SOM Ch 13 MC

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1. According to Christopher Bartlett and D. By 4. An early entrant find may C. faces a subsequent
Sumantra Ghoshal, how can local companies focusing on find itself at a disadvantage if change in business
differentiate themselves from foreign market niches it: regulations in the host-
multinationals? country.

A. is trying to realize location

A. By licensing their core technologies and experience curve
economies.
B. By entering into turnkey projects
B. incurs low development
C. By standardizing their product offerings costs.

D. By focusing on market niches C. faces a subsequent change

in business regulations in the
E. By raising trade barriers host-country.
2. Axiom International, an Australian company, B. Joint
D. has a core competence
wants to expand its operations to China, a venture
based on control over
country that is politically, culturally, and
technological know-how.
economically different. The firm needs to
select a mode of entry that would give it
E. considers a greenfield
access to local knowledge, allow sharing of
strategy.
development costs and risks, and also be
politically acceptable. Which of the 5. First-mover disadvantages A. disadvantages associated
following modes of entry into foreign refer to: with entering a foreign
markets is most suitable for Axiom market before other
International? international businesses.
A. disadvantages associated
with entering a foreign
A. Wholly owned subsidiary market before other
international businesses.
B. Joint venture
B. costs that a late entrant to
C. Exporting a foreign market has to bear.

D. Greenfield investments C. a direct restriction on the

quantity of a good that can
E. Licensing be imported into a country.
3. A distinction can be drawn between firms D.
D. imperfections in the
whose core competency is in which of the Technological
operation of the market
following? know-how
mechanism.
and
management
E. disadvantages experienced
A. Scale of entry and strategic know-how
by being a late entrant in a
commitments
foreign market.
B. Location and experience curves

C. Acquisitions and greenfield ventures

D. Technological know-how and

management know-how

E. Cost reductions and entry mode

6. Franchising as a mode of entry into
foreign markets is employed
primarily by:
A. service firms.
B. manufacturing companies.
C. online outfits.
D. high-technology companies.
E. primary industries.
7. How can a wholly owned subsidiary
be established in a foreign market?
A. Through a turnkey operation with
a local partner
B. Through franchising
C. By acquiring an established firm
in the host nation
D. By exporting
E. Through a licensing agreement
8. How can firms avoid incurring high
transport costs when exporting bulk
products?
A. By taking a minority equity
interest
B. By entering into a turnkey
project with a foreign firm
C. By manufacturing bulk products
regionally
D. By setting up subsidiaries
irrespective of market reach
E. By reducing the quantity of the
product offering
A. service firms. 9. If a firm is considering entering a country A.
where incumbents exist, and if the Greenfield
competitive advantage of the firm is based venture
on the transfer of organizationally
embedded competencies, skills, routines,
and culture, what would be the preferable
mode of entry?
A. Greenfield venture
B. Joint venture
C. Licensing agreement
C. By acquiring an
D. Franchising deal
established firm in the
host nation
E. Turnkey project
10. If a firm is seeking to enter a market via a A.
wholly owned subsidiary where there are acquisition.
already well-established incumbent
enterprises, and where global competitors
are also interested in establishing a
presence, a suitable mode of entry is a(n):
A. acquisition.
B. licensing deal.
C. By manufacturing
C. greenfield venture.
bulk products
regionally
D. turnkey project.
E. exporting deal.
11. In exporting, problems with local marketing E. setting up
agents can be overcome by: wholly
owned
subsidiaries
A. selling intangible property to a franchisee in foreign
and insisting on rules to conduct the nations to
business. handle local
marketing.
B. changing agents frequently.
C. engaging in turnkey projects and
exporting process technology to foreign
firms.
D. entering into cross-licensing agreements
with foreign firms.
E. setting up wholly owned subsidiaries in
foreign nations to handle local marketing.
12. In international business, an D. ride on an early 15. In which of the following modes of entry into B. Turnkey
advantage of being a late entrant entrant's investments in foreign markets does a firm agree to set up an project
in a foreign market is the ability to: learning and customer operating plant for a foreign client and hand
education. over the plant when it is fully operational?

A. create switching costs that tie

customers into products or A. Franchising agreement
services.
B. Turnkey project
B. capture demand by establishing
a strong brand name. C. Licensing agreement

C. build sales volume and ride D. Wholly owned subsidiary

down the experience curve before
early entrants. E. Joint venture
16. In which of the following situations can an C. When
D. ride on an early entrant's
international business command higher prices the
investments in learning and
for a particular product in a foreign market? product
customer education.
offers
greater
E. create a cost advantage over
A. When the product is widely available in the value to
first movers.
foreign market customers
13. In international business, a product A. is likely to have in the
that is not widely available in a greater value. B. When sales volumes is relatively low in the foreign
foreign market and satisfies an foreign market market
unmet need:
C. When the product offers greater value to
customers in the foreign market
A. is likely to have greater value.
D. When the product is more suitable to other
B. will have to be priced relatively foreign markets
low.
E. When domestic competitors are selling
C. will see a decrease in sales alternatives at reduced prices
volume.
17. Jupiter Systems is a high-tech firm looking to A. Wholly
set up operations in a foreign country. The owned
D. is not suited to that particular
firm's core competency is in technological subsidiary
market.
know-how. Which of the following modes of
entry would be most favorable to the firm if it
E. will fail to make a profit.
wants to keep a tight control over its
14. In terms of licensing, which of the E. Patent technology?
following is an intangible
property?
A. Wholly owned subsidiary

A. Infrastructure B. Joint venture

B. Machinery C. Franchising

C. Leased equipment D. Licensing

D. Advanced computing systems E. Turnkey project

E. Patent
18. The liability associated with
foreign expansion is greater
for foreign firms that:
A. choose to ride on an early
entrant's investments.
B. use countertrade
agreements.
C. enter a national market
early.
D. ride down the experience
curve behind their rivals.
E. avoid pioneering costs.
19. Licensing is NOT attractive to
which of the following firms?
A. Firms lacking the capital to
develop operations overseas
B. Firms unwilling to commit
substantial financial
resources to an unfamiliar
market
C. Firms requiring tight
control of operations for
realizing experience curve
and location economies
D. Firms wanting to explore
markets but prohibited from
doing so by investment
barriers
E. Firms with intangible
properties with business
applications that it does not
want to develop itself
C. enter a national market 20.
early.
C. Firms requiring tight
control of operations for
realizing experience curve 21.
and location economies
The probability of survival for A. enters a national market
an international business after several other foreign
increases if it: firms have already done so.
A. enters a national market
after several other foreign
firms have already done so.
B. avoids the use of
countertrade agreements.
C. enters a national market
early.
D. enters a foreign market via
turnkey projects.
E. avoids engaging in joint
ventures.
The risk of failure of an D. a detailed auditing of
acquisition can be reduced operations, financial
by: position, and management
culture.
A. undervaluing the assets of
an acquired firm.
B. ensuring that firms are
acquired in the home country.
C. replacing high-level
managers of an acquired firm.
D. a detailed auditing of
operations, financial position,
and management culture.
E. investing only in a firm that
is managing to break even.
22. The risks associated with E. acquires an established 24. Spring, an American firm, recently acquired C. there is
learning to do business in a host-country enterprise. another company, Tazel Inc., in Indonesia. The a clash
new culture are less if the firm: high-level managers at Tazel quit because between
they could not cope with the domineering and the
straightforward approach of their American cultures of
A. engages in global strategic counterparts. This illustrates how acquisitions the
coordination. may fail because: acquired
and the
B. imposes strict marketing acquiring
guidelines on how to do A. managers overestimate their ability to firm.
business. create value from an acquisition.

C. enters a greenfield venture B. integration of operations between the two

in the host country. firms takes longer than forecasted.

D. realizes substantial location C. there is a clash between the cultures of the

economies. acquired and the acquiring firm.

E. acquires an established host- D. an acquiring firm overpays for the assets of

country enterprise. an acquired firm.
23. Small-scale entry into a foreign B. is associated with a
E. inadequate pre-acquisition screening has
market makes it difficult to lack of commitment
been done.
build market share because it: demonstrated by the
foreign firm. 25. To reduce the risks of failure of an acquisition, D. move
managers must: rapidly
A. necessitates rapid entry into after an
a foreign market. acquisition
A. pay more for the acquired unit to please its to put an
B. is associated with a lack of existing employees. integration
commitment demonstrated by plan in
the foreign firm. B. encourage and facilitate management place.
turnover.
C. leads to escalating strategic
commitments. C. acquire a firm without wasting time on
screening.
D. requires that extra time be
spent in analyzing a foreign D. move rapidly after an acquisition to put an
market. integration plan in place.

E. leads to increased exposure E. ensure that the work cultures are

to a foreign market. significantly different from each other.
26. Turnkey projects being short-term C. taking a 28. What triggers the conflict of interest C. Shifts in
propositions can be disadvantageous for a minority over strategy and goals in joint relative
firm if a country subsequently proves to be a equity ventures? bargaining power
major market for the output of the process interest in of venture
that has been exported. The firm can get the partners
around this problem by: operation. A. Local partner's knowledge of host
country's competitive conditions

A. selling competitive advantage to B. Giving control of core technology to

competitors. the foreign partner

B. competing with the local firm in the global C. Shifts in relative bargaining power of
market. venture partners

C. taking a minority equity interest in the D. Trying to realize location and

operation. experience curve economies

D. withholding vital process technology from E. Risk of being subject to adverse

the local firm. government interference
29. When should a firm configure its value B. When cost
E. establishing a joint venture with a local
chain to maximize value at each stage? pressures are
firm.
intense
27. What gives a firm tight control for C. Setting
coordinating a globally dispersed value up wholly A. When government regulations relax
chain? owned
marketing B. When cost pressures are intense
subsidiaries
A. Signing joint-venture agreements C. When rapid imitation is expected

B. Installing manufacturing units in locations D. When the number of consumers

with optimal factor conditions increases

C. Setting up wholly owned marketing E. When incumbent competitors exist

subsidiaries
30. Which of the following countries B. A country with
presents a favorable benefit-cost-risk a free market
D. Establishing a greenfield venture
trade-off scenario for foreign system
expansion?
E. Using foreign marketing agents

A. A country ridden by private-sector

debt

B. A country with a free market system

C. A country experiencing a dramatic

upsurge in inflation rates

D. A country that is heavily populated

E. A country that is less developed and

politically unstable
31. Which of the following describes a
turnkey project?
A. Granting rights to intangible property
to other firms
B. Establishing firms that are jointly
owned by two or more otherwise
independent firms
C. Exporting process technology to
other countries
D. Setting up wholly owned subsidiaries
in foreign nations
E. Selling products produced in one
country to residents of other countries
32. Which of the following entry modes into
a foreign market best serves a high-tech
firm?
A. Turnkey projects
B. Franchising
C. Wholly owned subsidiaries
D. Joint ventures
E. Exporting
33. Which of the following factors
determines the value that an
international business can create in a
foreign market?
A. Population density in the foreign
market
B. Political stability of the foreign
market
C. Nature of indigenous competition
D. Per capita income in the foreign
market
E. Type of political system in the foreign
market
C. Exporting 34. Which of the following is a course D. Benchmark one's
process of action suggested by operations and
technology to Christopher Bartlett and Sumantra performance against
other countries Ghoshal for companies based in foreign multinationals.
developing nations?
A. Build up financial resources to
match those of the largest global
competitors.
B. Enter foreign markets at a
similar time and scale as
multinational companies.
C. Enter markets rapidly and exit
at an equally rapid pace to avoid
heavy losses.
D. Benchmark one's operations and
C. Wholly
performance against foreign
owned
multinationals.
subsidiaries
E. Do not focus on market niches
that multinational companies
ignore.
35. Which of the following is a C. It is difficult to
disadvantage of franchising? maintain quality
control across foreign
franchisees that are
A. The franchiser has to bear distant from the
development costs and risks franchiser.
associated with foreign expansion.
C. Nature of
B. Franchising leads to undesirable
indigenous
results for service firms.
competition
C. It is difficult to maintain quality
control across foreign franchisees
that are distant from the
franchiser.
D. The franchiser has no long-term
interests in the foreign country.
E. It forces a franchiser to take out
profits from one country to
support competitive attacks in
another.
36. Which of the following is a D. It is slower to 38. Which of the following is a E. The difficulty of
disadvantage of greenfield establish than disadvantage of small-scale entry building market share
ventures? acquisitions. for an international firm and capturing first-
considering foreign expansion? mover advantages

A. They have a higher potential for

throwing up unpleasant surprises. A. The possibility of escalating
commitment leading to major
B. It is much more difficult to build financial losses
an organizational culture from
scratch than to change the culture B. The limited availability of
of an existing unit. resources for use in other markets

C. Companies find it difficult to C. The lack of flexibility associated

avoid falling into the trap of the with strategic commitments
hubris hypothesis.
D. The increase in economic
D. It is slower to establish than exposure due to minimal time spent
acquisitions. in evaluating a foreign market

E. A firm does not have the E. The difficulty of building market

freedom to build the kind of share and capturing first-mover
subsidiary that it wants. advantages
37. Which of the following is a E. Availability of fewer 39. Which of the following is a B. High costs and
disadvantage of large-scale entry resources to support disadvantage of wholly owned risks
into a foreign market? expansion in other subsidiaries as a mode of entry into
desirable markets foreign markets?

A. Decrease in a firm's exposure to

the foreign market A. Lack of control over quality

B. Difficulty attracting customers B. High costs and risks

and distributors for the product
C. Problems with local marketing
C. Inability to build rapid market- agents
share irrespective of the scale of
entry D. Inability to engage in global
strategic coordination
D. Limited product acceptance due
to the avoidance of potential E. Lack of control over technology
losses

E. Availability of fewer resources

to support expansion in other
desirable markets
40. Which of the following is a B. Licensing does not 41. Which of the following is an A. They are quick to execute
drawback of licensing as a mode give a firm tight control advantage of acquisitions as a and help firms to rapidly
of entry into foreign markets? over manufacturing, means of entering foreign build their presence in the
marketing, and strategy. markets? target foreign market.

A. The licensor has to bear all

costs and risks associated with A. They are quick to execute
developing a foreign market. and help firms to rapidly build
their presence in the target
B. Licensing does not give a firm foreign market.
tight control over
manufacturing, marketing, and B. It is much easier to change
strategy. the culture of an existing
organization than build a new
C. Licensing does not benefit organization.
firms lacking the capital to
expand operations overseas. C. It is easier to convert the
operating routines of acquired
D. Licensing deals fail when units than establish routines in
there are barriers to foreign new subsidiaries.
investment in a particular
country. D. They give firms access to
valuable intangible assets
E. A firm that enters into a while minimizing a pileup of
licensing deal with a foreign tangible assets.
country will have no long-term
interest in that country. E. Acquired firms are often
undervalued and hence assets
can be purchased at minimal
prices.
42. Which of the following is an A. A firm can avoid the 43. Which of the following is an A. The franchiser is relieved
advantage of choosing cost of establishing advantage of franchising as a of many of the costs and
exporting as a mode of entry manufacturing operations mode of entry into foreign risks of opening a foreign
into foreign markets? in the host country. markets? market on its own.

A. A firm can avoid the cost of A. The franchiser is relieved of

establishing manufacturing many of the costs and risks of
operations in the host country. opening a foreign market on
its own.
B. A firm shares the
development costs and risks B. The franchiser is allowed to
with its host partner. take profits out of one
country to support
C. A firm can earn returns from competitive attacks in
process technology skills in another.
countries where FDI is
restricted. C. The franchiser can easily
maintain uniform quality
D. A firm has access to local across many geographically
partner's knowledge. dispersed franchisees.

E. A firm has the ability to D. Manufacturing concerns

engage in global strategic can be effectively
coordination. coordinated across adjacent
processes.

E. The franchiser can support

its short-term interests in a
country with an unstable
economy.
44. Which of the following is an
advantage of joint ventures as a
mode of entry into foreign
markets?
A. The foreign firm benefits from a
local partner's knowledge of the
host country.
B. The foreign firm can protect its
technology from being
appropriated by its local partner.
C. There is less cause for friction
and conflict between the foreign
and local partners.
D. It gives a firm tight control over
subsidiaries, which enables it to
realize experience curve or
location economies.
E. The foreign firm does not have
to bear any development costs
and risks associated with opening a
foreign market.
A. The foreign firm 45.
benefits from a local
partner's knowledge of
the host country.
46.
Which of the following is an B. It is a useful strategy to
advantage of turnkey projects earn great returns from the
as a mode of entry into know-how of a
foreign markets? technologically complex
process.
A. It is an ideal way to gain
entry into a country where FDI
is not limited by government
regulations.
B. It is a useful strategy to
earn great returns from the
know-how of a technologically
complex process.
C. It is an ideal way to
establish a firm's long-term
presence in a foreign country.
D. It helps protect a firm's
competitive advantage.
E. The firm that enters into a
turnkey project with a foreign
enterprise avoids giving rise to
potential competitors.
Which of the following is an A. The ability to create
example of a first-mover switching costs that tie
advantage? customers into one's
products or services
A. The ability to create
switching costs that tie
customers into one's products
or services
B. The avoidance of pioneering
costs that a later entrant into
the foreign market has to bear
C. The increased probability of
surviving in a foreign market
D. The opportunity to observe
and learn from the mistakes of
other entrants
E. The ability to let later
entrants ride ahead on the
experience curve
47. Which of the following is an example of B. Biotechnology 50. Which of the following is a risk of entering B.
an industry in which cross-licensing developing nations like India and China on a Absence
agreements are increasingly becoming large scale? of prior
common? foreign
entrants
A. Lower potential for long-term rewards
A. Glass-blowing
B. Absence of prior foreign entrants
B. Biotechnology
C. Lack of control over quality
C. Organic farming
D. Fear of rapid imitation of technology
D. Basketry
E. High management turnover
E. Weaving
51. Which of the following is the most likely D.
48. Which of the following is a reason why A. Rapid outcome of a foreign firm entering a developed Limited
a relatively poor country may be an economic growth nation on a small scale after other international future
attractive target for inward businesses in the firm's industry? growth
investment? potential

A. Capturing first-mover advantages

A. Rapid economic growth
B. Political instability
C. Currency depreciation
D. High cost of living
E. Less developed infrastructure
49. Which of the following is a reason why
firms often overpay for the assets of
an acquired firm?
B. Higher pioneering costs
C. Rapid increase in market share
D. Limited future growth potential
E. Increase in sales volume
D. Interest of
more than one
party in acquiring
a particular firm

A. Studies supporting the rise of failed

companies post acquisitions

B. Evidence of high management

turnover post acquisitions

C. The success rate of acquisitions

exceeding that of failures

D. Interest of more than one party in

acquiring a particular firm

E. Inevitable clash between cultures of

acquiring and acquired firms
52. Which of the following is true
of international firms
considering foreign
expansion?
A. The timing and scale of
entry of foreign expansion
are minor details in
comparison with the choice of
foreign market.
B. The long-run economic
benefits of doing business in
a country are solely a
function of the country's
population size.
C. 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.
D. The costs and risks
associated with foreign
expansion are higher in
economically advanced
nations.
E. Politically unstable and
less developed nations offer
favorable benefit-cost-risk
trade-off conditions.
C. 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.
54.
55.
53. Which of the following is true of the costs D. They are
and risks associated with doing business in a lower in
foreign country? economically
advanced
nations.
A. They are greater for late entrants.
B. They are higher in politically democratic
nations.
C. They are less pronounced in the case of
licensing.
D. They are lower in economically
advanced nations.
E. They are called opportunity costs.
Which of the following modes of entry into B.
foreign markets can result in a lack of Franchising
control over quality?
A. Exporting
B. Franchising
C. Turnkey projects
D. Wholly owned subsidiaries
E. Joint ventures
Which of the following modes of entry is B.
suitable for service firms where the risk of Franchising
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?
A. Exporting
B. Franchising
C. Licensing
D. Turnkey projects
E. Cross-licensing
56. 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
57. Which of the following types of entry
into a foreign market allows a firm to
learn about the foreign market while
limiting the firm's exposure to that
market?
A. Early entry
B. Small-scale entry
C. Large-scale entry
D. Late entry
E. Rapid entry
58. Why do acquisitions fail sometimes?
A. There is a clash between the cultures
of the acquiring and acquired firm.
B. Acquisitions take a long time to
execute.
C. Acquisitions are easily preempted by
making greenfield investments.
D. The revenue and profit stream
generated by an acquisition's resources
is usually unknown.
E. Losses produced by intangible assets
outweigh profits from acquired tangible
assets.
C. Hubris 59. Why do firms pursuing global C. It allows firms to use
hypothesis standardization or the profits generated in
transnational strategies tend one market to improve its
to prefer establishing wholly competitive position in
owned subsidiaries? another market.
A. It gives firms sound
knowledge of the local
markets, culture, and the
political environment.
B. It helps protect competitive
advantages based on
technology.
B. Small-scale
C. It allows firms to use the
entry
profits generated in one
market to improve its
competitive position in another
market.
D. It is the most politically
accepted mode of entry into
foreign markets.
E. It has the least costs and
risks associated with
developing a foreign market.
60. Why should a high-tech firm B. Risk of losing control
avoid selecting licensing as a over technology
mode of entry?
A. There is a
clash between
the cultures of
A. Threat of creating efficient
the acquiring and
partners
acquired firm.
B. Risk of losing control over
technology
C. Fear of rapid imitation of
core technology
D. Lack of a transitory
technological advantage
E. Inability to deter
development costs