66) Which of the following is an advantage of franchising?
A) A firm takes profits out of one country to support competitive attacks in another.
B) A firm is relieved of many of the costs and risks of opening a foreign market on its own.
C) It guarantees consistent product quality and achieves experience curve and location economies.
D) It improves the firm’s ability to take profits out of one country to support competitive attacks in
another.
67) Firms engaging in a ________ with a local company can benefit from a local partner’s
knowledge of the host country’s competitive conditions, culture, language, political systems, and
business systems.
A) turnkey project
B) joint venture
C) greenfield investment
D) licensing arrangement
68) The most typical joint venture is a ________ venture.
A) 50–50
B) 60–40
C) 75–25
D) 10–90
69) In a ____, the firm owns 100 percent of the stock.
A) joint venture
B) wholly owned subsidiary
C) turnkey project
D) franchising agreement
70) Which of the following is true of wholly owned subsidiaries?
A) It is the least expensive method of serving a foreign market from a capital investment
standpoint.
B) It the most feasible entry mode due to the political considerations.
C) It is required if a firm is trying to realize location and experience curve economies.
D) It is particularly useful where FDI is limited by host-government regulations.
71) A wholly owned subsidiary is appropriate when the firm wants
A) to share the cost and risk of developing a foreign market.
B) 100 percent of the profits generated in a foreign market.
C) a plant that is ready to operate.
D) to test a market.
72) A ________ entails establishing a firm that is owned together by two or more otherwise
independent firms.
A) joint venture
B) licensing agreement
C) franchisee
D) turnkey contract
73) Apple exports its products to many countries. An advantage of exporting products to another
country is that it
A) minimizes exchange rate risks.
B) provides the ability to achieve experience curve and location economies.
C) faces less trade barriers.
D) gives firms access to local knowledge.
74) When technological know-how constitutes a firm’s core competence, which entry mode is the
optimal choice?
A) foreign franchises controlled by joint ventures
B) licensing agreements
C) wholly owned subsidiaries
D) turnkey contracts
75) Firms pursuing global standardization or transnational strategies tend to prefer ________
arrangements.
A) wholly owned subsidiary
B) franchising
C) joint-venture
D) licensing
76) 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.
A) licensing; joint venture
B) wholly owned subsidiary; exporting
C) turnkey contracts; exporting
D) exporting; joint venture
77) If a high-tech firm sets up operations in a foreign country to profit from a core competency in
technological know-how, which of the following entry strategy is best?
A) joint ventures
B) licensing
C) wholly owned subsidiaries
D) turnkey contacts
78) The valuable asset of firms, whose competitive advantage is based on management know-how,
is their
A) top management staff.
B) USP.
C) advertisements.
D) brand name.
79) Most service firms have found that ________ with local partners work best for the master
controlling subsidiaries.
A) joint ventures
B) licensing agreements
C) greenfield investments
D) turnkey projects
80) A firm can establish a wholly owned subsidiary in a country by building a subsidiary from the
ground up, called the
A) joint venture.
B) turnkey strategy.
C) licensing agreement.
D) greenfield strategy.
81) What is true of acquisitions?
A) It is a time-consuming process.
B) Managers view them as more risky than greenfield ventures.
C) They give the firm a much greater ability to build the kind of subsidiary company that it wants.
D) In many cases, firms make acquisitions to preempt their competitors.
82) According to the ________, top managers typically overestimate their ability to create value
from an acquisition.
A) misvaluation theory
B) performance extrapolation hypothesis
C) market timing theory
D) hubris hypothesis
83) To increase the potential for a successful acquisition, a firm should
A) always bid low to allow for partial failure.
B) try to acquire a firm with a very different corporate culture so there is no forced overlap.
C) rush to beat out other competitors.
D) screen the foreign enterprise to be acquired.
84) Firms entering markets where there are no incumbent competitors to be acquired should
choose
A) greenfield investments.
B) joint ventures.
C) acquisitions.
D) takeovers.
85) ________ allow a firm to rapidly build its presence in the target foreign market.
A) Joint ventures
B) Acquisitions
C) Subsidiaries
D) Turnkey contracts