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Global Marketing, 7e (Keegan/Green)
Chapter 9 Global Market Entry Strategies: Licensing, Investment, and Strategic Alliances
1) Starbucks had to close its small coffee cafe in Beijing's Forbidden City in 2007 bowing to criticism
that the present of a Western brand near the former imperial palace was disrespectful.
Answer: TRUE
Diff: 2 Page Ref: 254
AACSB: Reflective Thinking
Objective: 1
Question Type: Synthesis
2) Licensing is a contractual agreement whereby one company (the licensor) makes a legally protected
asset available to another company (the licensee) in exchange for royalties, license fees, or some other
form of compensation.
Answer: TRUE
Objective: 1
Question Type: Definitional
3) Organizations as diverse as Disney, Caterpillar, and National Basketball Association make extensive
use of licensing in overseas markets.
Answer: TRUE
Objective: 1
Question Type: Application
4) The only costs in licensing are the signing agreement and policing its implementation.
Answer: TRUE
Objective: 1
5) Apple's failure to license its technology in the pre-Windows era arguably cost the company tens of
billions of dollars.
Answer: TRUE
Objective: 1
1
© 2013 Pearson Education, Inc. Publishing as Prentice Hall
6) Companies may find that the upfront easy money obtained from licensing turns out to be a very
expensive source of revenue.
Answer: TRUE
Objective: 1
7) Sony was the first company to manufacture and market a transistor radio.
Answer: FALSE
Objective: 1
8) One of the advantages of a license arrangement is that it can create export market opportunities and
open the door to a high-risk manufacturing relationship.
Answer: FALSE
Objective: 1
9) Companies that use contract manufacturing provide technical specifitications to a sub-contractor or

local manufacturer.
Answer: TRUE
Objective: 1
10) Executives at Guatemala's Pollo Campero SA knew how to spot a market entry opportunity by
observing passengers flying to the United States from Guatemala City and San Salvador who often
carried packages of the company's spicy chicken on board the planes.
Answer: TRUE
AACSB: Analytic Skills
Objective: 3
Question Type: Critical thinking
11) Franchising is another variation of licensing strategy.

Answer: TRUE
Objective: 2
2
12) Franchising is a variation of licensing strategy in which there is a contract between the parent
company franchiser and a franchisee that allows the franchisee to operate a business developed by the
franchiser in return for all rights for operations.
Answer: FALSE
Objective: 2
13) In China, regulations require foreign franchisers to directly own two or more stores for a minimum
of one year before franchising.
Answer: TRUE
Objective: 2
14) McDonald's has learned the wisdom of leveraging local market knowledge by granting franchisees
considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific
preferences and taste.
Answer: TRUE
Objective: 2
15) Franchising in a global market is actually a market entry strategy that is typically executed with less
localization than licensing.
Answer: TRUE
Objective: 2
16) Foreign direct investment figures reflect investment flows out of the home country as companies
invest in or acquire plants, equipment, or other assets.
Answer: TRUE
Objective: 2
17) Foreign investment can take the form of minority or majority shares in joint ventures, minority or
majority equity stakes in another company, or outright acquisition.
Answer: TRUE
Objective: 2
3
18) A joint venture with a local partner represents a more extensive form of strategy that is similar to
exporting and licensing.
Answer: FALSE
Diff: 2 Page Ref: 260-261
Objective: 3
19) A lesson that can be learned from Anheuser-Busch's experience in Japan is that it is better to give
control to a local partner via a licensing agreement rather than making a major investment.
Answer: TRUE
Objective: 3
20) The joint venture between Corning Glass and Mexican manufacturer Vitro failed primarily due to
conflicts arising out of cultural differences.
Answer: TRUE
Objective: 3
21) GM and South Korea's Daewoo Group formed a joint venture which helped Daewoo improve its
competitiveness. The venture was terminated since Daewoo prevented the import of GM cars to Korea.
Answer: FALSE
Objective: 3
22) In an alliance, one has to learn skills of the partner. For example, Toyota learned many new things
from its partnership with GM.
Answer: TRUE
Objective: 3
23) "Greenfield investment" is a phrase sometimes used interchangeably with the phrase "licensing
agreement."
Answer: FALSE
Objective: 3
4
24) In 2008, the largest merger and acquisition deal in the pharmaceutical industry, Roche's acquisition
of Genentech, is an example of an equity stake.
Answer: FALSE
Objective: 3
25) Companies may move from licensing or joint venture strategies to ownership in order to achieve
faster expansion in a market, greater control, or higher profits.
Answer: TRUE
Objective: 3
26) Monsanto and the German pharmaceutical company, Bayer AG, entered a joint venture in order to
have subsidiaries in Japan.
Answer: FALSE
Objective: 3
27) If government restrictions prevent majority or 100-percent ownership by foreign companies, the
investing company will have to settle for a minority equity stake.
Answer: TRUE
Objective: 3
28) Japan's Fuji Photo Film Company invested hundreds of millions of dollars in the United States after
the U.S. government ruled that Fuji was guilty of dumping.
Answer: TRUE
Objective: 3
29) Following its bankruptcy filing in 2009, GM divested itself of several non-core businesses and
brands, including Saab.
Answer: TRUE
Objective: 3
5
30) Avon Products uses both acquisition and joint ventures to enter developing markets.
Answer: TRUE
Objective: 3
31) To succeed in global markets, firms can rely exclusively on the technological superiority or core
competence which made them successful in the past.
Answer: FALSE
Objective: 3
32) Sony entered into a strategic partnership with Samsung in order to produce flat-panel TV screens
due to the high product development costs.
Answer: TRUE
Objective: 3
33) One of the disadvantages of global strategic partnerships is it may strengthen a competitor in another
country thereby presenting a number of risks.
Answer: TRUE
Objective: 3
34) The alliance between GE and Snecma got off to a strong start due to the personal chemistry between
the top two executives of respective companies in spite of the differing views regarding governance,
management, and organization.
Answer: TRUE
Objective: 3
35) Asian cultures exhibit collectivist social values where cooperation and harmony are highly valued in
both personal life and the business world. Therefore, it is not surprising that some of the Asia's biggest
companies, including Mitsubishi and Hyundai, pursue cooperation strategies.
Answer: TRUE
AACSB: Multicultural and Diversity
Objective: 4
6
36) Because "keiretsu" relationships are crossing the Pacific and directly affecting the American market,
U.S. companies have reason to be concerned.
Answer: TRUE
Objective: 4
37) The South Korean government has recently abandoned the "chaebol" industry structure in favor of
the "keiretsu" structure.
Answer: FALSE
Objective: 4
38) Prior to the economic crisis of 1997-1998, the south Korea's "chaebol" had become bloated and
heavily in debt.
Answer: TRUE
Objective: 4
39) The virtual corporation will seem to be a single entity with vast capabilities but will really be the
result of numerous collaborations assembled only when needed.
Answer: TRUE
Objective: 5
40) In a country and market concentration strategy, a company serves many markets in a few countries.
Answer: FALSE
Objective: 6
7
41) For Starbucks and other companies whose business models include a service component, it is not
recommended that they use this method for going global.
A) joint ventures
B) licensing
C) 100-percent ownership
D) exporting
E) franchising
Answer: D
Objective: 1
42) Licensing as a market entry mode has several disadvantages and opportunity costs, which do not
include:
A) limited market control.
B) agreement may have short life.
C) leveraging and exploiting by licensee.
D) similar product or technology development by licensee.
E) adaptations by licensee to fit local tastes.
Answer: E
Objective: 2
43) ________ represent(s) a market entry strategy whereby one company permits a foreign company to
make use of its patents, know-how, technology, company name, or other intangible assets in return for a
royalty payment.
A) Joint ventures
B) One-hundred-percent ownership
C) Licensing
D) Exporting
E) Global strategic alliances
Answer: C
Objective: 2
8
44) In order to prevent a licensor-competitor from gaining unilateral benefit, licensing agreements
should provide for:
A) contract manufacturing.
B) franchising.
C) cross licensing.
D) strategic decision-making.
E) adaptation for local tastes.
Answer: C
Objective: 2
45) Pollo Campero, a chicken restaurant chain based in Central America, is using the following method
for expanding operations in the United States.
A) joint ventures
B) licensing
C) exporting
D) franchising
E) acquisition
Answer: D
Objective: 2
46) In the mid-1980s, Apple Computer lost tens of billions of dollars by not using:
A) joint ventures.
B) licensing.
C) 100% ownership.
D) exporting.
E) global strategic alliances.
Answer: B
Objective: 2
47) The specialty retailing industry, as well as the fast-food industry, favors ________ for global
growth.
A) licensing
B) investment
C) franchising
D) joint ventures
E) strategic alliances
Answer: C
Objective: 2
9
48) The agreements that allow McDonald's franchisees around the globe to use McDonald's trademarked
name and menu items represent, in essence, which form of market entry?
A) joint ventures
B) franchising
C) 100% ownership
D) exporting
E) acquisition
Answer: B
Objective: 2
49) McDonald's success in franchising in global markets can be attributed to several factors which do
not include:
A) a well known global brand name.
B) a business system that can be easily replicated.
C) local market knowledge.
D) cross licensing.
E) granting franchisees leeway to tailor menu offerings to suit local tastes.
Answer: D
Objective: 2
50) Honda has invested $550 million in building an assembly plant in Greensburg, Indiana; IKEA spent
nearly $2 billion to open stores in Russia; and South Korea's LG Electronics purchased a 58% stake in
Zenith Electronics. All of these are examples of:
A) acquisition.
B) licensing.
C) franchising.
D) FDI.
E) exporting.
Answer: D
Objective: 2
10
51) The disadvantages of joint venturing can include all of the following except:
A) Joint venture partners must share rewards as well as risks.
B) Joint ventures allow partners to achieve synergy.
C) Joint ventures can have the potential for conflict between partners.
D) A dynamic joint venture partner can evolve into a strong competitor.
E) A company incurs very significant costs by joint venturing.
Answer: B
Objective: 2
52) The strategy to use joint ventures has several advantages which do not include:
A) risk sharing.
B) reduced financial risk.
C) reward sharing.
D) achieve synergy.
E) only way to enter a country or region.
Answer: C
Objective: 2
53) Which of the following does not fit into the sequence of experiences Anheuser-Busch had in Japan?
A) Anheuser-Busch first entered Japan by means of a licensing agreement with Suntory, the smallest
brewery in Japan.
B) Anheuser-Busch created a joint venture with Kirin Brewery, the market leader.
C) Anheuser-Busch dissolved the joint venture with Kirin Brewery.
D) Anheuser-Busch entered into a joint venture with Kirin Brewery.
E) Anheuser-Busch reverted to a licensing agreement with Kirin Brewery.
Answer: D
Objective: 2
54) As a general rule, the Chinese government allows foreign companies to participate in its market only
if those companies agree to establish operations with local Chinese enterprises. Which market entry
mode would be the appropriate choice under these circumstances?
A) acquisition
B) licensing
C) joint venture
D) exporting
E) franchising
Answer: C
Objective: 2
11
55) The president of a Mexican company recently remarked, "Business in Mexico is done on a
consensus basis, very genteel and sometimes slow by U.S. standards." A few months later, the Mexican
company and its U.S. joint venture partner parted company. Judging by the president's remark, one
important reason for the "divorce" was:
A) failure of one partner to live up to the terms of the contract.
B) cultural differences.
C) the cancellation of NAFTA.
D) the U.S. government's insistence on quick negotiations.
E) the language barrier.
Answer: B
Objective: 2
56) GM executives are looking for a joint venture with AvtoVAZ, the largest carmaker in:
A) Germany.
B) Lithuania.
C) Russia.
D) Kazakhstan.
E) Turkey.
Answer: C
Objective: 2
57) In a joint venture with Russian manufacturer AvtoVAZ, GM executives were planning to have a
stripped-down reengineered car based on its Opel model. However, the market research revealed that a
"Made-in-Russia" car would only be acceptable if:
A) it has a German name.
B) it sported a very low sticker price.
C) it has an American name.
D) it has a very high sticker price.
E) it has a Russian name.
Answer: B
Objective: 2
12
58) Ford Motor Company (United States) has a 50-50 joint venture to build Ford Fiestas with:
A) Toyota (Japan).
B) Shanghai Automotive Industry (China).
C) BMW (Germany).
D) Mahindra & Mahindra (India).
E) Mazda (Japan).
Answer: D
Objective: 2
59) Which automaker currently has a joint venture with Hindustan Motors (India)?
A) Volkswagen
B) Ford
C) GM
D) Renault
E) Mazda
Answer: C
Objective: 2
60) Sony Ericsson is a ________ Sweden's Telefonaktiebolaget LM and Japanese consumer electronics
giant Sony Corporation.
A) joint venture between
B) licensor for
C) licensee for
D) franchisee for
E) franchisor for
Answer: A
Objective: 2
61) Which of the following currently owns a 70% stake in Skoda, the Czech automaker?
A) GM
B) Volkswagen
C) Ford
D) DaimlerChrysler
E) Renault
Answer: B
Objective: 2
13
62) Which automaker owns an equity stake in Japan's Nissan Motor?
A) GM
B) Volkswagen
C) Ford
D) DaimlerChrysler
E) Renault
Answer: E
Objective: 2
63) Tata Motors (India) acquired the following auto company:

A) Volkswagen AG (Germany).
B) Volvo (Sweden).
C) Jaguar (UK).
D) Toyota (Japan).
E) Hyundai (South Korea).
Answer: C
Objective: 2
64) Gerber's woes in France illustrate some of the disadvantages of which market entry strategy?
A) joint ventures
B) licensing
C) 100% ownership
D) exporting
E) franchising
Answer: B
Objective: 2
65) Which of the following is not a characteristic of global strategic alliances?

A) Participants maintain independence outside the framework of alliance.
B) Participants share benefits of the alliance.
C) Participants share control over the performance of the assigned tasks.
D) Participants make ongoing contributions in technology, products, and other areas.
E) Participants agree not to compete in areas unrelated to the alliance.
Answer: E
Objective: 3
14
66) Which of the following is not a characteristic of global strategic alliances?
A) Participants maintain independence outside the framework of alliance.
B) Participants share benefits as well as control.
C) Participants make ongoing contributions in technology, products, and other areas.
D) Participants focus on an individual country market.
E) Participants share benefits of the alliance.
Answer: D
Objective: 3
67) The terminology used to describe the new forms of cooperation strategies varies widely and the
phrases used include all of the following except:
A) collaborative agreements.
B) strategic alliances.
C) global strategic partnerships.
D) strategic international alliances.
E) Greenfield operations.
Answer: E
Objective: 3
68) GSPs (Global Strategic Partnerships) are attractive for several reasons which do not include:
A) sharing high product development costs.
B) sharing technological developments.
C) securing access to national and regional markets.
D) continuous transfer of technology between partners.
E) focus on a single national market or a specific problem.
Answer: E
Objective: 3
69) Which of the following does not fit in with the factors that should be considered by companies
forming GSPs?
A) Partners are competitors to each other.
B) Harmony is not the most important measure of success.
C) All employees and managers must understand where cooperation ends and competitive compromise
begins.
D) Learning from partners is critically important.
E) none of the above
Answer: E
Objective: 3
15
70) "Discussion and consensus must be the norms. Partners must be viewed as equals." When applied to
global strategic partnerships, this statement indicates the importance of which factor?
A) mission
B) strategy
C) governance
D) culture
E) organization
Answer: C
Objective: 3
71) "Successful GSPs create win-win situations, where participants pursue objectives on the basis of
mutual advantage." When applied to global strategic partnerships, this statement indicates the
importance of which factor?
A) mission
B) strategy
C) governance
D) culture
E) organization
Answer: A
Objective: 3
72) According to a 1991 report by McKinsey & Co., problems of alliances between Western and
Japanese firms were related to all of the following factors except:
A) objective levels of performance.
B) a feeling of mutual disillusionment.
C) difference in expectations.
D) balance between partners.
E) frictional loss.
Answer: A
Objective: 4
16
73) The success of CFM International (the strategic partnership between GE and Snecma) can be
attributed to which of the following?
A) compatibility of the partners.
B) capability of the partners.
C) commitment of the partners.
D) personal chemistry between executives.
E) all of the above
Answer: E
Objective: 4
74) Boeing developed the wide-bodied aircraft, the 777, with about ________ of the work subcontracted
out to Mitsubishi, Fuji, and Kawasaki.
A) 50%
B) 25%
C) 20%
D) 60%
E) 75%
Answer: C
Objective: 4
75) A number of factors combine to make Russia an excellent location for an alliance which do not
include:
A) a well-educated workforce.
B) quality is important to Russian consumers.
C) abundance of supplies.
D) potential for economic growth.
E) potential for growth in service sector.
Answer: C
Objective: 3
76) Which of the following is not true of Japanese keiretsu?

A) promotes risk sharing
B) promotes long-term employment
C) ensures low prices for Japanese consumers
D) blocks foreign suppliers from the Japanese market
E) relationships are cemented by bank ownership
Answer: E
Diff: 3 Page Ref: 274,276-277
Objective: 4
17
77) Which of the following is true about Japanese keiretsu?
A) Toyota is a vertical keiretsu, Mitsubishi is a horizontal keiretsu.
B) Toyota is a horizontal keiretsu, Mitsubishi is a vertical keiretsu.
C) Toyota and Mitsubishi are both horizontal keiretsu.
D) Toyota and Mitsubishi are both vertical keiretsu.
Answer: A
Diff: 3 Page Ref: 274,276-277
Objective: 4
78) Which of the following statements most accurately describes the extent to which GM and Toyota
outsource components?
A) GM and Toyota each outsource approximately 50% of their components.
B) Toyota outsources about 50% of its components; GM outsources about 75%.
C) GM outsources about 50% of its components; Toyota outsources about 75%.
D) Neither GM nor Toyota outsources a significant proportion of its components.
E) GM and Toyota each outsource approximately 25% of their components.
Answer: C
Objective: 4
79) Another perspective on the future of cooperative strategies envisions the emergence of:
A) mergers and acquisition.
B) virtual corporations.
C) franchising.
D) joint ventures.
E) keiretsu.
Answer: B
Objective: 5
18
80) Saab markets two luxury car models, both prized by drivers for their "quirkiness." About 30% of
Saab's sales come from the USA, with most of the rest from Western Europe. Which strategy does Saab
appear to be using?
A) country concentration/market segment concentration
B) country diversification/market segment concentration
C) country concentration/market segment diversification
D) country diversification/market segment diversification
Answer: A
Objective: 6
81) Walt Disney Company has successfully adapted licensing as a market entry mode in different
countries. What are the advantages of using licensing as entry mode?
Answer: Walt Disney Company generates nearly $15 billion in annual revenues from licensed
merchandise, thanks to the popularity of their theme parks, movies, and television shows, as well as
Mickey Mouse, Winnie the Pooh, and other popular characters which have gained familiarity all over
the world. Licensing is a contractual arrangement whereby one company (the licensor) makes a legally
protected asset available to another company (the licensee) in exchange for royalties, license fees, or
some other form of compensation. There are two key advantages associated with licensing as a market
entry mode. First of all, because the licensee is typically a local business that will produce and market
the goods or services on a local or regional basis, companies can circumvent tariffs, quotas, or similar
export barriers. Secondly, licensees are granted considerable autonomy by the licensor to freely adapt
the licensed goods to an extent to suit the local tastes and preferences. Disney licenses trademarked
cartoon characters, names and logos to producers of clothing, toys, and watches for sale throughout the
world. This allows Disney to create synergies based on its core theme park, motion pictures, and
television businesses. Its licensees have considerable leeway to adapt colors, materials, or other design
elements that fit with the local tastes of a particular country or region.
Objective: 1
19
82) Nike provides technical specifications to a subcontractor or local manufacturer for its products.
What is this arrangement called and what are its major benefits and drawbacks?
Answer: This type of arrangement is referred to as "contract manufacturing." Nike, for example,
provides technical specifications of products to be manufactured to the subcontractor, who then oversees
production. The licensing firm can specialize in product design and marketing, while transferring
responsibility for ownership of manufacturing facilities to contractors and subcontractors. Other
advantages include limited commitment of financial and managerial resources and quick entry into
target countries. This is especially helpful when the target market is too small to justify full- scale
investment. Also, there is the possible advantage of securing labor and resources at less cost than in the
licensor's home country or manufacturing plant. One disadvantage would be that the licensed companies
may become subject to public scrutiny and criticism for several reasons. Nike has to face this problem if
workers in the contracted companies are underpaid. Inhumane working conditions and hiring underage
workers have also been points of criticism by many governmental and private organizations. Violations
of sustainable business practices have also come under scrutiny.
Objective: 1
83) McDonald's and other fast food restaurants have benefitted tremendously by using franchising as a
mode of entry into different countries. What are the benefits of franchising and how does it differ from
other modes of entry?
Answer: Franchising involves a contract between a parent company (franchiser) and a franchisee that
allows a franchisee to operate a business developed by the franchiser in return for a fee and adherence to
franchise-wide policies and practices. This definition is very similar to that of licensing since franchising
itself is another variation of licensing strategy. McDonald's is a very good example of the success that
can be achieved through franchising. It has great appeal to local entrepreneurs who are very anxious to
learn and apply franchising, which has been found to be very successful in the United States. The
specialty retailing industry favors franchising as a market entry mode. Many of the famous American
restaurant chains have used franchising to enter and to develop in other countries. McDonald's has a
well-known global brand name and a business system that can be easily replicated in multiple country
markets. It also provides its franchisees considerable leeway to tailor restaurant interior designs and
menu offerings to suit country-specific preferences and tastes. Franchising is a market entry strategy that
is typically executed with less localization than licensing.
Objective: 1
20
84) Joint ventures are becoming very popular as entry mode into foreign markets. Why is this strategy so
attractive to companies interested in entering other markets in the world?
Answer: A joint venture with a local partner represents a more extensive form of participation in
foreign markets than either exporting or licensing. A joint venture is an entry strategy for a single target
country in which the partners share ownership of a newly created business entity. This strategy is
attractive for several reasons such as the sharing of risk. Sharing of risk is a very important advantage
when a company is entering a new and unfamiliar region. Also, by pursuing joint venture entry
strategies, a company can limit its financial risks as well as exposure to political uncertainty. A company
can also use the joint venture experience to learn about a new market environment. Joint ventures also
allow partners to achieve synergy by combining different value chain strengths. One company may be
helpful in providing knowledge about local markets and availability of resources, and the other company
may have a brand name and well-established reputation in the market. Thus, there can be a
complimentary effect by linking the attributes of both the companies. Joint venture is recommended for
companies which lack enough resources or technical know-how. Also, in cases where the governmental
policies restrict the full ownership of the companies by foreign businesses, joint venture is the only
option to enter.
Objective: 2
85) Companies like Anheuser-Busch, Corning Glass, and GM have learned a lot by using joint venture
as a mode of entry into a foreign market. Some of their experiences are not very positive. What are the
disadvantages of joint venturing?
Answer: Many companies have experienced difficulties, some serious, when working with partners
under joint venture agreement. Anheuser-Busch first entered the Japanese market in order to cross the
difficult barrier by entering into a licensing agreement with Suntory, the smallest of the brewers in
Japan. Although Budweiser became popular, it had a minuscule share of the market. Anheuser-Busch
then created a joint venture with Kirin Brewery, the market leader with a 90% stake in the venture.
Kirin's distribution channel was very helpful, and Anheuser-Busch was able to use some of Kirin's
facilities. On the other hand, Kirin gained a lot of knowledge about the beer market globally. The beer
market did not increase substantially for Anheuser-Busch, and the joint venture was losing money.
Finally, Anheuser-Busch decided to dissolve the joint venture and reverted to a licensing agreement with
Kirin. Thus, joint venture does not work in all circumstances, and at times licensing works as well. In
order for the joint venture relationship to work well, both partners must share rewards as well as risks.
The main disadvantage associated with joint venture is that a company may incur very significant costs
associated with control and coordination issues that arise when working with partners in another
country. Another disadvantage is that of potential for conflict between partners. These often arise out of
cultural differences. Corning Glass and Vitro, Mexico's largest industrial manufacturer, had a joint
venture. Mexican managers viewed the Americans as too direct and aggressive, whereas the American
managers believed Mexicans took too much time to make important decisions. Another disadvantage is
that a dynamic joint venture partner can evolve as a stronger competitor. GM and South Korea's Daewoo
had joint venture to produce cars for the Korean market. GM developed Daewoo's competitiveness, and
finally Daewoo terminated the venture since their cars were not allowed for exportation. Thus, all the
disadvantages have to be taken into account when entering into a joint venture agreement.
Diff: 3 Page Ref: 261,263
Objective: 2
21
86) Why would any firm, whether global or otherwise, seek to collaborate with another firm, be it local
or foreign?
Answer: Recent changes in the political, economic, sociocultural, and technological environments of
the global firms have prompted the need for strategies that are more current rather than the traditional
strategies. Trade barriers are less, global markets are more accessible, consumer needs and wants have
changed, product life cycles have shortened, and new communication technologies and trends have
emerged. These factors may provide unprecedented opportunities. However, there are strong strategic
implications for the global organizations and new challenges for the global marketer. All these
converging environmental forces or changes require different unprecedented global strategies that take
into account collaborations which were not thought of at any period of time. Today's competitive
environment is described as turbulent, dynamic, and unpredictable. Global firms are under intense
pressure to respond and adapt quickly. They have to pursue "entrepreneurial globalization" by
developing unique and flexible organizational capabilities, innovation, and updating global strategies
that take care of the demands.
Objective: 3
87) A true global strategic partnership is unique and different. Using the example of Sony's strategic
alliance with Samsung, discuss attributes that are needed for a fine working partnership.
Answer: A true global strategic partnership requires a mutual collaboration between partners. There are
five attributes that are described as important for this type of collaboration. (1) Two or more companies
should develop a joint long-term strategy aimed at achieving world leadership by pursuing cost-
leadership, differentiation, or a combination of two. Samsung and Sony are two major companies
jockeying for leadership in the global television market. Flat-panel TV market is the newest market that
has a great potential. (2) The relationship should be reciprocal with each partner bringing in specific
strengths that can prove to be mutually beneficial. Also, both sides should be able to learn from each
other. Samsung is the leader in the manufacturing technology into world-class products. They can learn
from Sony how the present technology can be advanced. (3) The partners' vision and effort are truly
global, extending beyond home countries and the home regions to the rest of the world. Sony and
Samsung are both global companies that market global brands throughout the world. (4) The
relationship should be organized along horizontal not vertical lines. Also, continual transfer of resources
laterally between partners is required, with resource pooling representing norms. Both Sony and
Samsung are in direct contact with each other and there is good sharing of resources. (5) When
competing in markets excluded from the partnership, the participants retain their national and
ideological identities. Both Sony and Samsung are well established and have sufficient key products in
the world market that they will be able to retain their national and ideological identities as well as
competitive edge.
Objective: 3
22
88) Why are alliances between Western companies and Asian competitors so different if not difficult?
What are some of the concerns, and how can those be addressed?
Answer: Western companies may find themselves to be at a disadvantage in GSPs with an Asian
competitor. To limit transparency, some companies involved in GSPs establish a "collaboration section."
This department is designed to serve as a gatekeeper through which requests for access to people and
information must be channeled. Unintended transfers are therefore guarded and controlled. A study by
McKinsey & Co. identified four common problem areas that have gone wrong in alliances between
Japanese and Western firms. The Japanese partner saw itself emerging from the alliance as a leader in its
business or building a new basis for the future, whereas the Western partner sought relatively quick and
risk-free financial returns. The second area of concern related to the balance between partners. Each
must contribute to the alliance and each must depend on the other to a degree that justifies participation
in the alliance. Another common cause of problems was found to be due to friction. This mainly
stemmed from differences in management philosophy, expectations, and approaches. Lastly, the study
found that short-term goals can result in the foreign partner limiting the number of people allocated to
the joint venture. The original goals of the venture are lost as each new manager takes their turn. There
is little original corporate memory or reminder of the initial intent of the venture. These concerns, if
addressed adequately and before any formal agreement is signed, will be helpful in taking care of later
concerns, frictions and unnecessary problems.
Objective: 4
89) Japanese keiretsu is considered to be a strong cooperative strategy that will have an impact in global
marketing. Describe what it is and how it can affect U.S. businesses.
Answer: Japan's keiretsu represents a special category of cooperative strategy which is an interbusiness
alliance or enterprise group. It exists in a broad spectrum of markets, including the capital market,
primary goods markets, and component parts markets. Keiretsu relationships are often cemented by
bank ownership of large blocks of stock and by cross-ownership of stock between a company and its
buyers and nonfinancial suppliers. Also, keiretsu executives can legally sit on each other's boards, share
information, and coordinate prices. Thus, keiretsu serves as a cartel that has the government's blessing.
Although it is not a market entry strategy per se, it played an integral part in the international success of
the Japanese companies as they sought new markets. Clyde Prestowitz provided the following example
to show how keiretsu relationships have a potential impact on U.S. businesses. In the 1980s, Nissan was
in the market for a supercomputer to use in car design. Two vendors under consideration were Cray and
Hitachi. Cray was the worldwide leader in supercomputers, and Hitachi had no functional product to
offer. When it appeared that the purchase of a Cray computer was pending, Hitachi executives called for
solidarity since both Nissan and Hitachi were members of the same big six keiretsu. Hitachi was pushing
Nissan to show preference for Hitachi, and the U.S. had to put pressure on both Nissan and the Japanese
government to have the sale proceed with Cray. Because keiretsu relationships are crossing the Pacific
and directly affecting the American market, the U.S. companies have a reason for concern. In California
alone, keiretsu owns more than half of the Japanese businesses. Other keiretsu businesses are moving
into different parts of the United States.
Diff: 2 Page Ref: 274,276-277
Objective: 4
23
Test Bank for Global Marketing 7th Edition by Keegan
90) Companies are faced with the decision whether to expand by seeking new markets in existing
countries or seeking new country markets for already identified and served market segments. Faced with
these situations, what are the strategies that can be followed?
Answer: There are four different dimensions that emerge in combination to produce four different sets
of strategies that are described as follows. (1) Country and market concentration, which involves
targeting a limited number of customer segments in a few countries. This is typically a starting point for
most companies and it matches with limited company resources and market investment needs. (2)
Country concentration and market diversification, in which a company serves many markets in a few
countries. Many European companies have followed this strategy. American companies that decide to
diversify in the U.S. market as opposed to going international have also followed this strategy. (3)
Country diversification and market concentration is the classic global strategy whereby a company seeks
out the world market for a product. This strategy is desirable since it serves the world customer, and a
company can achieve a greater accumulated volume at a lower cost. It also has a competitive advantage
due to cost. This is the strategy followed by well-managed businesses that serve a distinct need and
customer category. (4) Country and market diversification is the corporate strategy of a global,
multibusiness company such as Matsushita. Thus, based on the level of involvement desired and
available resources, one of the above-mentioned strategies should be selected.
Objective: 6
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9) Companies that use contract manufacturing provide technical specifitications to a sub-contractor or

11) Franchising is another variation of licensing strategy.

63) Tata Motors (India) acquired the following auto company:

65) Which of the following is not a characteristic of global strategic alliances?

76) Which of the following is not true of Japanese keiretsu?

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