Which of the following is a reason for the rise in regional expansion?

81.

Which of the following is a reason for the rise in regional expansion?    A.  increase in the number of trading blocs and free trade zones B.  decrease in the number of trading blocs and free trade zones C.  increasing national trade restrictions D.  increasing local taxes and tariffs Another reason for regional expansion is the rise of the trading blocs and free trade zones. A number of regional agreements have been created that facilitate the growth of business within these regions by easing trade restrictions and taxes and tariffs.

AACSB: Analytic Blooms: Understand Learning Objective: 07-06 The difference between regional companies and truly global companies. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets

82.

Which one of the following explains why so few firms are global?    A.  Culture, language, and religion are similar between countries. B.  Legal and political systems are similar between countries. C.  Governments are increasing trade restrictions in general. D.  Geographic distance is multiplied by distance in culture, language, religion, and legal and political systems. Distance, in the final analysis, may be viewed as a concept with many dimensions, not just a measure of geographical distance. When the effects of geographic distance are multiplied by distance in terms of culture, language, religion, and legal and political systems between two countries, companies will choose to remain regional or, at best, biregional.

AACSB: Analytic Blooms: Understand Learning Objective: 07-06 The difference between regional companies and truly global companies. Level of Difficulty: 2 Medium Topic: Achieving Competitive Advantage in Global Markets

83.

Which of the following describes the most typical order of entry into foreign markets?    A.  franchising, licensing, exporting, joint venture, and wholly owned subsidiary B.  exporting, licensing, franchising, joint venture, and wholly owned subsidiary C.  licensing, exporting, franchising, joint venture, and wholly owned subsidiary D.  exporting, franchising, licensing, joint venture, and wholly owned subsidiary The various types of entry form a continuum ranging from exporting (low investment and risk, low control), followed by licensing, franchising, joint venture and finally to a wholly owned subsidiary (high investment and risk, high control).

AACSB: Analytic Blooms: Remember Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 1 Easy Topic: Entry Modes of International Expansion

84.

A domestic corporation considering international expansion for the first time typically will follow which of these paths?    A.  It will start off by implementing a wholly owned foreign subsidiary in order to maintain standards identical to those at home. B.  It will license or franchise its operations. C.  It will implement a low risk-low control strategy such as exporting. D.  It will form a joint venture with a reputable foreign producer. Exporting consists of producing goods in one country to sell in another. This entry strategy enables a firm to invest the least amount of resources in terms of its product, its organization, and its overall corporate strategy. Multinationals often stumble onto a stepwise strategy for penetrating markets, beginning with the exporting of products.

AACSB: Analytic Blooms: Understand Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 2 Medium Topic: Entry Modes of International Expansion

85.

The form of entry strategy into international operations that offers the lowest level of control for the domestic corporation would be _________.    A.  franchising B.  licensing C.  joint venture D.  exporting The various types of entry form a continuum ranging from exporting (low investment and risk, low control) to a wholly owned subsidiary (high investment and risk, high control).

AACSB: Analytic Blooms: Understand Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 2 Medium Topic: Entry Modes of International Expansion

86.

Fees that a multinational receives from a foreign licensee in return for its use of intellectual property (trademark, patent, trade secret, technology) are usually called _____________.    A.  transfer prices B.  dividends C.  royalties D.  intra-corporate inflows Licensing enables a company to receive a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable item of intellectual property.

AACSB: Analytic Blooms: Remember Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 1 Easy Topic: Entry Modes of International Expansion

87.

The difference between a franchise contract and a licensing contract is that ___________.    A.  a franchise contract is more specific and usually longer in duration B.  a franchise contract must include a foreign government C.  a licensing contract covers more aspects of operations D.  a franchise contract involves less control and less risk Licensing enables a company to receive a royalty or a fee in exchange for the right to use its trademark, patent, trade secret, or other valuable item of intellectual property. Franchising contracts generally include a broader range of factors in an operation and have a longer time period during which the agreement is in effect.

AACSB: Analytic Blooms: Understand Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 2 Medium Topic: Entry Modes of International Expansion

88.

__________ entail the creation of a third-party legal entity, whereas __________ do not.    A.  Licensing agreements; joint ventures B.  Joint ventures; strategic alliances C.  Strategic alliances; joint ventures D.  Franchising agreements; strategic alliances Joint ventures and strategic alliances differ in that joint ventures entail the creation of a third-party legal entity, whereas strategic alliances do not. In addition, strategic alliances generally focus on initiatives that are smaller in scope than joint ventures.

AACSB: Analytic Blooms: Remember Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 1 Easy Topic: Entry Modes of International Expansion

89.

A __________ is a business in which a multinational company owns 100 percent of the stock.    A.  joint venture B.  strategic alliance C.  wholly owned subsidiary D.  franchising operation A wholly owned subsidiary is a business in which a multinational company owns 100 percent of the stock. Two ways a firm can establish a wholly owned subsidiary are: acquire an existing company in the home country or develop a totally new operation (often referred to as a greenfield venture).

AACSB: Analytic Blooms: Remember Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 1 Easy Topic: Entry Modes of International Expansion

90.

__________ are most appropriate when a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations in many countries.    A.  Joint ventures B.  Strategic alliances C.  Licensing agreements D.  Wholly owned subsidiaries Wholly owned subsidiaries are most appropriate when a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations.

AACSB: Analytic Blooms: Understand Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 2 Medium Topic: Entry Modes of International Expansion

91.

PepsiCo leads Coca-Cola in the Indian market. Why?    A.  PepsiCo entered the market before Coca-Cola. B.  PepsiCo formed a joint venture with two Indian companies to introduce its products under their label. C.  Coca-Cola promoted too many products. D.  Coca-Cola created too much direct employment in the beginning of its operation. Coca-Cola entered the Indian market first, but pulled out of the market after new government regulations forced it to partner with an Indian company. PepsiCo, on the other hand, formed a joint venture with two Indian companies and introduced products under the Lehar brand. By the time Coca-Cola re-entered the market, since PepsiCo had had no international competition for a number of years, it had become the catch-all for anything that was bottled, fizzy, and from abroad.

AACSB: Analytic Blooms: Understand Learning Objective: 07-07 The four basic types of entry strategies and the relative benefits and risks associated with each of them. Level of Difficulty: 2 Medium Topic: Entry Modes of International Expansion