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A) joint venture
B) wholly owned subsidiary
C) turnkey project
D) franchising agreement
61) Which of the following is true of wholly owned subsidiaries?
A) It is the least expensive method of serving a foreign market from a capital investment
standpoint.
B) It the most feasible entry mode due to the political considerations.
C) It is required if a firm is trying to realize location and experience curve economies.
D) It is particularly useful where FDI is limited by host-government regulations.
62) A wholly owned subsidiary is appropriate when the firm wants
A) to share the cost and risk of developing a foreign market.
B) 100 percent of the profits generated in a foreign market.
C) a plant that is ready to operate.
D) to test a market.
63) A _____ entails establishing a firm that is owned together by two or more otherwise
independent firms.
A) joint venture
B) licensing agreement
C) franchisee
D) turnkey contract
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64) Apple exports its products to many countries. An advantage of exporting products to
another country is that it
A) minimizes exchange rate risks.
B) provides the ability to achieve experience curve and location economies.
C) faces less trade barriers.
D) gives firms access to local knowledge.
65) When technological know-how constitutes a firm’s core competence, which entry mode
is the optimal choice?
A) foreign franchises controlled by joint ventures
B) licensing agreements
C) wholly owned subsidiaries
D) turnkey contracts
66) Firms pursuing global standardization or transnational strategies tend to prefer _____
arrangements.
A) wholly owned subsidiary
B) franchising
C) joint-venture
D) licensing
67) If a firm’s core competency is based on control over proprietary technological know-how,
_____ and _____ arrangements should be avoided if possible to minimize the risk of losing
control over that technology.
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A) licensing; joint venture
B) wholly owned subsidiary; exporting
C) turnkey contracts; exporting
D) exporting; joint venture
68) If a high-tech firm sets up operations in a foreign country to profit from a core
competency in technological know-how, which of the following entry strategy is best?
A) joint ventures
B) licensing
C) wholly owned subsidiaries
D) turnkey contacts
69) The valuable asset of firms, whose competitive advantage is based on management
know-how, is their
A) top management staff.
B) USP.
C) advertisements.
D) brand name.
70) Most service firms have found that _____ with local partners work best for the master
controlling subsidiaries.
A) joint ventures
B) licensing agreements
C) greenfield investments
D) turnkey projects
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71) A firm can establish a wholly owned subsidiary in a country by building a subsidiary
from the ground up, called the
A) joint venture.
B) turnkey strategy.
C) licensing agreement.
D) greenfield strategy.
72) What is true of acquisitions?
A) It is a time-consuming process.
B) Managers view them as more risky than greenfield ventures.
C) They give the firm a much greater ability to build the kind of subsidiary company
that it wants.
D) In many cases, firms make acquisitions to preempt their competitors.
73) According to the _____, top managers typically overestimate their ability to create value
from an acquisition.
A) misvaluation theory
B) performance extrapolation hypothesis
C) market timing theory
D) hubris hypothesis
74) To increase the potential for a successful acquisition, a firm should
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A) always bid low to allow for partial failure.
B) try to acquire a firm with a very different corporate culture so there is no forced
overlap.
C) rush to beat out other competitors.
D) screen the foreign enterprise to be acquired.
75) Firms entering markets where there are no incumbent competitors to be acquired should
choose
A) greenfield investments.
B) joint ventures.
C) acquisitions.
D) takeovers.
76) _____ allow a firm to rapidly build its presence in the target foreign market.
A) Joint ventures
B) Acquisitions
C) Subsidiaries
D) Turnkey contracts
77) The main advantage of _____ is that it gives the firm a much greater ability to build the
kind of subsidiary company that it wants.
A) an acquisition
B) strategic alliances
C) greenfield investment
D) franchising
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78) If a firm is trying to enter a market where there are already well-established companies,
and where global competitors are also interested in establishing a presence, the firm should
choose
A) a franchise.
B) a greenfield investment.
C) a joint venture.
D) an acquisition.
79) Which of the following is true of establishing a greenfield venture in a foreign country?
A) Greenfield investments are less risky than acquiring an existing company in a foreign
market.
B) A degree of uncertainty is associated with a greenfield venture because of future
revenue and profit prospects.
C) Greenfield investments virtually eliminate the possibility of a more aggressive global
competitor entering the market via acquisitions.
D) Greenfield investments are quick to establish.
80) _____ refer to cooperative agreements between potential or actual competitors.
A) Greenfield investments
B) Strategic alliances
C) Takeovers
D) Licensing agreements
81) Which of the following statements is true of strategic alliances?
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A) The fixed costs and associated risks of developing new products or processes are
borne by the alliance partner.
B) They are a way to bring together complementary skills and assets that both
companies develop.
C) They limit the entry of firms into foreign markets.
D) A firm risks giving away technological know-how and market access to its alliance
partner.
82) Managing an alliance successfully requires building interpersonal relationships between
the firms’ managers. This is sometimes referred to as
A) relational capital.
B) relational assets.
C) operational assets.
D) venture capital.
83) An advantage of forming a strategic alliance is that it helps firms
A) protect their procedures and technologies.
B) reduce the level of conflicts that occur within an organization.
C) share the risks of developing new products or processes.
D) increase the cultural similarities between employees.
84) Which of the following is true of strategic alliances?
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A) Strategic alliances can make entry into a foreign market difficult.
B) Strategic alliances, while they have many benefits, do not allow firms to share the
fixed costs of developing new products or processes.
C) Strategic alliances allow firms to bring together complementary skills and assets that
neither company could easily develop on its own.
D) Strategic alliances, while beneficial to firms, make the establishment of
technological standards for an industry difficult.
85) _____ is a way to bring together complementary skills and assets that neither company
could easily develop on its own.
A) An alliance
B) A turnkey contract
C) A wholly owned subsidiary
D) A licensing agreement
86) _____ can be used to formalize arrangements to swap skills and technology in a strategic
alliance.
A) Modularization
B) Cross-licensing agreements
C) Structured transfer agreements
D) Contractual safeguards
87) _____ refers to the building of interpersonal relationships between the firms’ managers in
a strategic alliance.
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A) Alliance partnerships
B) Joint management
C) Relational capital
D) Team building
88) The choice of which international markets to enter should be driven by an assessment of
absolute short-run growth and profit potential.
⊚ true
⊚ false
89) The attractiveness of a country as a potential market for an international business depends
on balancing the benefits, costs, and risks associated with doing business in that country.
⊚ true
⊚ false
90) When determining the value of a foreign market, an international firm must consider both
its products and the competition.
⊚ true
⊚ false
91) Educating customers is an element of pioneering costs.
⊚ true
⊚ false
92) A strategic commitment can usually be successfully reversed by the top management at
will.
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⊚ true
⊚ false
93) Gadgets, Inc., wants to enter a foreign market on a small scale. This will allow it to learn
about the market while limiting the firm’s exposure to that market.
⊚ true
⊚ false
94) Exporting from a firm’s home base is most appropriate when lower-cost locations for
manufacturing the product can be found abroad.
⊚ true
⊚ false
95) Tangible property includes patents, designs, copyrights, and trademarks.
⊚ true
⊚ false
96) Licensing limits a firm’s ability to realize experience curve and location economies.
⊚ true
⊚ false
97) Franchising enables a firm to quickly build a global presence.
⊚ true
⊚ false
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98) The most typical joint venture is a 60–40 venture, in which one party holds most of the
ownership stake.
⊚ true
⊚ false
99) A wholly owned subsidiary limits a firm’s control over marketing and sales in different
countries.
⊚ true
⊚ false
100) If a firm’s core competence is proprietary technological knowledge, a joint venture is
preferable.
⊚ true
⊚ false
101) Brand names such as Starbucks and Subway are well protected by international laws
pertaining to trademarks.
⊚ true
⊚ false
102) A joint venture is often politically more acceptable than a wholly owned subsidiary and
brings a degree of local knowledge to the subsidiary.
⊚ true
⊚ false
103) The greater the pressures for cost reductions, the more likely a firm will want to pursue
some combination of exporting and wholly owned subsidiaries.
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⊚ true
⊚ false
104) Acquisitions rarely produce disappointing results.
⊚ true
⊚ false
105) Overpayment for assets of an acquired firm is one reason acquisitions fail.
⊚ true
⊚ false
106) Johan’s firm is considering entering a country where there are no incumbent competitors
to be acquired. Its best option is likely to be a greenfield venture.
⊚ true
⊚ false
107) Unlike joint ventures, strategic alliances require the firm to bear all the costs and risks of
foreign expansion.
⊚ true
⊚ false
108) A good ally will expropriate the firm’s technological know-how while giving away little
in return.
⊚ true
⊚ false
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109) Contractual safeguards cannot be written into an alliance agreement to guard against the
risk of opportunism by a partner.
⊚ true
⊚ false
110) To maximize the learning benefits of an alliance, a firm must try to learn from its partner
and then apply the knowledge within its own organization.
⊚ true
⊚ false
Answer Key
Test name: chapter 15
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