Chapter 9: Market Entry and Expansion
TRUE/FALSE
1. Proactive motivations influence firms that respond to environmental shifts by changing their activities
over time.
2. Profits provide the strongest proactive incentive to become involved in international marketing.
3. Geographic closeness to foreign markets may not translate into real or perceived closeness to the
foreign customers.
4. The primary outside influence on a firm’s decision to go international is foreign demand.
5. Bank participation in export trading companies was intended to allow better access to capital.
6. The small transaction volumes of the sogoshosha provides them with cost advantages.
7. Licensing increases the exposure to both government intervention and terrorism.
8. Licensing has been criticized as it lets multinational corporations capitalize on older technology.
9. From a recipient-country view, franchising requires considerable outflow of foreign exchange.
10. The advantage of franchising is that there is no need for standardization.
11. One key concern of franchising is the protection of the total business system that a franchise offers.
12. Corporate desire for growth is a major cause for the increase in foreign direct investment.
13. Efficiency seekers attempt to obtain the most economic sources of production.
14. A major cause for the increase in foreign direct investment is derived demand.
15. Nonfinancial incentives offer special funding for the investor by providing land or buildings.
16. By raising money locally, multinationals provide the much needed boost to smaller capital markets.
17. Full ownership by multinational firms is a prerequisite for international success.
18. Strategic alliances are arrangements between two or more companies with different types of business
objectives.
19. Strategic alliances are more rigid than joint ventures.
20. The risk of participating in an international venture is substantially increased for the supplier involved
in a management contract.
MULTIPLE CHOICE
1. Which of the following is a proactive motivation to go international?
a.
Competitive pressures
b.
Unique products
c.
Overproduction
d.
Excess capacity
2. The strongest proactive incentive to become involved in international marketing is _____.
a.
to avoid taxation
b.
to control overproduction
c.
the profit advantage
d.
creation of excess capacity
3. Historically, a firm with a competitive edge could count on being the sole supplier to international
markets for years to come. However, this advantage has shrunk dramatically because _____.
a.
of competing technologies and imitation due to insufficient protection of intellectual
property rights
b.
it is becoming increasingly difficult to gain knowledge about foreign customers,
marketplaces, or market situations
c.
globalization and the Internet do not allow the existence of a “first firm”
d.
most countries do not allow established big firms to enter their market
4. During downturns in the domestic business cycle, markets abroad provided an ideal outlet
for high inventories. This kind of market expansion represents _____.
a.
guerilla marketing
b.
innate exporting
c.
portfolio investment
d.
safety-valve activity
5. A firm with excess capacity assigns all fixed costs to domestic production. For the international
markets, the firm uses a pricing scheme that focuses mainly on variable costs. This strategy allows the
firm to offer its products abroad at a cost lower than at home. The firm in question could be accused of
_____.
a.
guerilla marketing
b.
dumping
c.
price skimming
d.
limit pricing
6. Which of the following refers to the lack of symmetry between growing international markets with
respect to cultural variables, legal factors, and other societal norms?
a.
The NIH syndrome
b.
Disequilibrium
c.
Psychological distance
d.
Environmental imbalance
7. The intervening individual or variable within the firm that initiates change and shepherds it through to
implementation is referred to as a _____.
a.
dodger
b.
change agent
c.
resource seeker
d.
contender
8. Which of the following is an internal change agent associated with the internationalization process?
a.
Demand
b.
Competition
c.
Governmental activities
d.
New management
9. In small and medium-sized firms, the initial decision to go international is usually made by the
president, with substantial input provided by the _____.
a.
HR department
b.
R&D team
c.
manufacturing department
d.
marketing department
10. The primary external influence on a firm’s decision to go international is _____.
a.
increasing competition at the international level
b.
management’s gamble on a new market segment
c.
government mandate requiring the firm to do so
d.
foreign demand for a particular product or service
11. A company that starts exporting its products or services within two years of its establishment is called
a(n) _____.
a.
innate exporter
b.
accidental exporter
c.
export management company
d.
trading company
12. _____ are domestic firms that perform international marketing services as commissioned
representatives or as distributors for several other firms.
a.
Sogoshoshas
b.
Innate exporters
c.
Export management companies
d.
Shell corporations
13. Which of the following is true about export management companies (EMCs)?
a.
Generally, most EMCs are large.
b.
The mode of operations of EMCs is constant for every client.
c.
The use of EMCs is a major channel commitment for the manufacturer.
d.
EMCs are multinationals involved in foreign investments.
14. Under a _____ agreement, one firm permits another to use its intellectual property in exchange for
royalty.
a.
personal contract purchase
b.
franchising
c.
hire purchase
d.
licensing
15. Which of the following costs is covered under the licensing agreement?
a.
Switching costs
b.
Sunk costs
c.
Fixed costs
d.
Transfer costs
16. While negotiating licensing agreements, which of the following refers to the costs incurred in the
foreclosure of other sources of profit, such as exports or direct investment?
a.
Opportunity costs
b.
Transfer costs
c.
R&D costs
d.
Sunk costs
17. _____ permits use of the names or logos of designers, literary characters, sports teams, and movie stars
on merchandise such as clothing.
a.
Copyright licensing
b.
Trademark licensing
c.
Patent licensing
d.
Utility licensing
18. In _____, a parent company grants an independent entity the right to do business in a specified manner
that includes the right to sell the parent company’s products and use its name, along with its
production, preparation, and marketing techniques.
a.
leasing
b.
a joint venture
c.
hire purchasing
d.
franchising
19. Which of the following is a key impediment to international franchising?
a.
The protection of the total business system that a franchise offers
b.
The franchisee’s concern about increased risks upon implementing a proven concept
c.
Increased outflow of foreign exchange from recipient nations
d.
The government’s concern regarding replacement of export jobs
20. Which of the following is true about franchising?
a.
From a government perspective, franchising replaces exports and export jobs.
b.
From a recipient-country view, franchising requires substantial outflow of foreign
exchange.
c.
Typically, there is no need for standardization in franchising.
d.
A key concern of franchising is the issue of selection and training of franchisees.
21. Which of the following best describes portfolio investment?
a.
It refers to direct investment in foreign entities.
b.
It is the purchase of a manufacturing plant in a foreign market.
c.
It is the outright purchase of a competing company.
d.
It focuses on the purchase of stocks and bonds internationally.
22. The United Nations defines _____ as “enterprises which own or control production or service facilities
outside the country in which they are based.”
a.
trading companies
b.
multinational corporations
c.
shell corporations
d.
export management companies
23. Which of the following is the negative effect of foreign direct investments by multinational
companies?
a.
Lower wage rates compared to the average domestically oriented firms
b.
Economic instability in the host countries
c.
Decrease in the number of jobs in the host countries
d.
Entry of imports on an ongoing basis
24. _____ demand is said to occur when large multinational firms who would like to maintain their
established business relationships, encourage their suppliers to follow them abroad.
a.
Derived
b.
Overfull
c.
Latent
d.
Irregular
25. Which of the following types of incentives consist of special depreciation allowances, tax credits or
rebates, special deductions for capital expenditures, tax holidays, and other reductions of the tax
burden on the investor?
a.
Financial incentives
b.
Fiscal incentives
c.
Nonfiscal incentives
d.
Nonfinancial incentives
26. _____ incentives are specific tax measures designed to attract the foreign investor.
a.
Financial
b.
Fiscal
c.
Nonfiscal
d.
Nonfinancial
27. _____ incentives offer special funding for the investor by providing land or buildings, loans, loan
guarantees, or wage subsidies.
a.
Financial
b.
Fiscal
c.
Nonfiscal
d.
Nonfinancial
28. _____ incentives consist of guaranteed government purchases; special protection from competition
through tariffs, import quotas, and local content requirements; and investments in infrastructure
facilities.
a.
Financial
b.
Fiscal
c.
Nonfiscal
d.
Nonfinancial
29. Multinational firms are accused of causing _____, when they deprive domestic firms of talent by
employing the brightest locals and moving them to another country.
a.
a brain drain
b.
cross-subsidization
c.
NIH syndrome
d.
profit repatriation
30. A major concern for governments about full ownership by multinational firms is profit _____, which is
the transfer of profits from the new foreign market back to the domestic country.
a.
repatriation
b.
sharing
c.
abolition
d.
disbursement
31. Which of the following is a major deterrent to full ownership of FDI?
a.
Profitability
b.
Product differentiation
c.
Market instability
d.
Competition
32. The collaboration of two or more organizations for more than a transitory period to share assets, risks,
and profits is referred to as a(n) _____.
a.
sole proprietorship
b.
acquisition
c.
portfolio investment
d.
joint venture
33. One special form of joint ventures consists of _____, which are arrangements between two or more
companies with a common business objective.
a.
wholly owned subsidiaries
b.
strategic alliances
c.
franchises
d.
reverse mergers
34. In a _____, the supplier brings together a package of skills that will provide an integrated service to the
client without incurring the risk and benefit of ownership.
a.
joint venture
b.
full ownership mechanism
c.
management contract
d.
portfolio investment
35. Which of the following observations is true of a management contract?
a.
For the supplier, the risk of participating in an international venture is substantially
increased.
b.
The supplier will be unable to exercise any amount of operational control.
c.
For the client, expertise that is built up is provided.
d.
For the client, organizational skills that are not available locally can be provided.
ESSAY
1. What is the difference between proactive and reactive motivators that spur a company to go
international?
2. List and describe the key corporate export stages.
3. Describe three types of ownership in foreign direct investment.