1. A firm contemplating expansion should choose a foreign market based on an assessment
of the nation’s long-run profit potential.
2. The attractiveness of a country as a potential market for an international business
depends solely on the size of its consumer market.
3. First-mover advantages refer to the advantages frequently associated with entering a
market early.
4. If an international business can offer a product that has been widely available in that
market, the value of that product to consumers is likely to be much greater than if the
international business offers a product that has not been widely available in that market.
5. For an international firm, entering a foreign market before other international businesses
does not have any drawbacks.
6. The probability of survival decreases if an international business enters a national market
after several other foreign firms have already done so.
7. In international business, a strategic commitment has a short-term impact and is easily
reversible.
8. In international business, an early entrant to a foreign market may be at a disadvantage
relative to a later entrant, if regulations change in a way that diminishes the value of an early
entrant’s investments.
9. Large-scale entry allows an international firm to learn about a foreign market while
limiting the firm’s exposure to that market.
10. A risk-averse international firm that enters a foreign market on a small scale will
increase its potential losses.
11. According to Christopher Bartlett and Sumantra Ghoshal, firms from developing countries
cannot succeed in foreign markets in the presence of other established global competitors.
12. Exporting, as a mode of entry into foreign markets, does not help a firm achieve
experience curve and location economies.
13. A drawback of exporting is that tariff barriers can make it uneconomical as a mode of
entry into a foreign market.
14. An international firm that enters into a turnkey deal has a long-term interest in the
foreign country.
15. Licensing, a mode of entry into a foreign market, gives an international firm tight control
over manufacturing, marketing, and strategy that is required for realizing experience curve and
location economies.
16. In a typical international licensing deal, a licensor puts up most of the capital necessary
to get an overseas operation going.
17. Under a cross-licensing agreement, a firm can either request a royalty payment or license
some valuable intangible property to a foreign partner.
18. In terms of the various modes of entry into a foreign market, franchising is employed
primarily by service firms, whereas licensing is pursued primarily by manufacturing firms.
19. Franchising, a mode of entry into a foreign market, helps firms exert greater quality
control over franchises in foreign locations.
20. The most typical joint venture is a 50/50 venture, in which there are two parties, each of
which holds a 50 percent ownership stake and contributes a team of managers to share
operating control.
21. In a joint venture, a firm benefits from a local partner’s knowledge of the host country’s
competitive conditions, culture, language, political systems, and business systems.
22. In international business, joint ventures with local partners face a significantly higher risk
of being subject to nationalization.
23. In terms of the entry modes into a foreign market, a joint venture does not give an
international firm the tight control over subsidiaries that might be required to realize experience
curve or location economies.
24. When a firm’s competitive advantage is based on technological competence, a joint
venture is the preferred mode of entry into a foreign market because it reduces the risk of losing
control over that competence.
25. An advantage of a wholly owned subsidiary is that it may be required if a firm is trying to
realize location and experience curve economies.
26. Establishing a wholly owned subsidiary gives an international firm a 100 percent share in
the profits generated in a foreign market.
27. Establishing a wholly owned subsidiary is generally the cheapest method of serving a
foreign market from a capital investment standpoint.
28. If an international firm’s core competence is based on proprietary technology, entering a
joint venture might risk losing control of that technology to the joint-venture partner.
29. An advantage of licensing and franchising is the low development costs and risks.
30. An international firm that perceives its technological advantage to be transitory
and susceptive to rapid imitation might want to license its technology to foreign firms.
31. The greater the pressures for cost reductions are, the more likely an international firm
will want to pursue some combination of exporting and wholly owned subsidiaries.
32. One of the advantages of acquisitions is that they are quick to execute.
33. When an international firm makes an acquisition in a foreign market, it acquires valuable
intangible as well as tangible assets.
34. According to David Ravenscraft and Mike Scherer’s study, many acquisitions destroy
rather than create value.
35. An advantage of establishing a greenfield venture in a foreign country is that it gives the
firm a much greater ability to build the kind of subsidiary company that it wants.
36. Which of the following is true of foreign expansion?
37. Which of the following is the first basic entry decision that a firm contemplating foreign
expansion must make?