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82) Why do firms pursuing global standardization or transnational strategies tend to prefer
establishing wholly owned subsidiaries?
A) It gives firms sound knowledge of the local markets, culture, and the political environment.
B) It helps protect competitive advantages based on technology.
C) It allows firms to use the profits generated in one market to improve its competitive position in
another market.
D) It is the most politically accepted mode of entry into foreign markets.
E) It has the least costs and risks associated with developing a foreign market.
83) One advantage of acquisitions as a means of entering foreign markets is that
A) they are quick to execute and help firms to rapidly build their presence in the target foreign
market.
B) it is much easier to change the culture of an existing organization than build a new organization.
C) it is easier to convert the operating routines of acquired units than establish routines in new
subsidiaries.
D) they give firms access to valuable intangible assets while minimizing a pileup of tangible
assets.
E) acquired firms are often undervalued and hence assets can be purchased at minimal prices.
84) How does the hubris hypothesis affect a company that is considering an acquisition?
A) The host country places additional tariff barriers on companies who want to acquire another
business.
B) Home country managers are less likely to understand the culture associated with the acquired
business.
C) Top managers typically overestimate their ability to create value from the acquisition.
D) The additional transportation costs devalue the potential for profit.
E) The acquired company must surrender its technological know-how.
85) Rather than build a new facility in Canada where it wants to make a presence, Denver-based
Mountain Man Gear decides to purchase Canada Goose Gear based in Toronto. This purchase
allows Mountain Man Gear to establish a bigger presence much faster than exporting their
products to Canadian customers. What mode of entry did Mountain Man Gear use?
A) turnkey project
B) licensing
C) wholly owned subsidiary
D) acquisition
E) franchising
86) Why do acquisitions fail sometimes?
A) There is a clash between the cultures of the acquiring and acquired firms.
B) Acquisitions take a long time to execute.
C) Acquisitions are easily preempted by making greenfield investments.
D) The revenue and profit stream generated by an acquisition's resources is usually unknown.
E) Losses produced by intangible assets outweigh profits from acquired tangible assets.
87) Autumn Roofing, an American firm, recently acquired another company, Shingle Shores, in
Indonesia. The high-level managers at Shingle Shores quit because they could not cope with the
domineering and straightforward approach of their American counterparts. This illustrates how
acquisitions may fail because
A) managers overestimate their ability to create value from an acquisition.
B) integration of operations between the two firms takes longer than forecasted.
C) there is a clash between the cultures of the acquired and the acquiring firm.
D) an acquiring firm overpays for the assets of an acquired firm.
E) inadequate pre-acquisition screening has been done.
88) The risk of failure of an acquisition can be reduced by
A) undervaluing the assets of an acquired firm.
B) ensuring that firms are acquired in the home country.
C) replacing high-level managers of an acquired firm.
D) a detailed auditing of operations, financial position, and management culture.
E) investing only in a firm that is managing to break even.
89) To reduce the risks of failure of an acquisition, managers must
A) pay more for the acquired unit to please its existing employees.
B) encourage and facilitate management turnover.
C) acquire a firm without wasting time on screening.
D) move rapidly after an acquisition to put an integration plan in place.
E) ensure that the work cultures are significantly different from each other.
90) What is a disadvantage of greenfield ventures?
A) They have a higher potential for throwing up unpleasant surprises.
B) It is much more difficult to build an organizational culture from scratch than to change the
culture of an existing unit.
C) Companies find it difficult to avoid falling into the trap of the hubris hypothesis.
D) They are slower to establish than acquisitions.
E) A firm does not have the freedom to build the kind of subsidiary that it wants.
91) If 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.
B) licensing deal.
C) greenfield venture.
D) turnkey project.
E) exporting deal.
92) If 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
B) joint venture
C) licensing agreement
D) franchising deal
E) turnkey project
93) Describe the factors that affect the long-run economic benefits of doing business in a foreign
country.
94) What are first-mover advantages? Describe three first-mover advantages for international
businesses.
95) Explain how pioneering costs can affect a business.
96) What are the consequences of an international firm entering a foreign market on a significant
scale?
97) List and briefly describe the six different modes a business can use to enter a foreign market.
98) What are the advantages and disadvantages of exporting as a mode of entry into foreign
markets?
99) Explain how a cross-licensing agreement helps reduce risk.
100) Describe the disadvantages of licensing as a mode of entry into the foreign market.
101) Explain franchising and provide examples of companies that would typically use this form of
entry into a foreign market.
102) What is a wholly owned subsidiary? List its advantages.
103) Describe the advantages of turnkey projects as a mode of entry into a foreign market.
104) Describe how pressures for cost reductions affect the choice of entry mode.
105) Describe the advantages and disadvantages of acquisitions.
106) Describe the pros and cons of greenfield ventures.
107) Describe the factors that should be considered for a firm choosing between a greenfield
venture and an acquisition.
