Question 1

Which mode of entry carries the lowest risk and has the lowest potential return?

Accepted Answer

A)   Exporting
B)   Licensing
C)   Franchising
D)   Foreign direct investment A

Question 2

Some firms utilize the entry mode that best serves to minimize risk when expanding into a new foreign market. Such firms are said to be following the _________________ rule in the selection of an entry mode:

Accepted Answer

A)   Naïve
B)   Pragmatic
C)   Strategy
D)   Repetitive B

Question 3

International joint ventures (IJVs) may help foreign firms overcome existing market access restrictions in countries such as China and open up market opportunities that otherwise would not be available.

Accepted Answer

A) True 
 B)False  True

Question 4

The ability to circumvent protectionist government policies is often cited as a reason firms engage in foreign direct investment (FDI). How does FDI allow a company to avoid the protectionist policies of a host country government?

Accepted Answer

The answer of The ability to circumvent protectionist government policies...

Question 5

Which of the following (if any) is a method of calculating royalty payments in a licensing transaction?

Accepted Answer

A)   Running
B)   Lump sum
C)   Minimum
D)   All of the above
E)   None of the above

Question 6

Companies interested in indirect exporting may find themselves approached by a(n) ______________________ based in their own home country working on behalf of a foreign buyer:

Accepted Answer

A)   Distributor
B)   Export management company
C)   Export buying agent
D)   Agent

Question 7

Which of the following is NOT a cost associated with negotiating a licensing agreement?

Accepted Answer

A)   Transfer cost
B)   Arbitrage cost
C)   R&D cost
D)   Opportunity cost

Question 8

Firms engage in foreign direct investment (FDI) for a number of reasons. How may these reasons for FDI be classified?

Accepted Answer

A)   Market related
B)   Trade related
C)   Cost related
D)   All of the above
E)   (a)  and (c)  only

Question 9

Entry modes may be classified by their risk/reward profile. In this context intermediate modes represent a sharing of the risks and rewards between two or more firms.

Accepted Answer

A) True 
 B)False

Question 10

Export management companies are firms that assist other firms in marketing their products in foreign markets. What is the generic term for such companies?

Accepted Answer

A)   Intermediaries
B)   Opportunists
C)   Functional shippers
D)   Product arrangers

Question 11

Foreign sales subsidiaries are wholly owned by their parent firms and are incorporated under the laws of their home country.

Accepted Answer

A) True 
 B)False

Question 12

From the perspective of the licensor list three advantages of licensing as a mode of entry.

Accepted Answer

The answer of From the perspective of the licensor list...

Question 13

Define the term 'foreign direct investment (FDI)'. Why is business confidence in the prospective host country so important when making FDI decisions?

Accepted Answer

The answer of Define the term 'foreign direct investment (FDI)'....

Question 14

Distinguish between direct and indirect exporting. Which would you recommend to a risk averse company that wants to begin exploring international markets?

Accepted Answer

The answer of Distinguish between direct and indirect exporting. Which...

Question 15

What is the distinction between export, intermediate and hierarchical modes of entry?

Accepted Answer

The answer of What is the distinction between export, intermediate...

Exam 8: Entering Foreign Markets