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Name:
Class:
Date:
chapter 10
Indicate whether the statement is true or false.
1. The pioneering status of first movers gives them the guarantee of success.
a.
True
b.
False
2. A Spanish firm specializing in textiles will be more successful if they first enter foreign markets with vastly different
cultural norms than Spain.
a.
True
b.
False
3. According to the stage model, firms will enter culturally different countries during their first stage of
internationalization and will then gain more confidence to enter culturally similar countries in later stages.
a.
True
b.
False
4. A liability of foreignness refers to the inherent disadvantage that foreign firms experience in host countries because of
their nonnative status.
a.
True
b.
False
5. In the context of entering into foreign business, location advantages are the most important consideration.
a.
True
b.
False
6. When foreign firms enter new markets, they are often discriminated against the local firms.
a.
True
b.
False
7. From a resource-based view, managers need to match entries with strategic goals to be successful in foreign markets.
a.
True
b.
False
8. One advantage to engaging in a Joint Venture is sharing costs and risks with a local partner that limits risk exposure.
a.
True
b.
False
9. Last movers will build precious relationships with key stakeholders such as customers and governments.
a.
True
b.
False
10. A joint venture is defined as a subsidiary located in a foreign country that is entirely owned by the parent
multinational.
a.
True
b.
False
11. A greenfield operation limits the equity and management control of and MNE, which gives joint ventures a
comparative advantage.
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chapter 10
a.
True
b.
False
12. To be successful in internationalization, managers need to understand the rules of the game, both formal and informal,
governing competition in foreign markets.
a.
True
b.
False
13. An MNE is defined by entering foreign markets via equity modes through FDI. A firm that merely exports/imports
with no FDI is usually not regarded as an MNE.
a.
True
b.
False
14. In the context of entering into foreign business, firms with a strategic goal to seek market should select economies of
scale and abundance of low-cost factors.
a.
True
b.
False
15. To overcome cultural and institutional differences, it is more important to consider strategic goals such as market and
efficiency rather than culture and institutions.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
16. Citigroup was one of the first firms to enter Afghanistan, earning a good deal of goodwill from the Afghan
government. This is an example of:
a.
Late-mover advantage through free riding on first-mover investments
b.
First-mover advantage through relationship building
c.
First-mover advantage through preemptive investments?
d.
Late-mover advantage through prior market adaptation
17. A software company in China has decided to become a multinational enterprise (MNE). The company desires to
completely own its subsidiary and requires a fast entry mode. In addition, the company wants to enter into business
immediately without requiring to add a new capacity. In this scenario, which of the following modes of entry will be most
appropriate for the company?
a.
Greenfield operation
b.
Acquisition
c.
Licensing
d.
Build-operate-transfer agreement
18. _____ is defined as a project in which clients pay contractors to design and construct new facilities and train
personnel.
a.
An acquisition
b.
A joint venture
c.
A greenfield project
d.
A turnkey project
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chapter 10
19. Which of the following modes of entry call for the establishment of independent organizations overseas?
a.
An equity mode
b.
An export mode
c.
A franchising mode
d.
A licensing mode
20. Laelle Corp., a popular cosmetic brand in France, has decided to expand its business to Australia. The company enters
into an agreement with a local firm in Australia by which the two companies share 50 percent equity. This mode of entry
is an example of _____.
a.
a turnkey project
b.
a joint venture
c.
licensing
d.
co-marketing
21. Flarring Corp. is a well-known company that manufactures spare parts for automobiles. The company, based in
Boston, expanded by entering the market of Nerodo. Even after 12 years of marketing in Nerodo, the company is on the
verge of failure. In this case, which of the following factors could lead to the failure of Flarring Corp. in Nerodo?
a.
Decreased liability of foreignness
b.
Formal rules that are favorable to local firms
c.
Decreased competition from the local firms
d.
Products that are hard to imitate
22. Which of the following is a strategy to overcome cultural distance while engaging in international business?
a.
Entering culturally distant countries with confidence
b.
Choosing countries with colony-colonizer links
c.
Entering in countries without much physical distance
d.
Entering a culturally different country as a late mover
23. Which of the following is a difference between first movers and late movers?
a.
First movers take advantage of the inflexibility of late movers, whereas late movers may be locked into a
given set of fixed assets.
b.
First movers face greater technological and market uncertainties, whereas late movers take advantage of the
solutions of the first movers.
c.
First movers may be able to free ride on the huge pioneering investments of late movers, whereas late movers
have to make preemptive investments.
d.
First movers attract more late entrants, whereas late movers erect entry barriers for further entrants.
24. Which of the following is true of location-specific advantages?
a.
They are independent of cultural distance of the countries involved in a business.
b.
They continually grow irrespective of any changes in the formal institution.
c.
They decline when companies overcrowd or when taxes are raised.
d.
They can be enjoyed only as a late mover.
25. Ink Struck Inc., a publishing company, wants to expand its market worldwide. In this case, which of the following will
be a challenge faced by Ink Struck Inc. in host countries?
a.
Decreased legal differences
b.
Decreased competition for its products in the host country
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c.
Loss of control over the operations
d.
Overcoming liability of foreignness due to its nonnative status
26. Rues and West Bros., a technological giant, is a company motivated with the drive to find new and affordable
technologies. It is selecting a location so that it can operate with its motive, as well as enjoy the benefits of the location. In
this scenario, Rues and West Bros. should select locations:
a.
that possess abundance of innovative individuals, firms, and universities.
b.
that feature a combination of scale economies and low-cost factors.
c.
that has an abundance of strong market demand.
d.
that possess natural resources and related infrastructure.
27. Which of the following statements is true of greenfield operations?
a.
They suffer from a slow entry speed of at least one to several years.
b.
They face difficulty in achieving effective equity and management control.
c.
They are cost effective and free from risk.
d.
They do not add any new capacity to an industry.
28. Which of the following statements is true of late movers?
a.
They face greater technological and market uncertainties.
b.
They drive some non-dominant firms abroad to avoid clashing with dominant firms in home market.
c.
They may be able to free ride on the huge pioneering investments of first movers.
d.
They may erect significant entry barriers for further entry by other firms.
29. A chip company operating in Pakistan, a majority Muslim country, recently got into a public relations nightmare when
the public discovered that the firm was using a pork based product in their chips. Many Muslim people do not eat pork.
Which of the following aspects of the liability of foreignness is this an example of?
a.
Regulatory risks
b.
Difference of informal institutions
c.
Economic differences
d.
Existence of multiple currencies
30. Which of the following is an informal barrier to trade when foreign firms enter new markets?
a.
Differences in norms
b.
Political differences
c.
Economic differences
d.
Existence of multiple currencies
31. Dubai attracts numerous foreign entrants to engage in international business. It is an ideal stopping point for air traffic
between Europe and Asia, and between Africa and Asia. Which of the following advantages has Dubai honed to attract
foreign business?
a.
Late-mover advantage
b.
Location-specific advantage
c.
Export advantage
d.
Cultural advantage
32. A greenfield operation refers to:
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chapter 10
a.
efforts among a number of firms to jointly market their products.
b.
building new factories and offices from scratch.
c.
a new entity jointly created and owned by two or more parent companies.
d.
exports and contractual agreements of smaller commitments to overseas markets.
33. Which of the following is true of a multinational enterprise (MNE)?
a.
A firm that enters into a contractual agreement with a foreign firm
b.
A firm that enters foreign market via foreign direct investment (FDI)
c.
A firm that merely exports/imports products to host countries
d.
A firm that enters foreign market by non-equity mode
34. If a firm decides to engage in crude oil and petroleum business abroad, which of the following countries will provide
location-specific advantage to the firm?
a.
Russia
b.
Liberia
c.
Switzerland
d.
Greenland
35. In the context of modes of entry, _____ refers to efforts among a number of firms to jointly market their products and
services.
a.
franchising
b.
licensing
c.
co-marketing
d.
a joint venture
36. Pro-creations Corp., a tool manufacturing company, has decided to expand its business internationally. Consequently,
the company has paid a contractor to construct a manufacturing facility and an office. When the project is complete and
ready for operation, the contractor will hand over the facility to Pro-creations Corp. to pursue its business. This mode of
entry into international market is an example of _____.
a.
a franchise
b.
a greenfield project
c.
a joint venture
d.
a turnkey project
37. _____ is a type of wholly owned subsidiary.
a.
A research and development (R&D) contract
b.
A greenfield project
c.
Co-marketing
d.
Franchising
38. _____ is a non-equity mode of entry into a foreign market.
a.
Acquisition
b.
Turnkey project
c.
Joint venture
d.
Wholly owned subsidiary
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39. Palova Skin care, a famous cosmetic brand, is successfully engaging in international business with several countries.
Contrary to the successes in foreign market, the recent attempts to expand its business in its neighboring country, Arkadas,
has been unsuccessful, owing to its strict rules for women and perception of beauty. In this scenario, which of the
following is most likely the reason for Palova’s failure in Arkadas?
a.
Lack of natural resources
b.
Physical distance
c.
Cultural distance
d.
Lack of purchasing power
40. Which of the following statements is true of research and development (R&D) contracts?
a.
They make innovations at relatively high cost.
b.
They are difficult to negotiate and enforce.
c.
Quality of a research is easy to assess.
d.
Firms build their core R&D capabilities in the long run.
41. Prime Vera is a company that sells electrical baking appliances in over 12 countries. It collaborates with Silibakes Inc.
and sells silicon baking cups with its new range of electric oven. This mode of entry is an example of _____.
a.
a turnkey project
b.
franchising
c.
co-marketing
d.
a joint venture
42. Which of the following statements is true of scale of entry?
a.
Small-scale entries experience higher liability of foreignness.
b.
Large-scale entries demonstrate a strategic commitment to certain markets.
c.
Small-scale entries face the difficulty of limited strategic flexibility elsewhere.
d.
Large-scale entries will face difficulty capturing first-mover advantages.
43. KG Steel Co. is exporting steel bars at prices that are below what it costs to manufacture them, with the intent to raise
prices after eliminating local rivals. This practice is known as:
a.
Extortion
b.
Market seeking
c.
Dumping
d.
Plunking
44. _____ is the location-specific advantage that arises from the clustering of economic activities in certain locations.
a.
Agglomeration
b.
First-mover advantage
c.
Late-mover advantage
d.
Innovation
45. Which of the following is a formal barrier to trade when foreign firms enter new markets?
a.
Differences in values
b.
Differences in norms
c.
Currency risk
d.
Cultural differences
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46. Being a first mover in a market is advantageous for a firm because:
a.
it may have an opportunity to free ride on late-mover investments.
b.
it may gain advantage through proprietary technology.
c.
it would attract more firms to join their business network.
d.
it would face minimal technological and market uncertainties.
47. If generating returns from foreign markets is the goal, and returns are not being generated, which of the following
strategies may be necessary?
a.
Changing strategic goals
b.
Withdrawing from those foreign markets
c.
Engaging in a price war
d.
Ignoring the liability of foreignness
48. In the context of entry timing, _____ is defined as the benefit that accrues to firms that are late entrants in the market
and that early entrants do not enjoy.
a.
late-mover advantage
b.
first-mover advantage
c.
location-specific advantage
d.
cultural advantage
49. Which of the following is a way that a foreign firm may be effected by the liability of foreignness?
a.
Experiencing both formal and informal discrimination
b.
Heightened competitive advantage
c.
Adoption of VIRO
d.
Having first-mover advantage
50. Analyze first-mover disadvantages.
51. Discuss the institution-based view and resource-based view that determines success of firms.
52. Explain equity and non-equity modes of entry.
53. Explain cultural distance and institutional distance. How can these distances be overcome?
54. What is a location-specific advantage? Explain its significance with examples. Align location advantages with
strategic goals.
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Answer Key
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chapter 10
Name:
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Date:
chapter 10
