Business

International Trade Theory

The Political Economy of International Trade

Foreign Direct Investment

Regional Economic Integration

The Foreign Exchange Market

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Exporting, Importing, and Countertrade

Global Production, Outsourcing, and Logistics

Global Marketing and RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters

If a firm's core competency is based on control over proprietary technological know-how, _ and _ arrangements should be avoided if possible to minimize the risk of losing control over that technology.