Chapter 13 Entering Foreign Markets True False Questions 1 A firm contemplating expansion should choose a foreign market based on an assessment of the nation s long run profit potential True False 2 The attractiveness of a country as a potential market for an international business depends solely on the size of its consumer market True False 3 First mover advantages refer to the advantages frequently associated with entering a market early True False 4 If an international business can offer a product that has been widely available in that market the value of that product to consumers is likely to be much greater than if the international business offers a product that has not been widely available in that market True False 5 For an international firm entering a foreign market before other international businesses does not have any drawbacks True False 6 The probability of survival decreases if an international business enters a national market after several other foreign firms have already done so True False 7 In international business a strategic commitment has a short term impact and is easily reversible True False 13 1 2014 by McGraw Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied scanned duplicated forwarded distributed or posted on a website in whole or part 8 In international business an early entrant to a foreign market may be at a disadvantage relative to a later entrant if regulations change in a way that diminishes the value of an early entrant s investments True False 9 Large scale entry allows an international firm to learn about a foreign market while limiting the firm s exposure to that market True False 10 A risk averse international firm that enters a foreign market on a small scale will increase its potential losses True False 11 According to Christopher Bartlett and Sumantra Ghoshal firms from developing countries cannot succeed in foreign markets in the presence of other established global competitors True False 12 Exporting as a mode of entry into foreign markets does not help a firm achieve experience curve and location economies True False 13 A drawback of exporting is that tariff barriers can make it uneconomical as a mode of entry into a foreign market True False 14 An international firm that enters into a turnkey deal has a long term interest in the foreign country True False 15 Licensing a mode of entry into a foreign market gives an international firm tight control over manufacturing marketing and strategy that is required for realizing experience curve and location economies True False 16 In a typical international licensing deal a licensor puts up most of the capital necessary to get an overseas operation going True False 13 2 2014 by McGraw Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied scanned duplicated forwarded distributed or posted on a website in whole or part 17 Under a cross licensing agreement a firm can either request a royalty payment or license some valuable intangible property to a foreign partner True False 18 In terms of the various modes of entry into a foreign market franchising is employed primarily by service firms whereas licensing is pursued primarily by manufacturing firms True False 19 Franchising a mode of entry into a foreign market helps firms exert greater quality control over franchises in foreign locations True False 20 The most typical joint venture is a 50 50 venture in which there are two parties each of which holds a 50 percent ownership stake and contributes a team of managers to share operating control True False 21 In a joint venture a firm benefits from a local partner s knowledge of the host country s competitive conditions culture language political systems and business systems True False 22 In international business joint ventures with local partners face a significantly higher risk of being subject to nationalization True False 23 In terms of the entry modes into a foreign market a joint venture does not give an international firm the tight control over subsidiaries that might be required to realize experience curve or location economies True False 24 When a firm s competitive advantage is based on technological competence a joint venture is the preferred mode of entry into a foreign market because it reduces the risk of losing control over that competence True False 25 An advantage of a wholly owned subsidiary is that it may be required if a firm is trying to realize location and experience curve economies True False 13 3 2014 by McGraw Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied scanned duplicated forwarded distributed or posted on a website in whole or part 26 Establishing a wholly owned subsidiary gives an international firm a 100 percent share in the profits generated in a foreign market True False 27 Establishing a wholly owned subsidiary is generally the cheapest method of serving a foreign market from a capital investment standpoint True False 28 If an international firm s core competence is based on proprietary technology entering a joint venture might risk losing control of that technology to the jointventure partner True False 29 An advantage of licensing and franchising is the low development costs and risks True False 30 An international firm that perceives its technological advantage to be transitory and susceptive to rapid imitation might want to license its technology to foreign firms True False 31 The greater the pressures for cost reductions are the more likely an international firm will want to pursue some combination of exporting and wholly owned subsidiaries True False 32 One of the advantages of acquisitions is that they are quick to execute True False 33 When an international firm makes an acquisition in a foreign market it acquires valuable intangible as well as tangible assets True False 34 According to David Ravenscraft and Mike Scherer s study many acquisitions destroy rather than create value True False 35 An advantage of establishing a greenfield venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants True False 13 4 2014 by McGraw Hill Education