46) There are several disadvantages of franchising as an entry mode. Which of the following is one
of them?
A) There is little incentive for the franchisee to build a profitable operation as quickly as possible.
B) The firm incurs many of the costs and risks of opening a foreign market on its own.
C) Franchising may inhibit the firm’s ability to use the profits obtained to open additional
businesses in the same country.
D) Franchising may inhibit the firm’s ability to take profits out of one country to support
competitive attacks in another.
47) In many countries, political considerations make ________ the only feasible entry mode.
A) joint ventures
B) franchises
C) licensing agreements
D) wholly owned subsidiaries
48) How can a firm protect its proprietary information in a joint venture?
A) Share only the technology that is central to the core competence of the firm.
B) Hold majority ownership in the venture so that the firm has greater control over the technology.
D) Hold minority ownership in the venture so that the firm does not have to give over control of the
technology.
49) Firms entering a market via a ________ must bear all the costs and risks associated with the
venture.
A) licensing contract
B) joint venture
C) turnkey contract
D) wholly owned subsidiary
50) If a firm can realize location economies by moving production elsewhere, it should avoid
A) exporting.
B) turnkey contracts.
C) licensing.
D) wholly owned subsidiaries.
51) When an exporting firm finds that its local agent is also carrying competitors’ products, the
firm may switch to a ________ to handle local marketing, sales, and service.
A) wholly owned subsidiary
B) franchising arrangement
C) turnkey operation
D) licensing agreement
52) In ____, the contractor agrees to handle every detail of the project for a foreign client,
including the training of operating personnel.
A) exporting
B) licensing
C) franchising
D) turnkey projects
53) Turnkey projects are most common in which of the following industries?
A) fresh fruit, grain, and meat products
B) chemical, pharmaceutical, and metal refining
C) consumer durables, computer peripherals, and automotive parts
D) apparel, shoes, and leather products
54) Which of the following statements is true of turnkey projects?
A) Turnkey projects are most common in industries that use simple, inexpensive production
technologies.
B) A turnkey strategy can be more risky than conventional FDI, particularly in unstable political
environments.
C) A turnkey strategy is particularly useful where FDI is limited by host-government regulations.
D) Firms that enter into a turnkey deal have a long–term interest in the foreign country.
55) 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
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.
56) An arrangement whereby a firm grants the right of intangible property to another entity for a
specified time period in exchange for royalties is ________ agreement.
A) a turnkey
B) a licensing
C) a greenfield
D) an acquisition
57) Which of the following is a distinct advantage of exporting?
A) It avoids the threat of tariff barriers by the host-country government.
B) Firms benefit from a local partner‘s knowledge of the host country‘s competitive conditions.
C) It avoids the often substantial costs of establishing manufacturing operations in the host
country.
D) It is appropriate if lower cost locations for manufacturing the product can be found abroad.
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58) Patents, inventions, formulas, processes, designs, copyrights, and trademarks are all forms of
A) licensing agreements.
B) franchising agreements.
C) intangible property.
D) tangible property.
59) What is the primary advantage of licensing?
A) It helps a firm avoid the development costs and risks associated with opening a foreign market.
B) It gives a firm the tight control over manufacturing, marketing, and strategy.
C) It helps a firm achieve experience curve and location economies.
D) It increases a firm’s ability to utilize a coordinated strategy.
60) Which of the following is a disadvantage of licensing?
A) It does not help firms that lack capital to develop operations overseas.
B) It does not give a firm the tight control over strategy that is required for realizing experience
curve and location economies.
C) It cannot be used when a firm possesses some intangible property that might have business
applications.
D) The firm has to bear the development costs and risks associated with opening a foreign market.
61) Under ________ agreement, a firm might license some valuable intangible property to a
foreign partner, but in addition to a royalty payment, the firm might also request that the foreign
partner license some of its valuable know-how to the firm.
A) an integrated licensing
B) a chartering
C) a franchising
D) a cross-licensing
62) Cross-licensing agreements are increasingly common in the ________ industries.
A) transportation
B) high-technology
C) construction
D) consumer durables
63) ________ is pursued primarily by manufacturing firms and ________ is employed primarily
by service firms.
A) Licensing; franchising
B) Franchising; licensing
C) Franchising; exporting
D) Exporting; licensing
64) If a service firm wants to build a global presence quickly and at a relatively low cost and risk,
it must employ
A) chartering.
B) exporting.
C) a turnkey strategy.
D) franchising.
65) Which of the following statements about franchising is true?
A) It guarantees consistent product quality.
B) It tends to involve more short-term commitments than licensing.
C) It is a specialized form of licensing.
D) It is employed primarily by manufacturing firms.