San Francisco State University

IBUS 330

International Business, 8e

Chapter 12 Strategies for Analyzing and Entering Foreign Markets

1)Which of the following is not one of the three steps in increasing market share, revenue, and profits?

2. What is the first step in selecting a foreign market?

3. Which of the following is the least effective indicator of a country's potential for economic growth?

4.                          refer to expenses incurred by the firm as it enters a new foreign market.

5. Gameware recently entered the German market. Gameware executives also wanted to enter the Canadian market but had to delay the entry because of limited resources. What type of costs will Gameware incur as a result of being unable to enter the Canadian market?

6. Gameware recently entered the German market. Gameware incurred significant costs associated with setting up a business operation in Frankfurt, transferring managers to Germany, and shipping equipment to the German facility. Gameware's expenses are best described as  .

7. Which of the following are potential benefits of entering a new market?

8. Which theory listed below is useful in deciding which mode of entry to use when entering foreign markets?

9. The informational, political, and cultural disadvantages that foreign firms face when trying to compete against local firms in the host country market are referred to as                              .

10. Which of the following is the most intensive mode of entry into foreign markets?

11.                          are tangible or intangible resources owned by a firm which grant it a competitive advantage over its industry rivals.

12.                          are those factors that affect the desirability of host country production relative to home country production.

13.                          are those factors that make it desirable for a firm to produce a good or service itself rather than contracting with another firm to produce it.

14. Toyota's efficient manufacturing techniques and reputation for producing high- quality automobiles are examples of                                                                                     .

15. Delvin Pharmaceuticals, a U.S. firm, is considering the idea of entering the Japanese market. Which entry mode will Delvin most likely use?

16.                          is the most common form of international business activity.

17. Which of the following is a characteristic of exporting?

18.                          are those that pull a firm into foreign markets as a result of opportunities available there.

19.                          for exporting are those that push a firm into foreign markets.

20. Which of the following is an advantage of exporting?

21. Which mode of entry has the most potential to create a future competitor?

22. Which of the following is a characteristic of foreign direct investment?

23. Franklin Carpets engages in indirect exporting, so the firm sells its carpets to a(n)  .

24.                          occur(s) when a firm sells its products to a domestic customer, which in turn exports the product, in either its original form or a modified form.

25. When Hewlett-Packard buys microchips from Intel to use in manufacturing computers and then exports the completed computers to Europe,                                                                                        has occurred.

26. Which term refers to sales made to either distributors or end-users located outside the firm's home country?

27. Which term refers to the sale of goods by a firm in one country to an affiliated firm in another country?

28. When British Petroleum ships crude oil from its storage facilities in Kuwait to its Australian subsidiary,         has occurred.

29. Which form of exporting is used by firms in order to lower their production costs?

30. Which of the following would most likely discourage an international firm from relying on exports as an entry mode?

31. What are the third parties that specialize in facilitating imports and exports called?

32.                          offer services including export management companies, Webb- Pomerene associations, and international trading companies.

33. A(n)                            is a firm that acts as its client's export department.

34. Tanya is employed by an export management company that provides its services to many exporters in the Chicago area. Tanya would likely be responsible for

                        .

35. Wine consumption in China has been at an annual growth rate of                                               .

36. A(n)                            is a group of U.S. firms that operate within the same industry and are allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws.

37. Which of the following statements about Webb-Pomerene associations is most likely ?

38. A(n)                            is a firm directly engaged in importing and exporting a wide variety of goods for its own account.

39. Unlike an export management company, an international trading company

                        .

40. Where are the world's most important international trading companies located?

41. A sogo shosha is best described as a(n)                                         .

42. Which of the following best explains the success of the sogo shosha?

43. Which of the following solicits domestic orders for foreign manufacturers on a commission basis?

44. The                            acts as a foreign sales department for domestic producers by selling those firms' goods in foreign markets.

45.                          can bring together international buyers and sellers of standardized commodities like coffee and grains.

46. BTV Enterprises specializes in the physical transportation of goods for its clients by arranging customs documentation and obtaining transportation services. BTV Enterprises is most likely a(n)          .

47. The Mitsubishi Corporation is a firm that is directly engaged in importing and exporting a wide variety of goods for its own account and is a part of a keiretsu system. What type of export intermediary is it?

48. The Nintendo Company manufactures electronic video consoles and game cartridges. Nintendo provides game design firms with technical specifications for how Nintendo consoles function. The game design firms create the games and then pay Nintendo a fee to manufacture those games. What mode of entry is described in this example?

49. The firm that leases the right to use intellectual property is called the                                               .

50. Research suggests that in                                     of cases, a firm's initial direct exporting to a foreign market is the result of unsolicited orders.

51. Sub-Saharan Africa accounts for                                       of world GDP.

52. Which term refers to compensation under a licensing agreement?

53. Vinson Bicycles, a U.S. firm, is considering the idea of entering the EU market through an international licensing agreement. What is the main disadvantage of this entry method for Vinson?

54. Carmichael Candies, a U.S. firm, is considering the idea of entering the EU market through an international franchising agreement. What is the main advantage to Carmichael if the firm chooses this entry method?

55. In comparison to licensing, franchising offers a firm                                          .

56. International franchising is most likely to succeed when the franchisor has

                        .

57. Kodak focuses on developing photo editing software, and the firm has agreements with a Chinese manufacturer to assemble most Kodak cameras. Which entry mode for international business is used by Kodak?

58. British Airways has an arrangement with a state-owned airline headquartered in Brazil. British Airways provides the Brazilian airline with advice on reservation services and scheduling. Which entry mode for international business is used by British Airways?

59. Bechtel, a construction and engineering firm, has a contract with the Indian government to expand the airport in New Delhi. Bechtel will design, construct, and equip the airport before turning the facility over to the Indian government upon completion. Which entry mode for international business is used by Bechtel?

60. Which of the following is typically critical to a turnkey project?

61. Which term refers to a firm building and operating a facility before transferring ownership of the facility to another party?

62. Which country is the market leader in providing international business process outsourcing?

63. Juanita recently purchased a FDX Computer. She needs assistance setting it up and contacts the firm's customer service center, which is located in Bangalore, India. FDX Computer most likely engages in which of the following?

64. Which of the following is a method for foreign direct investment?

65. Comtex, a U.S. clock manufacturer, recently built a new production facility in Bangladesh. Which term best describes the activities of Comtex?

66. What is a common disadvantage of using a greenfield strategy?

67. The licensees that built Tokyo Disneyland insisted on a                                              licensing agreement with the Walt Disney Company before agreeing to invest the funds necessary to build the park.

68. When two or more firms agree to work together and create a joint owned firm to promote mutual interest,         has occurred.

69. Assessing market potential is the second step in the process of foreign market analysis.

70. A firm specializing in low-priced, lower-quality goods will most likely find a high- income market more attractive than a low-income one.

71. Firms should use both objective and subjective measures when considering the potential for growth in an economy.

72. Trade policies usually have little effect on a firm's choice of entry mode.

73. Government stability is an important factor in foreign market assessment.

74. Firms can reduce the uncertainty associated with sociocultural influences by focusing their internationalization efforts in countries that are culturally similar to their own.

75. Indirect costs are those the firm incurs in entering a new market and include costs associated with setting up a business operation.

76. Dunning's eclectic theory is useful in understanding which mode of entry to use.

77. When deciding which mode of entry to use, a firm must consider things like ownership advantages, location advantages, and internalization advantages.

78. Ownership advantages are always tangible resources.

79. Liability of foreignness refers to the internalization advantages that make it desirable to produce a good or service in-house.

80. Embedded technology is often best transferred through an equity mode.

81. Pharmaceutical firms routinely use licensing as their entry mode.

82. Exporting is the most complicated mode of internationalizing due to the issue of tariffs and nontariff barriers.

83. One disadvantage of exporting is the logistical complexities.

84. Foreign direct investment offers both high profit potential and high financial risk.

85. Reactive motivations for exporting are those that pull a firm into foreign markets as a result of opportunities available there.

86. Intracorporate transfers are common in the service sector.

87. Export management companies always take title to the goods.

88. Webb-Pomerene associations play a major role in international business.

89. The most important trading companies in the global marketplace are Japan's sogo shosha.

90. Manufacturers' agents specialize in the physical transportation of goods.

91. Royalties are determined most commonly as a percentage of the sales of the licensed products.

92. When the licensor fully investigates market opportunities and the abilities of its licensees, licensing has a relatively low financial risk.

93. The greater the investment costs incurred by the licensee, the longer is the likely duration of the licensing agreement.

94. International franchising is among the fastest growing forms of international business.

95. McDonald's, Pizza Hut, and KFC all rely on franchising for their international expansion.

96. Management contracts are attractive because they allow firms to earn additional revenues without incurring any investment risks or obligations.

97. When there is overcapacity in an industry, acquisition is the best strategy.

98. The number of joint ventures being formed today is on the decline.

99. Describe the basic components of foreign market analysis.

100. What types of government actions may encourage licensing?

101. What is the difference between direct costs and opportunity costs?

102. What are the five primary types of entry modes for foreign markets? What types of risks should international firms consider before entering a foreign market?

103. What is liability of foreignness?

104. What is the meaning of ownership advantages? Give an example.

105. Explain the meaning of internalization advantages.

106. What is an export management company? Why would an exporter hire an EMC? What are the two ways that EMCs operate?

107. What is contract manufacturing? What are the advantages and disadvantages of contract manufacturing?

108. What is indirect exporting?

109. Briefly describe the services provided by manufacturers' agents, manufacturers' export agents, export and import brokers, and freight forwarders.

110. What is the difference between international licensing and international franchising? What are the advantages of each entry mode?

111. How is compensation typically addressed in international licensing and franchising contracts? What basic issues should be addressed in such contracts?

112. What is the difference between a B-O-T project and a turnkey project? What are the benefits of each to an international business?

113. Why are international turnkey projects usually administered by large construction firms?

114. Which form of market entry should a firm use when it needs to coordinate the activities of its foreign subsidiaries to achieve strategic synergies?

115. What is the difference between a brownfield strategy and a greenfield strategy? Do you think one strategy is better than the other? Explain.

116. In a brief essay, discuss how both exporting and FDI enable international businesses to maintain control in a foreign environment.

117. What are the steps involved in foreign market analysis?

118. Explain the licensing process.

119. Describe the specialized entry modes for international business.

120. Turnkey projects and foreign direct investment are both risky modes for entering foreign markets. Briefly describe the risks associated with each mode.

121. Compare and contrast the three forms of foreign direct investment.