2nd Edition Chapter Part Three Managing the Global Factory

Chapter 9

Test Bank

Type: true-false

Title: Chapter 09 Question 01

1) Exporting is the most common form of market entry for small and medium sized firm (SMEs)

a. True

Feedback: It is true because exporting provides a relatively low cost, low risk but high control method of entering foreign markets. It appeals to SMEs who may have limited resources and experience in international business.

A-head reference: 9.3 Alternative overseas operating modes

b. False

Type: true-false

Title: Chapter 09 Question 02

2) The overall attractiveness of a potential new market is determined by the balance between the costs, risks and benefits of doing business in that market.

a. True

Feedback: Correct because market selection is based on a weighing up of these three considerations, the costs, benefits and risks of the market. In turn, these factors influence the choice of market operating mode.

A-head reference: 9.2 Antecedents of choice of foreign operation mode

b. False

Type: multiple choice question

Title: Chapter 09 Question 03

3) One of the advantages of being a first mover is _______

Feedback: An early entrant has very limited knowledge of likely demand, future competition or policy evolution so the correct response is d) and the opportunity to build a strong initial market position.

A-head reference: 9.4 Entry timing

a. a higher level of certainty of demand

b. certainty as to the future level of competition

c. certainty with regard to future government policies

d. the opportunity to create brand awareness and influence market development.

Type: true-false

Title: Chapter 09 Question 04

4) Standardisation is a widely used market entry mode

a. True

b. False

Feedback: The statement is false because standardisation describes a particular strategic approach to a market, not an entry or operating mode

A-head reference: 9.3 Alternative overseas operating modes

Type: multiple choice question

Title: Chapter 09 Question 05

5) Greenfield market entry offers _______

Feedback: The correct response is a) because a greenfield entry mode involves the creation of a new facility which offers a high level of control, but the resource commitment means a higher level of risk exposure.

A-head reference: 9.3 Alternative overseas operating modes

a. a high level of control and a high level of risk

b. a low level of control and risk

c. a high level of control and low risk

d. a flexible entry mode that is easily reversed

Type: true-false

Title: Chapter 09 Question 06

6) The majority of service firms enter a foreign market using exporting

a. True

b. False

Feedback: It is false because, certainly until the rise of digitisation, it was difficult to export intangible services. Service firms were more likely to engage in FDI or to use a resource transfer mode such as licensing, franchising or management contracts.

A-head reference: 9.3 Alternative overseas operating modes

Type: multiple response question

Title: Chapter 09 Question 07

7) Examples of platforms models are: (select all that applies)

Feedback: In a number of business sectors disruption has occurred as a result of the development of platform based businesses. This is apparent in travel, taxi services, music, news and entertainment. Platforms are successful because they create value by enabling direct interactions between two or more participant groups such as buyers and sellers. Their efficiency is reflected in lower transaction costs and the facilitation of exchange. Platforms encompass services (Airbnb, UberEats), asset sharing (Uber) and products (E-bay, Alibaba).

A-head reference: 9.3 Alternative overseas operating modes

a. McDonalds

b. Airbnb

c. Tesla

d. Uber

Type: true-false

Title: Chapter 09 Question 08

8) If a company is seeking to enter a foreign market with a culture highly dissimilar to its own, it could consider using a strategy of licensing

a. True

Feedback: It is true because using licensing to a local firm in particular, provides a means to reduce the likelihood of cultural misunderstanding. Of course, the investing firm has to successfully negotiate with the licensee who is also likely to be from the dissimilar culture, but may have experience in dealing with multinational enterprises. Considerations such as the protection of intellectual property would also need to be taken into account.

A-head reference: 9.3 Alternative overseas operating modes

b. False

Type: true-false

Title: Chapter 09 Question 09

9) FDI can take two forms: greenfield; and mergers and acquisitions

a. True

Feedback: True because these are precisely the two major forms of FDI.

A-head reference: 9.3 Alternative overseas operating modes

b. False

Type: multiple choice question

Title: Chapter 09 Question 10

10) _______ is one of the main internal factors affecting the choice of foreign market operating mode

Feedback: The correct response is b) firm capability, since it is the only internal factor. All the others are external to the firm and to the mode operation decision.

A-head reference: 9.3 Alternative overseas operating modes

a. Demand uncertainty

b. Firm capability

c. Locational advantage

d. The regulatory environment

Type: true-false

Title: Chapter 09 Question 11

11) Foreign market operating strategies entail decisions on market selection, entry mode and timing

a. True

Feedback: True because such decisions involve the where (market selection), how (entry mode) and when (timing) elements in a foreign market operating strategy

A-head reference: 9.2 Antecedents of choice of foreign operation mode

b. False

Type: true-false

Title: Chapter 09 Question 12

12) In the case of resource transfer modes, ownership and control are shared between the firm and its local partner

a. True

Feedback: A-head reference: 9.2 Antecedents of choice of foreign operation mode

b. False

Type: multiple choice question

Title: Chapter 09 Question 13

13) In the case of resource transfer modes, ownership and control are _______

Feedback: The correct answer is b) because a resource transfer mode involves the transfer of a package of skills and resources to an overseas partner, so ownership and control of transferred resources are shared by the two parties.

A-head reference: 9.2 Antecedents of choice of foreign operation mode

a. retained by the lead firm

b. shared between the firm and its local partner

c. shared with an agent and local supplier

d. unclear it depends on the terms of the contract

Type: true-false

Title: Chapter 09 Question 14

14) International experience is one of the primary external factors affecting the choice of foreign market operating mode

a. True

b. False

Feedback: It is false because international experience is an internal, not an external consideration when considering a foreign market operating mode

A-head reference: 9.2 Antecedents of choice of foreign operation mode

Type: true-false

Title: Chapter 09 Question 15

15) Different entry modes are expected to have a differential impact on a firm's performance in a foreign market

a. True

Feedback: It is true because of the impact of different modes on costs and revenues.

A-head reference: 9.3 Alternative overseas operating modes

b. False

Type: multiple choice question

Title: Chapter 09 Question 16

16) Direct exporting involves the production of goods in the home market and marketing into a foreign market _______

Feedback: The correct answer is c) which is a precise definition of what direct exporting means

A-head reference: 9.3 Alternative overseas operating modes

a. with the use of an intermediary

b. with sales made to an agent

c. without the use of an intermediary

d. With sales dependent on a domestic partner organisation

Type: multiple choice question

Title: Chapter 09 Question 17

17) Selection of the correct overseas market requires consideration of _______

Feedback: All three must be considered when selecting a suitable overseas market. Of course they may involve various trade-offs, but all must be evaluated.

A-head reference: 9.3 Alternative overseas operating modes

a. resources

b. control

c. risk

d. all of the above

Type: true-false

Title: Chapter 09 Question 18

18) Divestment is one element in the strategic planning activities of firms operating in a dynamic global economy

a. True

Feedback: In a dynamic global economy adaptation is an ongoing requirement and divestment may be part of this. It is not necessarily a sign of failure, but may indicate anticipation of a future decline or awareness of new and more lucrative opportunities

A-head reference: 9.6 Divestment

b. False

Type: true-false

Title: Chapter 09 Question 19

19) A disadvantage of late entrants to a market is being able to “free-ride” on the investments of early movers

a. True

b. False

Feedback: Being able to free-ride on investments made by previous market entrants such as distribution channels or consumer awareness is an advantage of late movers

A-head reference: 9.4 Entry timing

Type: true-false

Title: Chapter 09 Question 20

20) Foreign market operating strategies that offer low exit costs inhibit flexibility and opportunities for mode switching .

a. True

Feedback: It is false since low exit costs make it easier to switch modes

A-head reference: 9.5 Mode switching

b. False