Global strategy 3rd edition peng test bank

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GLOBAL STRATEGY: Test Bank/ Chapter Six

CHAPTER 6 – ENTERING FOREIGN MARKETS TEST BANK TRUE/FALSE QUESTIONS 1. The Liability of Foreignness is the inherent disadvantage foreign firms experience in host countries because of their nonnative status. a. True b. False AACSB: BUSPROG: Reflective Thinking; DISC: Environmental Influence LO: 6-1; Bloom’s: Knowledge; Difficulty: Easy 2. An underlying reason for firms to NOT go abroad is the size of the firm. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-1; Bloom’s: Comprehension; Difficulty: Moderate 3. An underlying reason for firms to NOT go abroad is the size of the domestic market. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-1; Bloom’s: Comprehension; Difficulty: Moderate 4. In regards to industry-based considerations, the higher the entry barriers, the more intensely firms will attempt to compete abroad. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Comprehension; Difficulty: Moderate 5. Backward vertical integration refers to vertical integration that has not been updated. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Knowledge; Difficulty: Easy 6. The bargaining power of suppliers may prompt backward vertical integration. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Comprehension; Difficulty: Easy 7. The bargaining power of buyers may lead to forward vertical integration. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy 1

GLOBAL STRATEGY: Test Bank/ Chapter Six

LO: 6-2; Bloom’s: Comprehension; Difficulty: Easy 8. The market potential of substitute products may encourage firms to bring them abroad. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Knowledge; Difficulty: Moderate 9. Currency risks can be reduced by speculation and hedging. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Knowledge; Difficulty: Easy 10. Under the Stage Model school of thought firms will enter culturally similar countries during their first stage of internationalization. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-3; Bloom’s: Knowledge; Difficulty: Easy 11. One of the drawbacks of large-scale entries is limited strategic flexibility. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Comprehension; Difficulty: Moderate 12. MNEs that enter foreign markets through foreign direct investment do not have OLI advantages. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Comprehension; Difficulty: Moderate

13. For small volume of exports, direct export is not optimal. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Knowledge; Difficulty: Easy 14. Indirect exports avoids exporting through domestically based intermediaries. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Knowledge; Difficulty: Moderate

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GLOBAL STRATEGY: Test Bank/ Chapter Six

15. Turnkey projects reduce the competitiveness of foreign clients and increase their dependence when selling state of the art technology. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Comprehension; Difficulty: Moderate 16. Acquisition adds no new capacity. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Knowledge; Difficulty: Easy 17. Entry strategies may change over time. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Knowledge; Difficulty: Easy 18. Some foreignness is never an asset. a. True b. False AACSB: BUSPROG: Reflective Thinking; DISC: Strategy LO: 6-6; Bloom’s: Comprehension; Difficulty: Easy 19. MNEs are firms that are truly global. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-6; Bloom’s: Comprehension; Difficulty: Moderate 20. International agreements have established whose “rules of the game” e-commerce follow. a. True b. False AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-7; Bloom’s: Knowledge; Difficulty: Moderate

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GLOBAL STRATEGY: Test Bank/ Chapter Six

MULTIPLE CHOICE QUESTIONS 1. The differences in formal and informal institutions that govern the rules of the game in different countries include _______ differences. a. Regulatory b. Language c. Cultural d. All of the above e. None of the above AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-1; Bloom’s: Comprehension; Difficulty: Moderate 2. As firms expand into more countries, they should recognize: a. Foreign firms are still often discriminated against. b. Foreign firms primarily deploy overwhelming resources and capabilities that offset the liability of foreignness. c. Foreign firms are able to offset the liability of foreignness and still have some competitive advantage. d. All of the above. e. None of the above.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-1; Bloom’s: Knowledge; Difficulty: Challenging 3. Small firms in a large domestic market are referred to as: a. Enthusiastic internationalizers. b. Follower internationalizers. c. Slow internationalizers. d. Occasional internationalizers. e. Domestic internationalizers.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-1; Bloom’s: Knowledge; Difficulty: Moderate 4. The lower the value of firm-specific resources and capabilities such as________ the more likely firms will aggressively leverage them overseas. a. Tangible assets b. Know-how c. Software d. All of the above e. None of the above AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Comprehension; Difficulty: Moderate 5. Firms may choose not to enter certain countries if:

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GLOBAL STRATEGY: Test Bank/ Chapter Six

a. b. c. d. e.

They possess rare firm-specific assets.

The transaction costs are be too low.

There are dissemination risks.

There is an authorized diffusion of firm-specific assets.

All of the above.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Knowledge; Difficulty: Moderate

6. Organizing firm-specific resources and capabilities as a bundle: a. Favors firms with strong complementary assets. b. Prevents having assets integrated s a system. c. Discourages using them overseas. d. Is counterproductive. e. Occurs only in domestic markets.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6 -2; Bloom’s: Knowledge; Difficulty: Moderate 7. Which of the following are not regulatory risks? a. An obsolescing bargain. b. Deals that have been struck by MNEs and host governments. c. Nationalization. d. Recent trends among host governments regarding their relationships with MNEs. e. B and C above.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Comprehension; Difficulty: Challenging 8. Which of the following exemplify trade barriers? a. Tariffs. b. Local content requirements. c. Restrictions on certain entry modes. d. A and C above. e. All of the above.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-2; Bloom’s: Comprehension; Difficulty: Moderate 9. Which of the following is not a location specific advantage? a. Agglomeration. b. Knowledge spillovers. c. A skilled labor force. d. A pool of specialized suppliers and buyers. e. All of the above are location advantages.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-3; Bloom’s: Comprehension; Difficulty: Moderate

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GLOBAL STRATEGY: Test Bank/ Chapter Six

10. The strategic goal of __________ involves going after countries that offer the highest price. a. Natural resources-seeking b. Market-seeking c. Efficiency-seeking d. Innovation-seeking e. Profit-seeking AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-3; Bloom’s: Knowledge; Difficulty: Moderate 11. Institutional Distance involves all of the following except that which is: a. Regulatory. b. Normative. c. Cognitive. d. Cultural. e. B and C above.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-3; Bloom’s: Analysis; Difficulty: Challenging 12. First mover advantages do not include: a. Developing proprietary, technological leadership. b. Preempting scarce assets. c. Establishing entry barriers. d. Successful clashes with dominant firms in domestic markets. e. Creating good relationships with key stakeholders.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-4; Bloom’s: Analysis; Difficulty: Moderate

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GLOBAL STRATEGY: Test Bank/ Chapter Six

13. Late mover advantages do not include: a. Taking a free ride on first movers’ investments. b. Joining the game with massive firepower when some of the uncertainties are removed. c. Preempting scarce assets. d. Taking advantage of first movers’ inflexibility by leapfrogging over them. e. Choice of Strategy.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-4; Bloom’s: Analysis; Difficulty: Moderate 14. Large-scale entries do which of the following? a. Benefit from a strategic commitment. b. Assure local customers and suppliers. c. Deter potential entrants. d. A and B above. e. All of the above.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Comprehension; Difficulty: Moderate 15. Small-scale entries normally benefit by their: a. Focus on accumulating experience. b. Emphasis on “learning by doing.” c. Strong strategic commitment. d. First mover advantages. e. A and B above.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Comprehension; Difficulty: Moderate 16. Non-equity modes of entry typically involve: a. Exports and contractual agreements. b. Larger, harder-to-reverse commitments. c. Establishing independent organizations overseas. d. Joint ventures (JVs). e. Wholly owned subsidiaries.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Comprehension; Difficulty: Moderate 17. All of the follow are true of direct exports except: a. Most basic mode of entry. b. Capitalizes on economies of scale in production concentrated in the home country. c. Affords better control over distribution. d. The agendas and objectives of the intermediaries and exporters are the same. e. Designs and productions geared for the domestic market first and foremost.

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GLOBAL STRATEGY: Test Bank/ Chapter Six

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Analysis; Difficulty: Moderate 18. Selling the rights to intellectual property for a royalty fee is involved in: a. Licensing/franchising. b. Turnkey projects. c. R&D contracts. d. Comarketing. e. All of the above.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Knowledge; Difficulty: Easy

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GLOBAL STRATEGY: Test Bank/ Chapter Six

19. Which is not true of joint ventures? a. They are jointly owned by two or more parent companies. b. They share risks with local partners. c. They gain access o the local partner’s knowledge about the host country. d. They are politically less acceptable than wholly owned subsidiaries. e. The goals of partners may diverge.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 65; Bloom’s: Analysis; Difficulty: Moderate 20. Greenfield operations refers to: a. Licensing/franchising. b. Turnkey projects. c. R&D contracts. d. Co marketing. e. Wholly owned subsidiaries.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-5; Bloom’s: Knowledge; Difficulty: Easy

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GLOBAL STRATEGY: Test Bank/ Chapter Six

SHORT ANSWER ESSAY QUESTIONS 1. Is “foreignness” a liability or an asset? What causes it to be one or the other?

In terms of the “liability of foreignness,” one contrasting view argues that under certain circumstances, being foreign can be an asset (that is, a competitive advantage). Japanese and German cars are viewed as of higher quality in the United States. Many American movies rake in more money overseas than at home. American cigarettes are “cool” among smokers in Central and Eastern Europe. Anything Korean—ranging from handsets and TV shows to kimchi (pickled cabbage)-flavored instant noodles—are considered hip in Southeast Asia. Conceptually, this is known as the country-of-origin effect.

AACSB: BUSPROG: Reflective Thinking; DISC: Environmental Influence LO: 6-1; Bloom’s: Comprehension; Difficulty: Easy 2. Schmaltz argues: “If a company wishes to be a global corporation it should truly globalize, not just operate within the so-called Triad.” What might Schmaltz be overlooking?

Schmaltz is implying that many global corporations are not truly global but it would be pointless for a company to develop a strategy simply so it could meet the strictest definition of the word “global.” Schmaltz is focused on the meaning of words and most so-called global corporations are focused on profit objectives. There are reasons why an MNE may not be truly global. First, most MNEs know what they are doing in regards to achieving their profit objectives and their current geographic scope is the maximum they can manage in the most profitable manner. Second, globalization is a trend and many will likely become more “globalized” over time.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-6; Bloom’s: Evaluation; Difficulty: Challenging 3. J. Lee disagrees with M. Schmaltz (above): “If a company wishes to be a global corporation, it does not need to locate in every continent – it should focus on those locations that are most profitable.” What do you think?

Again, the debate is over the meaning of words. J. Lee has a point. One should not expand globally just for the prestige of being recognized as global corporation. The firm has a responsibility to its shareholders.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-6; Bloom’s: Evaluation; Difficulty: Challenging 4. The text points out that from a resource-based view, you and your firm need to develop overwhelming capabilities to offset the liability of foreignness. However, how does a small firm do that?

Answers will vary but possible responses will relate to how the firm may be able use the resources of larger firms in achieving its objectives. This may be done through franchising or licensing intellectual property to larger firms with greater resources, using intermediaries who have overwhelming capabilities, and entering a joint

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GLOBAL STRATEGY: Test Bank/ Chapter Six

venture with another domestic company (which has the capabilities needed) in which the small firm puts up intellectual property as its share of the venture.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-1; Bloom’s: Comprehension; Difficulty: Moderate 5. Discussion of strategies for MNEs focus on growth and global expansion. Under what circumstances can downsizing and withdrawing from countries make sense? Why might some firms fail to withdraw or downsize?

The quick answer is that firms that wish to maximize profitability may find that resources used in a given country or in a particular product can be used more profitably elsewhere (including domestic instead of a foreign country) or on a different product. With constant changes in politics, economies, and technologies, opportunities and threats may require changes in the magnitude and dispersion of the firm’s operations.

Students will have various ideas as to why some firms may fail to downsize or withdraw but explanations would likely include entrenched management that feels no threat from stockholders and is more concerned about the status involved in extensive global operations or who are unwilling to admit that an error was made by going into a particular product or country.

AACSB: BUSPROG: Analytic; DISC: Strategy LO: 6-7; Bloom’s: Analysis; Difficulty: Challenging

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