47) When considering modes of entry, Christopher Bartlett and Sumantra Ghoshal suggest that
companies based in developing nations should
A) build up financial resources to match those of the largest global competitors.
B) enter foreign markets at a similar time and scale as multinational companies.
C) enter markets rapidly and exit at an equally rapid pace to avoid heavy losses.
D) benchmark operations and performance against foreign multinationals.
E) not focus on market niches that multinational companies ignore.
48) Storm Fighters Inc. makes winter clothing in the United States, and it is looking to distribute its
products in Europe. Rather than build and maintain a manufacturing facility in the Netherlands, the
company decides to ship its winter gear directly from its plant in Montana. What type of entry
mode is the company using?
A) exporting
B) turnkey project
C) acquisition
D) greenfield venture
E) licensing
49) California Fresh Food wants to expand internationally. Sales Director Sun-Jun Lee prefers that
the company export to foreign markets. What rationale should Lee use to show the advantage of
exporting as a mode of entry?
A) A firm can avoid the cost of establishing manufacturing operations in the host country.
B) A firm shares the development costs and risks with its host partner.
C) A firm can earn returns from process technology skills in countries where FDI is restricted.
D) A firm has access to local partner’s knowledge.
E) A firm has the ability to engage in global strategic coordination.
50) How can firms avoid incurring high transport costs when exporting bulk products?
A) taking a minority equity interest
B) entering into a turnkey project with a foreign firm
C) manufacturing bulk products regionally
D) setting up subsidiaries irrespective of market reach
E) reducing the quantity of the product offering
51) High transportation costs are a disadvantage for companies that
A) are service based.
B) produce and ship products regionally.
C) ship large, bulky products.
D) use customization.
E) ship component parts.
52) Farm Tuff Inc. hired a local agent to handle marketing when it started exporting products to
Europe. Unfortunately, the local agent also handled the marketing for a competitor, Agri-Corp.,
and Farm Tuff soon realized the agent could not be “loyal” to their product. What should Farm
Tuff do to best remedy this situation to its advantage?
A) Implement a tariff on their products.
B) Discontinue their exporting efforts.
C) Export only process technology to foreign firms.
D) Develop a licensing deal instead of exporting.
E) Set up a wholly owned subsidiary to handle local marketing.
53) Bossy Boots decided to export its products by hiring local marketing agents in each country.
Over the years, Bossy Boots ran into various problems with these local marketing agents that
affected both sales and profitability. Bossy Boots can overcome its problems with local marketing
agents by
A) selling intangible property to a franchisee and insisting on rules to conduct the business.
B) changing agents frequently.
C) engaging in turnkey projects and exporting process technology to foreign firms.
D) entering into cross-licensing agreements with foreign firms.
E) setting up wholly owned subsidiaries in foreign nations to handle local marketing.
54) In a ________, a firm agrees to set up an operating plant for a foreign client and hand over the
plant when it is fully operational.
A) franchising agreement
B) turnkey project
C) licensing agreement
D) wholly owned subsidiary
E) joint venture
55) Complex and expensive technology is needed to develop products at Feel-Better
Pharmaceuticals based in Austin, Texas. For this reason, the company plans to have a plant built in
Portugal that is ready for full operation and will be used for products sold in Europe. What type of
entry mode is Feel-Better Pharmaceuticals using?
A) wholly owned subsidiary
B) licensing
C) turnkey project
D) franchising
E) direct exporting
56) What is an advantage of turnkey projects as a mode of entry into foreign markets?
A) It is an ideal way to gain entry into a country where FDI is not limited by government
regulations.
B) It is a useful strategy to earn great returns from the know-how of a technologically complex
process.
C) It is an ideal way to establish a firm’s long-term presence in a foreign country.
D) It helps protect a firm’s competitive advantage.
E) The firm that enters into a turnkey project with a foreign enterprise avoids giving rise to
potential competitors.
57) An oil-rich country in the Middle East wants to develop its own refining industry but lacks the
technology to do so. To accomplish their goal, they decide to enter into an agreement with a U.S.
firm that has this technology. The U.S. firm is pleased to make this agreement because without it,
they could never gain value from their technology in this country due to its limits on FDI. What
type of agreement did these companies use?
A) acquisition
B) turnkey
C) export
D) subsidiary
E) franchise
58) Turnkey projects, being short-term propositions, can be disadvantageous for a firm if a country
subsequently proves to be a major market for the output of the process that has been exported. The
firm can get around this problem by
A) selling competitive advantage to competitors.
B) competing with the local firm in the global market.
C) taking a minority equity interest in the operation.
D) withholding vital process technology from the local firm.
E) establishing a joint venture with a local firm.
59) As the Chief Financial Officer for a metal refinery, Kaylee disagrees with using a turnkey
strategy to enter into the Asian market. She is concerned that the company will not benefit from a
long-term interest and could lose financially if the market proves to be successful. What is one way
the metal refinery could get around this concern?
A) Sell competitive advantage to competitors.
B) Agree to import another product from the Asian market.
C) Take a minority equity interest in the operation.
D) Withhold vital process technology from the local firm.
E) Establish a franchise operation.
60) What is an example of an intangible property?
A) infrastructure
B) machinery
C) leased equipment
D) advanced computing systems
E) patent
61) John developed a food additive that replaces processed sugars. He granted the right to use this
additive to a major cereal manufacturer, and John now receives a $0.50 royalty for every box of
cereal sold that contains this additive. What is this an example of?
A) franchising
B) acquisition
C) licensing
D) exporting
E) turnkey project
62) What is a drawback of licensing as a mode of entry into foreign markets?
A) The licensor has to bear all costs and risks associated with developing a foreign market.
B) Licensing does not give a firm tight control over manufacturing, marketing, and strategy.
C) Licensing does not benefit firms lacking the capital to expand operations overseas.
D) Licensing deals fail when there are barriers to foreign investment in a particular country.
E) A firm that enters into a licensing deal with a foreign country will have no long-term interest in
that country.
63) ________ would be an example of an industry in which cross-licensing agreements are
becoming increasingly common.
A) Glass-blowing
B) Biotechnology
C) Organic farming
D) Textiles
E) Weaving
64) Franchising as a mode of entry is employed primarily by
A) service firms.
B) manufacturing companies.
C) online outfits.
D) high-technology companies.
E) primary industries.
65) Stacey Yung wants to open a Pizza Hut restaurant in Beijing and has an agreement with the
restaurant chain in which she can use the trademark and must also follow a strict set of guidelines
detailing how the business should operate. The Pizza Hut Corporation will receive a percentage of
Stacey’s revenues from her restaurant. What type of entry mode does this represent?
A) franchising
B) wholly owned subsidiary
C) licensing
D) acquisition
E) turnkey operation
66) What is a disadvantage of franchising?
A) The franchiser has to bear development costs and risks associated with foreign expansion.
B) Franchising leads to undesirable results for service firms.
C) It is difficult to maintain quality control across foreign franchisees that are distant from the
franchiser.
D) The franchiser has no long-term interests in the foreign country.
E) It forces a franchiser to take out profits from one country to support competitive attacks in
another.
67) One advantage of joint ventures is that
A) the foreign firm benefits from a local partner’s knowledge of the host country.
B) the foreign firm can protect its technology from being appropriated by its local partner.
C) there is less cause for friction and conflict between the foreign and local partners.
D) it gives a firm tight control over subsidiaries, which enables it to realize experience curve or
location economies.
E) the foreign firm does not have to bear any development costs and risks associated with opening
a foreign market.
68) When two or more independent firms establish a new firm together, it is an example of
A) an acquisition.
B) franchising.
C) a joint venture.
D) a wholly owned subsidiary.
E) licensing.
69) What is one way a wholly owned subsidiary can be established in a foreign market?
A) through a turnkey operation with a local partner
B) through franchising
C) by acquiring an established firm in the host nation
D) by exporting
E) through a licensing agreement
70) Which entry mode into a foreign market best serves a high-tech firm because it reduces the risk
of losing that competence?
A) turnkey projects
B) franchising
C) wholly owned subsidiaries
D) joint ventures
E) exporting
71) A company might not want to consider ________ as a means of entry into a foreign market
because it is generally the most costly method from a capital investment standpoint.
A) licensing
B) a wholly owned subsidiary
C) franchising
D) a joint venture
E) exporting
72) The risks associated with learning to do business in a new culture are less if the firm
A) engages in global strategic coordination.
B) imposes strict marketing guidelines on how to do business.
C) enters a greenfield venture in the host country.
D) realizes substantial location economies.
E) acquires an established host-country enterprise.
73) An international firm considering foreign expansion should take into account that
A) the timing and scale of entry of foreign expansion are minor details in comparison with the
choice of foreign market.
B) the long-run economic benefits of doing business in a country are solely a function of the
country’s population size.
C) if the firm’s core competence is based on proprietary technology, entering a joint venture might
risk losing control of that technology.
D) the costs and risks associated with foreign expansion are higher in economically advanced
nations.
E) politically unstable and less developed nations offer favorable benefit-cost-risk trade-off
conditions.
74) Comp-U-Learn Inc. prides itself on a competitive advantage based on their proprietary
educational software technology. What two entry modes should the company avoid in order to
minimize the risk of losing this technology?
A) joint venture and wholly owned subsidiary
B) exporting and franchising
C) acquisitions and greenfield ventures
D) licensing and joint venture
E) licensing and exporting
75) Which mode of entry into foreign markets can result in a lack of control over quality?
A) exporting
B) franchising
C) turnkey projects
D) wholly owned subsidiaries
E) joint ventures
76) Why should a high-tech firm avoid selecting licensing as a mode of entry?
A) threat of creating efficient partners
B) risk of losing control over technology
C) fear of rapid imitation of core technology
D) lack of a transitory technological advantage
E) inability to deter development costs
77) Jumpin’ Joey Tennis Shoes, an Australian company, wants to expand its operations to China, a
country that is politically, culturally, and economically different. The firm needs to select a mode
of entry that would give it access to local knowledge, allow sharing of development costs and
risks, and also be politically acceptable. Which mode of entry into foreign markets is most suitable
for Jumpin’ Joey Tennis Shoes?
A) wholly owned subsidiary
B) joint venture
C) exporting
D) greenfield investments
E) licensing
78) Cal-Com Systems is a high-tech firm looking to set up operations in a foreign country. The
firm’s core competency is in technological know-how. Which mode of entry would be most
favorable to the firm if it wants to keep a tight control over its technology?
A) wholly owned subsidiary
B) joint venture
C) franchising
D) licensing
E) turnkey project
79) Service Corp. International provides customer service support for a variety of industries. Their
brand name is well known, and as a service firm, it does not have to protect any proprietary
technology. What mode of entry is most suitable for service companies like Service Corp.
International where its main asset is its brand name?
A) exporting
B) franchising
C) licensing
D) turnkey projects
E) cross-licensing
80) What form of entry into a foreign market gives a firm tight control for coordinating a globally
dispersed value chain?
A) signing joint-venture agreements
B) installing manufacturing units in locations with optimal factor conditions
C) setting up wholly owned marketing subsidiaries
D) establishing a greenfield venture
E) using foreign marketing agents
81) What is one disadvantage of wholly owned subsidiaries as a mode of entry into foreign
markets?
A) lack of control over quality
B) high costs and risks
C) problems with local marketing agents
D) inability to engage in global strategic coordination
E) lack of control over technology