978-1305500891 Chapter 10 Solution Manual

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END-OF-CHAPTER GUIDE

*Review Questions and Answers

*Critical Discussion Questions and Answers

*Global Action

*Closing Case

REVIEW QUESTIONS AND ANSWERS

1. How do foreign firms suffer from liability of foreignness?



First, there are numerous differences in formal and informal institutions governing



Second, although customers in this age of globalization supposedly no longer

2. What does the institution-based view suggest about how a firm should address the

liability of foreignness? What does the resource-based view advise?

The institution-based view suggests that firms need to undertake actions deemed

legitimate and appropriate by the various formal and informal institutions governing

3. ON CULTURE: What risk does a firm take in putting strategic goals ahead of cultural

distance?

Students will likely point out that ignoring any aspect of a country’s culture is risky. A

4. Describe how four strategic goals may affect the decision of where to enter.

Four strategic goals include natural resources, markets, efficiency, and innovations. In

discussing this question, it might be good to point out that the specific industry will affect

5. Summarize the advantages of being a first mover.



First movers may gain advantage through proprietary technology.



First movers may make preemptive investments.

Chapter 10: Entering Foreign Markets

6. Regarding PengAtlas Map 3.3, consider emerging economies that are late movers in the

economic realm. To what extent do they have some of the same advantages as firms that

are late movers?

7. How does a large-scale entry differ from a small-scale entry?

Large-scale entries are a demonstration of strategic commitment to certain markets.

8. What are some of the hallmarks of each type of equity mode?



Acquisition: a wholly owned subsidiary is created through direct foreign investment.

9. How may the country-of-origin effect change for a firm over time?

Over time, the country-of-origin effect may shift and affect the use of that country’s name

10. Devise your own example of how a firm may use its capabilities to overwhelmingly

offset the liability of foreignness as it moves into a new foreign market.

In regards to the examples, the important thing is not so much the answer as the extent to

11. ON CULTURE: If you were a manager charged with choosing a new location for your

firm’s business, how would you go about matching the location options with your firm’s

strategic goals?

The important thing is not so much the answer as the extent to which the student

12. Compare Maps 3.1 and 3.4.

a. To what extent are the richest countries also among the easiest to do business? Are

any of the richest countries among the most difficult in which to do business? Indicate

whether you think the relationship is coincidental or causal and why you think that

way.

Chapter 10: Entering Foreign Markets

The countries that are the richest are among those that are easiest to do business but

b. If you were thinking of expanding your firm’s operations, you would probably wish

to go where it is easier to do business and where income is higher. Furthermore, at

least some of the poorest countries might like to have your firm expand into them to

help lift income. If such is the case, why don’t they simply make it easier to do

business? What do you think?

Explanations may vary but the values prevailing within countries and cultures may be a

c. Although at present the United States is regarded as one of the easier countries for

doing business, do you think that the long-term trend is for it to become even easier

or to become more difficult? Why?

CRITICAL DISCUSSION QUESTIONS AND ANSWERS

1. Pick an industry in which firms from your country are internationally active. What are the

top five most favorite foreign markets for firms in that industry? Why?

The specific choices will depend on the student’s home country. Even students from the

2. From institution-based and resource-based views, identify the liability of foreignness

confronting MNEs from emerging economies interested in expanding overseas. How can

such firms overcome them?

This is a question in which the answer is not as important as the thought process and the

ability to clearly articulate. The institution-based view suggests that firms need to take

ON ETHICS: Entering foreign markets, by definition, means not investing in a firm’s home

country. For example, Nissan closed factories in Japan and added a new factory in the United

States. GM shut down factories at home but kept them open in Europe. What are the ethical

dilemmas here?

You should start out by asking students whether there is truly an ethical dilemma. Within

the United States firms will sometimes shut down an operation in one part of the country

Chapter 10: Entering Foreign Markets

GLOBAL ACTION

1. You work for a mid-sized machinery firm that has never sold anything abroad. Top

managers have asked you to identify the top five potential markets that your firm can

focus on in its initial efforts to develop export markets. Please prepare a report to present

why you have selected those five countries.

Exercise 1 Answers

One resource which can be used is “Export.gov: Manufacturing Industries”. This website

can be found by entering the search term “export market” at the globalEDGE™ Resource

2. Your firm has been successfully exporting products to many customers around the world,

but has never set up a subsidiary abroad. Top managers want to know whether the firm

has reached a point that it would be advantageous to start setting up subsidiaries—and if

so, what would be the top three countries where the first batch of subsidiaries can be set

up and what would be the ideal mode of entry. Please prepare a report on what your

research has uncovered.

Exercise 2 Answers

One resource which can be used is “World Economic Forum: Global Competitiveness

Report”. This website can be found by entering the search term “competitiveness report”

CLOSING CASE DISCUSSION GUIDE AND ANSWERS

EMERGING MARKETS: Mickey Goes to Shanghai

1. Why does Disney feel compelled to make significant changes to its theme park when it

enters China?

2. Does Disney have any overwhelming resources and capabilities?

Chapter 10: Entering Foreign Markets

3. What are the lessons Disney has learned from operating theme parks outside the United

States (in Tokyo, Paris, and Hong Kong)? How applicable are these lessons to the new

park in Shanghai?

4. Will Disney’s new park in Shanghai be successful?