Which psychological term has been applied to the situation in Southeast Asia in 1997 when the
currencies of Thailand, Malaysia, South Korea, and Indonesia lost more than 50% of their value one after
the other?
a. Bandwagon effect
The ___________ effect involves currency traders moving as a group in the same direction at the same
time.
a. Bandwagon
Expectations becoming a self-fulfilling prophecy when currency traders move in the same direction at
the same time is called the ______________ effect.
a. Bandwagon
If a value creation activity of a firm can take place in Mexico most effectively, then that activity of the
firm must be based in Mexico. Firms that pursue such a strategy are most likely to realize:
a. Location Economies
Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign
markets?
a. High costs and risks
ACQUISITION
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.
Why do acquisitions fail sometimes?
a. There is a clash between the culture of the acquiring and acquired firm.
Which of the following is a disadvantage of greenfield ventures?
a. It is slower to establish than acquisitions.
oIf 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
oIf 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
Uniway Technologies Inc. has based its manufacturing units in the country of Lanthania. The
country’s stable economic and political environment has helped the firm gain competitive
advantage by lowering its production costs and improving product quality. Other things being
equal, the benefits realized from such a strategy can be typically referred to as:
a. Location Economies
The concept that as plant output expands, unit costs decrease, is known as:
a. Economies of Scale
The currency of the country of Venadia falls sharply in value against the currency of Lutetia, a
neighboring country. Which of the following is a consequence of this exchange rate movement?
a. Venadia’s exports to Lutetia will increase, because Venadian goods will become cheaper in
Lutetia.
Which of the following is an advantage of joint ventures?
a. Firms benefit from a local partner’s knowledge of the host country
Three months ago, the Japanese ¥/U.S. $ exchange rate was 100¥/$1. However, today the rate now
stands at 80¥/$1. What has happened to the value of the ¥en?
