76) A ________ joint venture is formed when each partner requires the same component in its
production process.
A) backward
B) multistage
C) forward
D) buyback
77) Which of the following is a disadvantage of strategic alliances?
A) They are the most expensive among the investment entry modes.
B) They increase the likelihood that one partner will try to take advantage of the other.
C) They create future competitors.
D) They fail to tap into their competitors’ specific strengths.
78) Which of the following is a strategic factor that influences a company’s international entry
mode selection?
A) market consumption capacity
B) market receptivity
C) market size
D) market intensity
79) Which of the following statements is true of the strategic factors that influence a company’s
international entry mode selection?
A) Low tariffs and high quota limits encourage market entry by means of investment.
B) Companies that produce goods with high shipping costs prefer exporting.
C) Companies set up production units in a host market if the total cost of production is lower in
the home market.
D) Markets that are likely to remain relatively small consider exporting as a viable option.
Scenario: Owen’s HomeCare Products
Owen McCain, owner of Owen’s HomeCare Products, is considering going international. He
feels that the products he manufactures will be well-received, especially in developing countries.
He wants to understand the exporting process and then scale his exporting activities accordingly.
80) Through his research, Owen learns that the first step in developing a successful export
strategy is ________.
A) initiation of meetings with intermediaries
B) identification of a potential market
C) commitment of resources
D) matching of market needs to company abilities
81) Which of the following steps would Owen implement toward the end while developing a
successful export strategy?
A) initiation of meetings with intermediaries
B) identification of a potential market
C) commitment of resources
D) matching of market needs to company abilities
82) If Owen’s HomeCare Products decides to sell their products to intermediaries who then resell
them to buyers in target markets, the company would be engaging in ________.
A) indirect exporting
B) counterpurchase
C) an acquisition
D) a joint venture
Scenario: Wang’s Techno Toys
Ann Wang has been successfully running Wang’s Techno Toys that sells high-tech toys in the
domestic market. Continually increasing and stiff competition at home has now forced Wang’s
Techno Toys to enter international markets through direct exports.
83) Which of the following will most likely help Techno Toys sell its toys directly to buyers in
the target market?
A) agents
B) sales representatives
C) export management companies
D) export trading companies
84) In some countries, people exchange electronic goods for Techno Toys instead of paying
money for them. This practice is known as ________.
A) offset
B) counterpurchase
C) switch trading
D) barter
85) Which of the following methods of export/import financing is Techno Toys’ bank using if it
acts as an intermediary without accepting financial risk?
A) documentary collection
B) buyback
C) letter of credit
D) advance payment
Scenario: Gro-Tru Grows To Europe
Gro-Tru, a maker of chemical fertilizers and pesticides, sees enormous growth potential in
Central Europe. The company has received several inquiries from potential importers in the
region, but in most cases, the potential importers have expressed difficulty in obtaining the hard
currency to pay for Gro-Tru’s products. Alistair Green, vice-president for business development,
is exploring how Gro-Tru can meet the needs of the potential market.
86) Alistair has identified an option that might help the firm deal with the importer’s inability to
pay with hard currency. The option involves selling goods or services that are paid for in whole
or part with other goods or services. Which of the following methods is Alistair considering?
A) auction
B) bidding
C) countertrade
D) tendering
87) Which of the following methods would Gro-Tru be implementing if it exchanges its products
directly for other goods or services without the use of money?
A) barter
B) offset
C) switch trading
D) buyback
88) Gro-Tru would be engaging in ________, if it decides that in exchange for a hard-currency
sale it would make a hard-currency purchase of an unspecified product from the importing nation
in the future.
A) barter
B) offset
C) switch trading
D) buyback
89) One option that intrigues Alistair is the process in which one company sells to another its
obligation to make a purchase in a given country. This arrangement is known as ________.
A) barter
B) offset
C) switch trading
D) buyback
90) In his research, Alistair discovers a type of arrangement in which industrial equipment is
exported in return for products produced by that equipment. This arrangement is known as
________.
A) barter
B) offset
C) switch trading
D) buyback
Scenario: Sports Stuff Inc.
Herb Graham is vice president of Sports Stuff Inc., a business that develops, manufactures, and
markets sports products. The company is looking to expand its operations into the European
market. Herb believes that if the company expands its product line to include products reflecting
sports that are popular in Europe, the company will achieve success there.
91) Herb knows that much of the success his company enjoys is due to the patents and
copyrights that protect the company’s products. If Sports Stuff chooses an entry mode in which it
grants another firm the right to use its intangible property for a specified period of time, it would
be engaging in ________.
A) a turnkey project
B) franchising
C) licensing
D) a joint venture
92) Herb has been exploring another type of entry mode that requires ongoing assistance on the
part of one firm, often in the form of start-up capital, management training, or location advice.
Herb is most likely considering ________.
A) a strategic alliance
B) franchising
C) licensing
D) a joint venture
93) Which of the following entry modes would Sports Stuff be implementing if it hires a
company to design, construct, and test a production facility on its behalf?
A) joint venture
B) turnkey project
C) wholly owned subsidiary
D) franchising
94) The CEO of Sports Stuff has decided that the company needs to retain complete control over
its operations in Europe. To achieve this objective, Herb would most likely recommend that the
firm establish a ________.
A) joint venture
B) cross licensing agreement
C) wholly owned subsidiary
D) strategic alliance
95) The board of directors of Sports Stuff is concerned with the firm’s lack of experience in
foreign markets. To minimize this problem, Herb recommends that the firm create a ________
with a local partner.
A) joint venture
B) turnkey project
C) wholly owned subsidiary
D) franchise
96) Explain why companies consider exporting. Describe the four-step model of developing a
successful export strategy.
97) Why would an exporter use a sales representative or a distributor? Why would the exporter
be reluctant to offer an open account payment method?
98) Discuss the steps companies should take to avoid export and import blunders. How can an
advance payment method help exporters reduce financial risk?
99) What are the different financing methods available to exporters and importers?
100) Describe the process of how the documentary collection procedure works using an example.
101) Explain franchising with examples. Mention the advantages and disadvantages associated
with franchising. How is franchising different from licensing?
102) What are the advantages of pursuing a wholly owned subsidiary as an entry strategy?
103) What is countertrade? Explain the concept of buyback as a type of countertrade, and discuss
buyback as a joint venture configuration.
104) What are the differences between a turnkey project and a strategic alliance?
105) Identify the strategic factors that influence a company’s international entry mode selection.
Explain any three of them.
106) Discuss the advantages of licensing, low-cost production, and low-cost shipping for
international companies.