bus 280 chp 13

The management of an acquiring firm is often too optimistic about the value that can be created via an acquisition and is thus willing to pay a significant premium over a target firm’s market capitalization. This is known as the _____ and is the reason why acquisitions fail.

hubris hypothesis

Which of the following is an advantage of acquisitions as a means of entering foreign markets?

It enables firms to preempt their competitors.

Which of the following is an advantage of acquisitions as a means of entering foreign markets?

They are quick to execute and help firms to rapidly build their presence in the target foreign market.

Which of the following is a disadvantage of exporting as a mode of entry into foreign markets?

The local agents may not market the firm’s products as well as the firm would if it managed its marketing itself.

Which of the following is an example of a first-mover advantage?

The ability to build sales volume in the foreign country

_____ refer to costs that an early entrant in a foreign market has to bear that a later entrant can avoid.

Pioneering costs

Which of the following is an advantage of franchising as a mode of entry into foreign markets?

The franchiser is relieved of many of the costs and risks of opening a foreign market on its own.

In international business, the benefits frequently associated with entering a foreign market early are known as _____.

first-mover advantages

Which of the following is an advantage of an acquisition as a means of entry into foreign markets?

It gives firms access to valuable intangible assets along with a set of tangible assets.

Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets?

It is a useful strategy to earn great returns from the know-how of a technologically complex process.

The probability of survival for an international business increases if it:

enters a national market after several other foreign firms have already done so.

Which of the following countries presents a favorable benefit-cost-risk trade-off scenario for foreign expansion?

A country with a free market system

Which of the following is a disadvantage of greenfield ventures as a mode of entering foreign markets?

There is a possibility of being preempted by aggressive global competitors who enter via acquisitions.

Which of the following is true of foreign expansion?

All the nations in the world do not all hold the same profit potential for a firm contemplating foreign expansion.

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:

taking a minority equity interest in the operation.

Which of the following is the first basic entry decision that a firm contemplating foreign expansion must make?

Which foreign markets to enter

Which of the following is a course of action suggested by Christopher Bartlett and Sumantra Ghoshal for companies based in developing nations?

Benchmark one’s operations and performance against foreign multinationals.

Which of the following is true of international firms considering foreign expansion?

If the firm’s core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology to the joint-venture partner.

Which of the following is generally the most costly form of serving a foreign market from a capital investment standpoint?

Wholly owned subsidiary

_____ with a foreign firm are believed to reduce the risks associated with licensing technological know-how.

Cross-licensing agreements

Which of the following is the most likely outcome of a foreign firm entering a developed nation on a small scale after other international businesses in the firm’s industry?

Limited future growth potential

Which of the following is an advantage of acquisitions as a means of entering foreign markets?

They are quick to execute and help firms to rapidly build their presence in the target foreign market.

Which of following is true of franchising as a mode of entry into foreign markets?

The franchiser insists that the franchisee agree to abide by strict rules as to how it does business.

Which of the following is a drawback of licensing as a mode of entry into foreign markets?

Licensing does not give a firm tight control over manufacturing, marketing, and strategy

Which of the following is an advantage of licensing as a mode of entry into foreign markets?

The licensor does not have to bear the development costs and risks associated with opening a foreign market.

Establishing a _____ gives international firms a 100 percent share in the profits generated in a foreign market.

wholly owned subsidiary

In the context of modes of entry into foreign markets, turnkey projects are a means of:

exporting process technology to other countries.

A joint venture in which both parties hold equal ownership stakes is known as a(n) _____.

50/50 joint venture

Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries?

It allows firms to use the profits generated in one market to improve its competitive position in another market.

Which of the following is true of strategic commitments for an international firm considering foreign expansion?

They are difficult to reverse.

Under a(n) _____ 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.

cross-licensing

If a firm is considering entering a country where there are no incumbent competitors to be acquired, then which of the following modes of entry into foreign markets is most suitable?

Greenfield venture

In exporting, problems with local marketing agents can be overcome by:

setting up wholly owned subsidiaries in foreign nations to handle local marketing.

Which of the following is a disadvantage of franchising as a mode of entry into foreign markets?

It is difficult to maintain quality control across foreign franchisees that are distant from the franchiser.

Which of the following is a disadvantage of franchising as a mode of entry into foreign markets?

Poor quality standards of a foreign franchisee can cause a decline in the franchising firm’s worldwide reputation.

Which of the following is a disadvantage of joint ventures as a mode of entry into foreign markets?

Joint ventures can lead to conflicts and battles for control between the investing firms.

Which of the following is a disadvantage of exporting as a mode of entry into foreign markets?

The local agents may not market the firm’s products as well as the firm would if it managed its marketing itself.

Which of the following is an advantage of franchising as a mode of entry into foreign markets?

The franchiser is relieved of many of the costs and risks of opening a foreign market on its own.

Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?

Foreign firms must bear the full capital costs and risks of setting up overseas operations.

An advantage of a(n) _____ as a mode of entry into foreign markets is that it is much easier to build an organization culture from scratch than it is to change the culture of an acquired unit.

greenfield venture

_____ with a foreign firm are believed to reduce the risks associated with licensing technological know-how.

Cross-licensing agreements

Which of the following is a disadvantage of greenfield ventures as a mode of entering foreign markets?

There is a possibility of being preempted by aggressive global competitors who enter via acquisitions

If a firm is seeking to enter a market via a wholly owned subsidiary where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, a(n) _____ is a suitable mode of entry.

acquisition

Which of the following modes of entry into foreign markets can result in a lack of control over quality?

Franchising

In international business, the benefits frequently associated with entering a foreign market early are known as _____.

first-mover advantages

Which of the following is a disadvantage of joint ventures as a mode of entry into foreign markets?

Joint ventures do not give a firm tight control over subsidiaries that it might need to realize experience curve or location economies.

Axiom International wants to expand its operations to a country that is politically, culturally, and economically different from its home country. The firm needs to select a mode of entry which 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?

Joint venture

Which of the following is an example of a first-mover advantage?

The ability to create switching costs that tie customers into one’s products or services

In exporting, problems with local marketing agents can be overcome by:

setting up wholly owned subsidiaries in foreign nations to handle local marketing.

In international business, a product that is not widely available in a foreign market and satisfies an unmet need:

is likely to have greater value.

Which of the following modes of entry into foreign markets have the advantage of being characterized by low development costs and risks?

Licensing

Which of the following is true of licensing as a mode of entry into foreign markets?

The licensor receives a royalty fee from the licensee.

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

When the product offers greater value to customers in the foreign market

Which of the following is an advantage of joint ventures as a mode of entry into foreign markets?

A foreign firm shares the costs and risks of development with its local partner.

Which of the following is true of market entry by an international firm considering foreign expansion?

Entering a large developing nation before most other international businesses on a large scale is associated with high levels of risk.

Which of the following factors determine the value that an international business can create in a foreign market?

Nature of indigenous competition

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:

taking a minority equity interest in the operation.

Which of the following is a reason why firms often overpay for the assets of an acquired firm?

Interest of more than one party in acquiring a particular firm

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, then a _____ is the preferable mode of entry.

greenfield venture

Which of the following is a disadvantage of franchising as a mode of entry into foreign markets?

Poor quality standards of a foreign franchisee can cause a decline in the franchising firm’s worldwide reputation.

_____ refer to costs that an early entrant in a foreign market has to bear that a later entrant can avoid.

Pioneering costs

Which of the following is a way in which the risk of failure of an acquisition can be reduced?

By a detailed auditing of operations, financial position, and management culture

Which of the following is an advantage of exporting as a mode of entry into foreign markets?

A firm can avoid the cost of establishing manufacturing operations in the host country. Response Feedback:

Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets?

It can be less risky than conventional FDI

Which of the following is a disadvantage of joint ventures as a mode of entry into foreign markets?

Joint ventures can lead to conflicts and battles for control between the investing firms.

In international business, a product that is not widely available in a foreign market and satisfies an unmet need:

is likely to have greater value.

Franchising, a mode of entry into foreign markets, is employed primarily by _____ firms.

service

If a firm is seeking to enter a market via a wholly owned subsidiary where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, a(n) _____ is a suitable mode of entry.

acquisition

The liability associated with foreign expansion is greater for foreign firms that:

enter a national market early.

In exporting, problems with local marketing agents can be overcome by:

setting up wholly owned subsidiaries in foreign nations to handle local marketing.

Which of the following is an advantage of exporting as a mode of entry into foreign markets?

A firm can avoid the cost of establishing manufacturing operations in the host country.

Why do firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries?

It allows firms to use the profits generated in one market to improve its competitive position in another market.

Which of the following modes of entry into foreign markets has the ability to realize location and experience curve economies?

Exporting

Which of the following is true of foreign expansion?

All the nations in the world do not all hold the same profit potential for a firm contemplating foreign expansion.

Which of following is true of franchising as a mode of entry into foreign markets?

The franchiser insists that the franchisee agree to abide by strict rules as to how it does business.

A _____, a mode of entry into foreign markets, entails establishing a firm that is collectively owned by two or more otherwise independent firms.

joint venture

Which of the following is true of basic entry decisions for an international firm into a foreign market?

Greater value of a product in a foreign market translates into an ability to charge higher prices and/or to build sales volume more rapidly

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country to profit from its technological know-how which is its core competency. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology?

Wholly owned subsidiary

Which of the following is an advantage of exporting as a mode of entry into foreign markets?

It helps a firm achieve experience curve and location economies.