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28) Costs that an early entrant has to bear that a later entrant can avoid are known as
A) first-mover costs.
B) late-mover disadvantages.
C) pioneering costs.
D) licensing fees.
29) Large-scale strategic commitments may
A) have many benefits and few to no risks.
B) increase strategic flexibility.
C) have many risks and few to no benefits.
D) limit strategic flexibility.
30) A ________ is more likely to capture first-mover advantages associated with demand
preemption, scale economies, and switching costs.
A) large-scale entrant
B) joint venture
C) small-scale entrant
D) turnkey contract
31) Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in
A) politically unstable developing nations that operate with a mixed or command economy.
B) nations where there is a dramatic upsurge in either inflation rates or private-sector debt.
C) politically stable developed and developing nations that have free market systems.
D) developing nations where speculative financial bubbles have led to excess borrowing.
32) Early entrants to a market that are able to create switching costs that tie customers into their
products or services are capitalizing on
A) first-mover advantages.
B) pioneering costs.
C) economies of scale.
D) late-mover advantages.
33) Which of the following is a first-mover advantage?
A) lower research and development costs and marketing costs than other firms
B) ability to preempt rivals and capture demand by establishing a strong brand name
C) ability to capitalize on the work done by other firms
D) creation of innovative products at lower costs than other firms
34) Switching costs may
A) drive early entrants out of the market.
B) make it easy for later entrants to win business.
C) make it difficult for later entrants to win business.
D) give later entrants a cost advantage over early entrants.
35) The costs of promoting and establishing a product offering when a firm enters a foreign market
prior to its rivals are known as ________ costs.
A) switching
B) market development
C) pioneering
D) promotional development
36) A large-scale entrant is more likely than a small-scale entrant to be able to capture first-mover
advantages associated with
A) scale economies.
B) diseconomies of scale.
C) pioneering costs.
D) diseconomies of scope.
37) Which of the following statements about small-scale entry is true?
A) The commitment associated with a small-scale entry makes it possible for the small-scale
entrant to capture first-mover advantages.
B) Small-scale entry is a way to gather information about a foreign market before deciding
whether to enter on a significant scale.
C) By giving a firm time to collect information, small-scale entry increases the risks associated
with a subsequent large-scale entry.
D) Small-scale entry limits a firm's ability to learn about a foreign market thereby also limiting the
firm's exposure to that market.
38) ________ is advantageous because it avoids the cost of establishing manufacturing operations
in the host country and it may help a firm achieve experience curve and location economies.
A) Licensing
B) Exporting
C) Franchising
D) A turnkey contract
39) In ________, the contractor agrees to handle every detail of the project for a foreign client.
A) a joint venture
B) an exporting agreement
C) a turnkey project
D) a licensing agreement
40) A disadvantage of ________ is that the firm that enters into such an arrangement will have no
long-term interest in the foreign country.
A) wholly owned subsidiaries
B) exporting
C) licensing
D) turnkey projects
41) By its very nature, ________ limits a firm's ability to coordinate strategic moves across
countries.
A) licensing
B) turnkey contracting
C) franchising
D) exporting
42) An advantage of ________ with a local partner is the knowledge of the local environment that
the local partner contributes to the venture.
A) turnkey contracts
B) licensing contracts
C) joint ventures
D) wholly owned subsidiary contracts
43) Which of the following is true of exporting?
A) It avoids the often substantial costs of establishing manufacturing operations in the host
country.
B) It is the best choice if lower-cost manufacturing locations are available abroad.
C) Low transportation costs may make exporting uneconomical.
D) Tariff barriers may make exporting the most attractive option.
44) Which of the following is true of licensing?
A) Licensing is used when a firm possesses some tangible property but does not want to pursue a
potential application itself.
B) The firm does not have to bear the development costs and risks associated with opening a
foreign market.
C) It is an attractive option when a firm is interested in pursuing a foreign market and is ready to
commit substantial resources to a foreign market.
D) It is an attractive option for firms that have the capital to open overseas markets.
45) ________ agreements enable firms to hold each other "hostage," thereby reducing the risk they
will behave in an opportunistic manner toward each other.
A) Turnkey
B) Franchising
C) Cross-license
D) Integrated license
