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Student name:__________
1) What are first-mover advantages? Discuss these advantages.
2) Explain the relationship between first-mover disadvantages and pioneering costs.
3) Discuss the trade-offs associated with large-scale entry versus small-scale entry.
4) Explain the idea of a turnkey project. Why should a firm use this arrangement to expand
internationally? In what industries are turnkey arrangements most common?
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5) Why should a firm be cautious about entering a licensing agreement?
6) Compare and contrast licensing agreements and franchising agreements.
7) What is a joint venture? What type of joint venture is most common? Provide an example
of a joint venture.
8) Imagine that you are meeting with your superiors to discuss entering a foreign market.
Your boss has asked you to analyze a joint venture prospect. Why might you tell your boss that
the joint venture is not a good idea?
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9) What are the two methods of entering foreign marketing using a wholly owned
subsidiary?
10) Consider why a firm should enter a market via a wholly owned subsidiary. What are the
advantages and disadvantages of this type of strategy?
11) Discuss the three advantages of acquiring an enterprise in a target market.
12) Discuss the advantages of establishing a greenfield venture in a foreign country.
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13) Discuss the three primary characteristics of a good ally.
14) How can a firm increase the probability of selecting a good partner?
15) Explain the term relational capital and the importance this concept plays in managing
an effective business alliance.
16) According to Bartlett and Ghoshal, how should firms from developing countries approach
international expansion?
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A) They suggest joint ventures to improve the firm’s presence in the country while also
growing the business opportunities for companies in the developing country.
B) They suggest that franchising should be used in order to minimize risk and allow for
the maximum expansion in the quickest amount of time.
C) They suggest turnkey operations that allow for a rapid startup.
D) They suggest that companies should use the entry of foreign multinationals as an
opportunity to learn from these competitors by benchmarking their operations and performance
against them.
17) The costs and risks associated with doing business in a foreign country are typically
A) low in an economically advanced nation.
B) low in the countries of the European Union.
C) high in an economically advanced nation.
D) high in a politically stable democratic nation.
18) _____ are the advantages associated with entering a market early.
A) Pioneering advantages
B) First-mover advantages
C) Core competencies
D) Late-mover advantages
19) Costs that an early entrant has to bear that a later entrant can avoid are known as
A) first-mover costs.
B) late-mover disadvantages.
C) pioneering costs.
D) licensing fees.
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20) Large-scale strategic commitments may
A) have many benefits and few to no risks.
B) increase strategic flexibility.
C) have many risks and few to no benefits.
D) limit strategic flexibility.
21) A _____ is more likely to capture first-mover advantages associated with demand
preemption, scale economies, and switching costs.
A) large-scale entrant
B) joint venture
C) small-scale entrant
D) turnkey contract
22) Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in
A) politically unstable developing nations that operate with a mixed or command
economy.
B) nations where there is a dramatic upsurge in either inflation rates or private-sector
debt.
C) politically stable developed and developing nations that have free market systems.
D) developing nations where speculative financial bubbles have led to excess
borrowing.
23) Early entrants to a market that are able to create switching costs that tie customers into
their products or services are capitalizing on
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A) first-mover advantages.
B) pioneering costs.
C) economies of scale.
D) late-mover advantages.
24) Which of the following is a first-mover advantage?
A) lower research and development costs and marketing costs than other firms
B) ability to preempt rivals and capture demand by establishing a strong brand name
C) ability to capitalize on the work done by other firms
D) creation of innovative products at lower costs than other firms
25) Switching costs may
A) drive early entrants out of the market.
B) make it easy for later entrants to win business.
C) make it difficult for later entrants to win business.
D) give later entrants a cost advantage over early entrants.
26) The costs of promoting and establishing a product offering when a firm enters a foreign
market prior to its rivals are known as ________ costs.
A) switching
B) market development
C) pioneering
D) promotional development
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27) A large-scale entrant is more likely than a small-scale entrant to be able to capture first-
mover advantages associated with
A) scale economies.
B) diseconomies of scale.
C) pioneering costs.
D) diseconomies of scope.
28) Which of the following statements about small-scale entry is true?
A) The commitment associated with a small-scale entry makes it possible for the small-
scale entrant to capture first-mover advantages.
B) Small-scale entry is a way to gather information about a foreign market before
deciding whether to enter on a significant scale.
C) By giving a firm time to collect information, small-scale entry increases the risks
associated with a subsequent large-scale entry.
D) Small-scale entry limits a firm’s ability to learn about a foreign market thereby also
limiting the firm’s exposure to that market.
29) _____ is advantageous because it avoids the cost of establishing manufacturing
operations in the host country and it may help a firm achieve experience curve and location
economies.
A) Licensing
B) Exporting
C) Franchising
D) A turnkey contract
30) In _____, the contractor agrees to handle every detail of the project for a foreign client.
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A) a joint venture
B) an exporting agreement
C) a turnkey project
D) a licensing agreement
31) A disadvantage of _____ is that the firm that enters into such an arrangement usually will
have no long-term interest in the foreign country.
A) wholly owned subsidiaries
B) exporting
C) licensing
D) turnkey projects
32) By its very nature, _____ limits a firm’s ability to coordinate strategic moves across
countries.
A) licensing
B) turnkey contracting
C) franchising
D) exporting
33) An advantage of _____ with a local partner is the knowledge of the local environment
that the local partner contributes to the venture.
A) turnkey contracts
B) licensing contracts
C) joint ventures
D) wholly owned subsidiary contracts
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34) Which of the following is true of exporting?
A) It avoids the often substantial costs of establishing manufacturing operations in the
host country.
B) It is the best choice if lower-cost manufacturing locations are available abroad.
C) Low transportation costs may make exporting uneconomical.
D) Tariff barriers may make exporting the most attractive option.
35) Which of the following is true of licensing?
A) Licensing is used when a firm possesses some tangible property but does not want to
pursue a potential application itself.
B) The firm does not have to bear the development costs and risks associated with
opening a foreign market.
C) It is an attractive option when a firm is interested in pursuing a foreign market and is
ready to commit substantial resources to a foreign market.
D) It is an attractive option for firms that have the capital to open overseas markets.
36) _____ agreements enable firms to hold each other “hostage,” thereby reducing the risk
they will behave in an opportunistic manner toward each other.
A) Turnkey
B) Franchising
C) Cross-license
D) Integrated license
37) There are several disadvantages of franchising as an entry mode. Which of the following
is one of them?
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A) There is little incentive for the franchisee to build a profitable operation as quickly as
possible.
B) The firm incurs many of the costs and risks of opening a foreign market on its own.
C) Franchising may inhibit the firm’s ability to use the profits obtained to open
additional businesses in the same country.
D) Franchising may inhibit the firm’s ability to take profits out of one country to support
competitive attacks in another.
38) In many countries, political considerations make _____ the only feasible entry mode.
A) joint ventures
B) franchises
C) licensing agreements
D) wholly owned subsidiaries
39) How can a firm protect its proprietary information in a joint venture?
A) Share only the technology that is central to the core competence of the firm.
B) Hold majority ownership in the venture so that the firm has greater control over the
technology.
C) Share only the technology of the firm, not the patents and copyrighted information.
D) Hold minority ownership in the venture so that the firm does not have to give over
control of the technology.
40) Firms entering a market via a _____ must bear all the costs and risks associated with the
venture.
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A) licensing contract
B) joint venture
C) turnkey contract
D) wholly owned subsidiary
41) If a firm can realize location economies by moving production elsewhere, it should avoid
A) exporting.
B) turnkey contracts.
C) licensing.
D) wholly owned subsidiaries.
42) When an exporting firm finds that its local agent is also carrying competitors’ products,
the firm may switch to a _____ to handle local marketing, sales, and service.
A) wholly owned subsidiary
B) franchising arrangement
C) turnkey operation
D) licensing agreement
43) In ____, the contractor agrees to handle every detail of the project for a foreign client,
including the training of operating personnel.
A) exporting
B) licensing
C) franchising
D) turnkey projects
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44) Turnkey projects are most common in which of the following industries?
A) fresh fruit, grain, and meat products
B) chemical, pharmaceutical, and metal refining
C) consumer durables, computer peripherals, and automotive parts
D) apparel, shoes, and leather products
45) Which of the following statements is true of turnkey projects?
A) Turnkey projects are most common in industries that use simple, inexpensive
production technologies.
B) A turnkey strategy can be more risky than conventional FDI, particularly in unstable
political environments.
C) A turnkey strategy is particularly useful where FDI is limited by host-government
regulations.
D) Firms that enter into a turnkey deal have a long-term interest in the foreign country.
46) Many American firms that sold oil-refining technology to firms in the Gulf now find
themselves competing with these firms in the world oil market. This is an example of
A) a firm entering into a turnkey project with a foreign enterprise, inadvertently creating
a competitor.
B) a firm entering into a turnkey deal having no long-term interest in the foreign
country.
C) a country subsequently proving to be a major market for the output of the process
that has been exported.
D) a firm selling its process technology through franchisees in different countries.
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47) An arrangement whereby a firm grants the right of intangible property to another entity
for a specified time period in exchange for royalties is _____ agreement.
A) a turnkey
B) a licensing
C) a greenfield
D) an acquisition
48) Which of the following is a distinct advantage of exporting?
A) It avoids the threat of tariff barriers by the host-country government.
B) Firms benefit from a local partner’s knowledge of the host country’s competitive
conditions.
C) It avoids the often substantial costs of establishing manufacturing operations in the
host country.
D) It is appropriate if lower cost locations for manufacturing the product can be found
abroad.
49) Patents, inventions, formulas, processes, designs, copyrights, and trademarks are all
forms of
A) licensing agreements.
B) franchising agreements.
C) intellectual property.
D) tangible property.
50) What is the primary advantage of licensing?
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A) It helps a firm avoid the development costs and risks associated with opening a
foreign market.
B) It gives a firm the tight control over manufacturing, marketing, and strategy.
C) It helps a firm achieve experience curve and location economies.
D) It increases a firm’s ability to utilize a coordinated strategy.
51) Which of the following is a disadvantage of licensing?
A) It does not help firms that lack capital to develop operations overseas.
B) It does not give a firm the tight control over strategy that is required for realizing
experience curve and location economies.
C) It cannot be used when a firm possesses some intangible property that might have
business applications.
D) The firm has to bear the development costs and risks associated with opening a
foreign market.
52) Under _____ agreement, a firm might license some valuable intangible property to a
foreign partner, but in addition to a royalty payment, the firm might also request that the foreign
partner license some of its valuable know-how to the firm.
A) an integrated licensing
B) a chartering
C) a franchising
D) a cross-licensing
53) Cross-licensing agreements are increasingly common in the _____ industries.
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A) transportation
B) high-technology
C) construction
D) consumer durables
54) _____ is pursued primarily by manufacturing firms and _____ is employed primarily by
service firms.
A) Licensing; franchising
B) Franchising; licensing
C) Franchising; exporting
D) Exporting; licensing
55) If a service firm wants to build a global presence quickly and at a relatively low cost and
risk, it must employ
A) chartering.
B) exporting.
C) a turnkey strategy.
D) franchising.
56) Which of the following statements about franchising is true?
A) It guarantees consistent product quality.
B) It tends to involve more short-term commitments than licensing.
C) It is a specialized form of licensing.
D) It is employed primarily by manufacturing firms.
57) Which of the following is an advantage of franchising?
A) A firm takes profits out of one country to support competitive attacks in another.
B) A firm is relieved of many of the costs and risks of opening a foreign market on its
own.
C) It guarantees consistent product quality and achieves experience curve and location
economies.
D) It improves the firm’s ability to take profits out of one country to support competitive
attacks in another.
58) Firms engaging in a _____ with a local company can benefit from a local partner’s
knowledge of the host country’s competitive conditions, culture, language, political systems, and
business systems.
A) turnkey project
B) joint venture
C) greenfield investment
D) licensing arrangement
59) The most typical joint venture is a _____ venture.
A) 50–50
B) 60–40
C) 75–25
D) 10–90
60) In a ____, the firm owns 100 percent of the stock.