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Exam 13: Entering Foreign Markets

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Question 51

Multiple Choice

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Which of the following is a reason why a relatively poor country may be an attractive target for inward investment?

A) Rapid economic growth
B) Political instability
C) Currency depreciation
D) High cost of living
E) Less developed infrastructure

F) D) and E)
G) A) and D)

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Question 52

Multiple Choice

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Which of the following postulates that top managers typically overestimate their ability to create value from an acquisition?

A) Bandwagon effect
B) Fisher effect
C) Hubris hypothesis
D) International Fisher effect
E) Learning effect

F) B) and E)
G) None of the above

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Question 53

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In a joint venture, a firm benefits from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems.

In which of the following situations can an international business command higher prices for a particular product in a foreign market?

Franchising as a mode of entry into foreign markets is employed primarily by:

According to David Ravenscraft and Mike Scherer's study, many acquisitions destroy rather than create value.

Turnkey projects being short-term propositions can be disadvantageous for a firm if a country subsequently proves to be a major market for the output of the process that has been exported. The firm can get around this problem by:

In international business, an advantage of being a late entrant in a foreign market is the ability to:

Spring, an American firm, recently acquired another company, Tazel Inc., in Indonesia. The high-level managers at Tazel quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because:

Exporting, as a mode of entry into foreign markets, does not help a firm achieve experience curve and location economies.

Under a cross-licensing agreement, a firm can either request a royalty payment or license some valuable intangible property to a foreign partner.

Axiom International, an Australian company, wants to expand its operations to China, a country that is politically, culturally, and economically different. The firm needs to select a mode of entry that would give it access to local knowledge, allow sharing of development costs and risks, and also be politically acceptable. Which of the following modes of entry into foreign markets is most suitable for Axiom International?

By considering advantages and disadvantages, trade-offs can often be avoided when selecting an entry mode.

Licensing increases the risk of losing control over a firm's proprietary technological know-how.

The probability of survival decreases if an international business enters a national market after several other foreign firms have already done so.

What are the advantages and disadvantages of exporting as a mode of entry into foreign markets?

Describe the advantages and disadvantages of acquisitions.

If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, what would be the preferable mode of entry?

In international business, an early entrant to a foreign market may be at a disadvantage relative to a later entrant, if regulations change in a way that diminishes the value of an early entrant's investments.

Which of the following modes of entry is suitable for service firms where the risk of losing control over the management skills or technological know-how is not much of a concern, and where the firms' valuable asset is their brand name?