Lee-Final-2

Chapter 15 - Entry Modes

Chapter 15Entry Modes

True / False Questions

1. Evidence suggests that pioneers gain and maintain a competitive advantage in new markets. True False

2. Research shows that surviving pioneers hold a smaller average market share when their industries reach maturity than firms that were either fast followers or late entrants in the product category. True False

3. Volume and market share are the only dimensions by which success can be measured. True False

4. The means of supplying overseas markets-exporting to and production in those markets - depend on non-equity modes of entry. True False

5. Entering foreign markets may be described by two levels of involvement, non-equity and equity-based. True False

6. Direct exporting is an excellent means of getting a feel for international business without committing a great amount of human or financial resources. True False

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7. The Internet has made direct exporting much easier. True False

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8. A sales company is part of indirect exporting. True False

9. Direct exporting is simpler than indirect exporting because it requires neither special expertise nor large cash outlays. True False

10. Sales companies will import in their own name from the parent and will invoice in the currency of the parent company. True False

11. A sales company is established to market goods or services, not to produce them. True False

12. Turnkey projects export technology, management expertise, and capital equipment. True False

13. Producing a factory ready to operate is similar to producing a "turnkey project." True False

14. Licensing refers to a contractual agreement in which the licensor grants access to its patents, trade secrets, or technology for a fee paid by the licensee. True False

15. The licensee generally pays a fix sum when signing a license agreement and then royalties of five to seven percent of sales over the life of the contract. True False

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16. Some firms do not grant licenses to other firms because of the fear of having a strong competitor upon the expiration of the license. True False

17. A management contract is used only by manufacturing companies to earn income by providing expertise for a fee. True False

18. In the year 2005, more money was spent in acquiring established businesses than in setting up new ones. True False

19. Lack of control is one of the strongest arguments against a joint venture. True False

20. In a joint venture, a management contract is often used as a non-ownership-based control mechanism by any of the firms when an agreement can not be reached. True False

21. Most of the foreign direct investment in the United States has been spent establishing new companies. True False

22. If a firm decides to become involved in overseas manufacturing it has two options: (1) wholly owned subsidiary and (2) joint venture. True False

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23. Historically, firms engaged in FDI have generally preferred wholly owned subsidiaries. True False

24. It is not possible for foreign investors to control a joint venture if the host country's law prevents foreign investors from having more than 49% percent ownership. True False

25. Ford and Volkswagon formed a joint venture to compete in the Brazilian market because they were both suffering losses there. True False

26. When the government of a host country requires companies to have some local participation, foreign firms must engage in strategic alliances with local owners. True False

27. In a joint venture, "sleeping partner" refers to the firm that controls less than a majority of the stock. True False

28. Management contracts can enable the global partner to control many aspects of a joint venture even when holding only a minority position. True False

29. Another name for contract manufacturing is "foreign direct investment without investment." True False

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30. In a 12-country study conducted by Ernst & Young, 65% of U.S. companies were found to be engaged in a strategic alliance. True False

31. Strategic alliances can be not-for-profit. True False

32. Strategic alliances take many forms, including licensing, mergers, joint ventures, and joint research and development partnerships. True False

33. One type of strategic alliance between competitors is an R&D partnership. True False

34. Pooling alliances are driven by the logic of contributing dissimilar resources, while trading alliances are driven by similarity and integration. True False

35. Trading and pooling alliances are typically different in their goals, optimal structures, and managerial challenges. True False

36. Generally mergers and acquisitions are considered alliances. True False

37. Piracy can refer to both high-sea swashbuckling and the illegal appropriation of software, music, video, and other intellectual property. True False

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38. Software piracy can actually result in a net gain to the maker of the software because "pirates" often adopt the software and become paying customers. True False

39. Selecting the channel of distribution which will link the producer with the foreign user will depend on the method of entry into the market. True False

40. Export management companies act as international representatives for various noncompeting manufacturers. True False

41. Export commission agents represent overseas purchasers and act as resident buyers in industrialized nations. True False

42. Korean trading companies, owned by the conglomerates known as chaebol, are responsible for a major part of Korea's exports. True False

43. Export merchants are exporters who buy directly from the manufacturer and then sell in their own names. True False

44. Webb-Pomerene Associations are organizations of competing firms that have joined together for the sole purpose of export trade. True False

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45. Manufacturers agents often stock the products of their suppliers but they do not assume any financial responsibility. True False

46. The concept of a trading company is very well known and often used in the United States. True False

47. Generally, the structure of the wholesaling and retailing system is quite similar across nations. True False

Multiple Choice Questions

48. A pioneering firm stands the best chance for long term success in market-share leadership and profitability when: A. there are high entry barriers for competitorsB. it has strong patent protectionC. proprietary technologyD. substantial investment requirementsE. A, B, and DF. All of the above

49. In many cases, a firm entering international markets becomes a follower because: A. barriers are low for new entrants.B. strong patent protection exists.C. quicker competition beat it.D. all of the above.E. B and C

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50. Methods for supplying foreign markets may be subsumed in just two activities: A. exporting to a foreign market and manufacturing in it.B. exporting goods to a foreign market and exporting services to it.C. manufacturing in a foreign market and licensing technology.D. establishing joint ventures and wholly-owned production facilities.

51. Companies wishing to export must first choose between A. exporting directly and using sales companies.B. exporting indirectly or using joint ventures.C. exporting directly or indirectly.D. exporting directly and licensing.

52. __________ permits a firm to set up an export program with a minimum of cash outlay and little special expertise. A. Joint ventureB. Direct exportingC. FranchisingD. Indirect exporting

53. A disadvantage(s) of indirect exporting is that: A. firms gain little experience from the transactionB. commissions have to be paid to agentsC. firms are dependent on the agentsD. all of the above

54. Names for firms who export for indirect exporters include all of the following except: A. manufacturer's export agentsB. export commission agentsC. export merchantsD. domestic firms

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55. A disadvantage of indirect exporting is: A. foreign business can be lost if exporter changes supply sourcesB. no expertise or large cash outlays are requiredC. the firm gains little experience from transactionsD. A and CE. All of the above are disadvantages

56. A turnkey project includes all of the following except: A. plan design.B. technology supply.C. supply of raw material.D. personnel training.E. all of the above are included.

57. By means of a licensing agreement, A. an international firm receives permission from a foreign government to set up a subsidiary in that country.B. one firm grants to another the right to use stipulated parts of its expertise.C. a foreign company receives products made for it by another company.D. one firm grants to another the right to use all of its expertise.

58. When a licensing agreement is made, A. the licensee receives expertise from another company.B. the licensee obtains permission from the government to do business in a foreign country.C. the licensor is a foreign government which grants the license.D. the licensor pays to receive assistance from the licensee.E. B and C.

59. According to the text, management contracts usually stipulate that a fee of __________ be paid to the firm providing the management expertise. A. 2 to 5 percent of salesB. 30 to 50 percent of salesC. 2 to 5 percent of profitsD. 30 to 50 percent of profits

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60. Licensing provides income for: A. fashion designers.B. computer manufacturers.C. magazine publishers.D. A and B.E. A, B and C.

61. In 2005, foreign firms investing in the United States spent ____________ on establishing new firms as they did on acquiring going firms. A. twice as muchB. 25 percent as muchC. nine times as muchD. one-ninth as muchE. about the same amount

62. A joint venture may be: A. a corporate entity formed between an international firm and local owners.B. a corporate entity formed between two or more international firms.C. a corporate undertaking between two or more firms of a limited-duration project.D. A and B.E. A, B and C.

63. Foreign direct investment (FDI) includes all of the following except: A. Wholly Owned SubsidiaryB. Joint VentureC. FranchisingD. Contract ManufactureE. Management Contract

64. Franchising is a form of: A. contract management.B. licensing.C. contract manufacturing.D. joint venture.

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65. The principal ingredient which a franchiser exports is: A. a brand name.B. marketing strategy.C. a set of proven procedures.D. A and B.E. A, B and C.

66. McDonald's, Kentucky Fried Chicken, and Subway are examples of: A. joint ventures.B. licensing.C. franchising.D. strategic alliances.

67. According to the text, a management contract is useful for: A. joint ventures.B. earning money by providing know-how.C. A and B.D. wholly-owned subsidiaries.E. A, B and D.

68. Hilton and Delta provide assistance to other international companies. That is an example of: A. joint venture.B. management contract.C. strategic alliance.D. contract manufacturing.

69. International firms employ contract manufacturing A. as a means of entering a foreign market without investing in plant facilities.B. to subcontract assembly work or the production of parts to independent companies overseas.C. A and B.D. as a means of direct foreign investment.

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70. Although there are many forms of strategic alliances or competitive alliances, the alliances are often between: A. customers.B. competitors.C. suppliers.D. all of the above.E. B and C.

71. Strategic alliances are A. partnerships between competitors, customers, or suppliers that may take various forms.B. another name for a growth triangle.C. arbitration.D. none of the above.

72. Channels of distribution: A. are systems of agencies through which a product and title pass from producer to user.B. are both controllable and uncontrollable variables.C. are controllable variables.D. A and B.

73. Although there have been a number of European and American international trading companies in operation for centuries, the most diversified and the largest are the: A. sogo shosha.B. keiretsu.C. chaebol.D. dochakuka.

74. What are the functions of an indirect exporter? A. Sell for the manufacturerB. Buy for their overseas customersC. Buy and sell for their own accountD. A and BE. All of the above

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75. The Export Trading Company Act A. permits businesses to join together to export goods and services without fear of violating antitrust laws.B. permits banks to participate in export trading companies.C. benefits are extended to all exporters, not just export trading companies.D. A and B.E. A, B and C.

76. When a firm chooses to do its own exporting, which of the following middlemen is an option? A. Manufacturer's agents.B. Distributors.C. Retailers.D. Trading companies.E. all of the above.

77. In most cases the marketer will be able to select wholesalers that take title to the goods. Another name for such a wholesaler is: A. merchant wholesalersB. rack jobbersC. drop shippersD. agents or brokersE. a, b and c

Essay Questions

78. In what way does contract manufacturing resemble direct investment?

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79. Explain the various forms that a joint venture may take.

80. Why have more of the investment outlays made in the United States by foreign firms been spent on acquiring going companies rather than establishing new ones?

81. If a firm wishes to go abroad but is unable to provide all the capital a wholly subsidiary would require, what other means of foreign involvement are available? Describe each one.

82. How can a foreign partner control a joint venture even if it has only a minority ownership position in the venture?

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83. What are the four basic types of overseas middlemen from which a firm can choose if the firm chooses to do indirect exporting?

Fill in the Blank Questions

84. _________________ is an excellent means of getting a feel for international business without committing a great amount of human or financial resources. ________________________________________

85. Through a __________ agreement, one firm may grant to another firm the right to use its expertise, such as manufacturing processes, marketing procedures, or trademarks. ________________________________________

86. The exporting of goods and services by the firm that produces them is __________ __________. ________________________________________

87. The exporting of goods and services through various home-based exporters is __________ __________. ________________________________________

88. A __________ __________ is a business established by a direct exporter for purpose of marketing goods in a foreign market, not producing them in that market. ________________________________________

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89. A cooperative effort among two or more organizations who share a common interest in a business enterprise or undertaking is a __________ __________. ________________________________________

90. An arrangement by which one firm provides management in all or specific areas to another firm is a __________ __________. ________________________________________

91. __________ is a contractual arrangement in which one firm grants access to its patents, trade secrets, or technology to another for a fee. ________________________________________

92. A form of licensing in which one firm contracts with another to operate a certain type of business under an established name according to specific rules is __________. ________________________________________

93. An arrangement in which one firm contracts with another to produce products according to its specifications but assumes responsibility for marketing is __________ __________. ________________________________________

94. A firm established principally to export domestic goods and services and to help unrelated companies export their products is an __________ __________ __________. ________________________________________

95. Independent sales representatives of various non-competing suppliers are called __________ __________. ________________________________________

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Chapter 15 Entry Modes Answer Key

True / False Questions

1. (p. 446) Evidence suggests that pioneers gain and maintain a competitive advantage in new markets. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 1Topic: Market pioneers

2. (p. 446) Research shows that surviving pioneers hold a smaller average market share when their industries reach maturity than firms that were either fast followers or late entrants in the product category. FALSE

AACSB: AnalyticBloom: KnowledgeDifficulty: HardLearning Objective: 1Topic: Market pioneers

3. (p. 446) Volume and market share are the only dimensions by which success can be measured. FALSE


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4. (p. 447) The means of supplying overseas markets-exporting to and production in those markets - depend on non-equity modes of entry. FALSE

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 2Topic: Entering foreign markets

5. (p. 447) Entering foreign markets may be described by two levels of involvement, non-equity and equity-based. TRUE


6. (p. 448) Direct exporting is an excellent means of getting a feel for international business without committing a great amount of human or financial resources. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 2Topic: Nonequity modes of entry

7. (p. 448) The Internet has made direct exporting much easier. TRUE


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8. (p. 448) A sales company is part of indirect exporting. FALSE

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 2Topic: Nonequity modes of entry

9. (p. 448) Direct exporting is simpler than indirect exporting because it requires neither special expertise nor large cash outlays. FALSE


10. (p. 448) Sales companies will import in their own name from the parent and will invoice in the currency of the parent company. FALSE

AACSB: AnalyticBloom: ComprehensionDifficulty: HardLearning Objective: 2Topic: Nonequity modes of entry

11. (p. 448) A sales company is established to market goods or services, not to produce them. TRUE


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12. (p. 448) Turnkey projects export technology, management expertise, and capital equipment. TRUE


13. (p. 448) Producing a factory ready to operate is similar to producing a "turnkey project." TRUE


14. (p. 449) Licensing refers to a contractual agreement in which the licensor grants access to its patents, trade secrets, or technology for a fee paid by the licensee. TRUE


15. (p. 449) The licensee generally pays a fix sum when signing a license agreement and then royalties of five to seven percent of sales over the life of the contract. FALSE


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16. (p. 449) Some firms do not grant licenses to other firms because of the fear of having a strong competitor upon the expiration of the license. TRUE


17. (p. 451) A management contract is used only by manufacturing companies to earn income by providing expertise for a fee. FALSE

AACSB: AnalyticBloom: ComprehensionDifficulty: MediumLearning Objective: 2Topic: Nonequity modes of entry

18. (p. 452) In the year 2005, more money was spent in acquiring established businesses than in setting up new ones. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 2Topic: Equity modes of entry

19. (p. 452) Lack of control is one of the strongest arguments against a joint venture. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 2Topic: Equity modes of entry

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20. (p. 452) In a joint venture, a management contract is often used as a non-ownership-based control mechanism by any of the firms when an agreement can not be reached. FALSE


21. (p. 452) Most of the foreign direct investment in the United States has been spent establishing new companies. FALSE


22. (p. 452) If a firm decides to become involved in overseas manufacturing it has two options: (1) wholly owned subsidiary and (2) joint venture. FALSE


23. (p. 451) Historically, firms engaged in FDI have generally preferred wholly owned subsidiaries. TRUE


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24. (p. 453) It is not possible for foreign investors to control a joint venture if the host country's law prevents foreign investors from having more than 49% percent ownership. FALSE

AACSB: AnalyticBloom: KnowledgeDifficulty: HardLearning Objective: 2Topic: Equity modes of entry

25. (p. 452) Ford and Volkswagon formed a joint venture to compete in the Brazilian market because they were both suffering losses there. TRUE


26. (p. 453) When the government of a host country requires companies to have some local participation, foreign firms must engage in strategic alliances with local owners. FALSE


27. (p. 454) In a joint venture, "sleeping partner" refers to the firm that controls less than a majority of the stock. FALSE


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28. (p. 454) Management contracts can enable the global partner to control many aspects of a joint venture even when holding only a minority position. TRUE


29. (p. 451) Another name for contract manufacturing is "foreign direct investment without investment." TRUE


30. (p. 454) In a 12-country study conducted by Ernst & Young, 65% of U.S. companies were found to be engaged in a strategic alliance. FALSE


31. (p. 454) Strategic alliances can be not-for-profit. TRUE


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32. (p. 454) Strategic alliances take many forms, including licensing, mergers, joint ventures, and joint research and development partnerships. TRUE


33. (p. 454) One type of strategic alliance between competitors is an R&D partnership. TRUE


34. (p. 455) Pooling alliances are driven by the logic of contributing dissimilar resources, while trading alliances are driven by similarity and integration. FALSE


35. (p. 455) Trading and pooling alliances are typically different in their goals, optimal structures, and managerial challenges. TRUE


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36. (p. 455) Generally mergers and acquisitions are considered alliances. FALSE


37. (p. 450, 460) Piracy can refer to both high-sea swashbuckling and the illegal appropriation of software, music, video, and other intellectual property. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 3Topic: Piracy

38. (p. 450, 460) Software piracy can actually result in a net gain to the maker of the software because "pirates" often adopt the software and become paying customers. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 3Topic: Piracy

39. (p. 456) Selecting the channel of distribution which will link the producer with the foreign user will depend on the method of entry into the market. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 4Topic: Channels of distribution

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40. (p. 456) Export management companies act as international representatives for various noncompeting manufacturers. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 4Topic: Indirect exporting

41. (p. 458) Export commission agents represent overseas purchasers and act as resident buyers in industrialized nations. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 4Topic: Indirect exporting

42. (p. 458) Korean trading companies, owned by the conglomerates known as chaebol, are responsible for a major part of Korea's exports. TRUE


43. (p. 458) Export merchants are exporters who buy directly from the manufacturer and then sell in their own names. TRUE


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44. (p. 458) Webb-Pomerene Associations are organizations of competing firms that have joined together for the sole purpose of export trade. TRUE


45. (p. 459) Manufacturers agents often stock the products of their suppliers but they do not assume any financial responsibility. TRUE

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 4Topic: Direct exporting

46. (p. 459) The concept of a trading company is very well known and often used in the United States. FALSE


47. (p. 461) Generally, the structure of the wholesaling and retailing system is quite similar across nations. FALSE

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 4Topic: Direct exporting

15-29


Multiple Choice Questions

48. (p. 446) A pioneering firm stands the best chance for long term success in market-share leadership and profitability when: A. there are high entry barriers for competitorsB. it has strong patent protectionC. proprietary technologyD. substantial investment requirementsE. A, B, and DF. All of the above

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 1Topic: Market pioneers

49. (p. 446) In many cases, a firm entering international markets becomes a follower because: A. barriers are low for new entrants.B. strong patent protection exists.C. quicker competition beat it.D. all of the above.E. B and C

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 1Topic: Market pioneers

50. (p. 446) Methods for supplying foreign markets may be subsumed in just two activities: A. exporting to a foreign market and manufacturing in it.B. exporting goods to a foreign market and exporting services to it.C. manufacturing in a foreign market and licensing technology.D. establishing joint ventures and wholly-owned production facilities.


15-30


51. (p. 447) Companies wishing to export must first choose between A. exporting directly and using sales companies.B. exporting indirectly or using joint ventures.C. exporting directly or indirectly.D. exporting directly and licensing.


52. (p. 447) __________ permits a firm to set up an export program with a minimum of cash outlay and little special expertise. A. Joint ventureB. Direct exportingC. FranchisingD. Indirect exporting


53. (p. 447) A disadvantage(s) of indirect exporting is that: A. firms gain little experience from the transactionB. commissions have to be paid to agentsC. firms are dependent on the agentsD. all of the above


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54. (p. 447) Names for firms who export for indirect exporters include all of the following except: A. manufacturer's export agentsB. export commission agentsC. export merchantsD. domestic firms


55. (p. 447) A disadvantage of indirect exporting is: A. foreign business can be lost if exporter changes supply sourcesB. no expertise or large cash outlays are requiredC. the firm gains little experience from transactionsD. A and CE. All of the above are disadvantages


56. (p. 448) A turnkey project includes all of the following except: A. plan design.B. technology supply.C. supply of raw material.D. personnel training.E. all of the above are included.


15-32


57. (p. 449) By means of a licensing agreement, A. an international firm receives permission from a foreign government to set up a subsidiary in that country.B. one firm grants to another the right to use stipulated parts of its expertise.C. a foreign company receives products made for it by another company.D. one firm grants to another the right to use all of its expertise.


58. (p. 449) When a licensing agreement is made, A. the licensee receives expertise from another company.B. the licensee obtains permission from the government to do business in a foreign country.C. the licensor is a foreign government which grants the license.D. the licensor pays to receive assistance from the licensee.E. B and C.


59. (p. 451) According to the text, management contracts usually stipulate that a fee of __________ be paid to the firm providing the management expertise. A. 2 to 5 percent of salesB. 30 to 50 percent of salesC. 2 to 5 percent of profitsD. 30 to 50 percent of profits

AACSB: AnalyticBloom: KnowledgeDifficulty: HardLearning Objective: 2Topic: Nonequity modes of entry

15-33


60. (p. 449) Licensing provides income for: A. fashion designers.B. computer manufacturers.C. magazine publishers.D. A and B.E. A, B and C.


61. (p. 452) In 2005, foreign firms investing in the United States spent ____________ on establishing new firms as they did on acquiring going firms. A. twice as muchB. 25 percent as muchC. nine times as muchD. one-ninth as muchE. about the same amount


62. (p. 452) A joint venture may be: A. a corporate entity formed between an international firm and local owners.B. a corporate entity formed between two or more international firms.C. a corporate undertaking between two or more firms of a limited-duration project.D. A and B.E. A, B and C.

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 2Topic: Equity-based modes of entry

15-34


63. (p. 451) Foreign direct investment (FDI) includes all of the following except: A. Wholly Owned SubsidiaryB. Joint VentureC. FranchisingD. Contract ManufactureE. Management Contract


64. (p. 450) Franchising is a form of: A. contract management.B. licensing.C. contract manufacturing.D. joint venture.


65. (p. 450) The principal ingredient which a franchiser exports is: A. a brand name.B. marketing strategy.C. a set of proven procedures.D. A and B.E. A, B and C.


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66. (p. 450) McDonald's, Kentucky Fried Chicken, and Subway are examples of: A. joint ventures.B. licensing.C. franchising.D. strategic alliances.

AACSB: AnalyticBloom: ComprehensionDifficulty: EasyLearning Objective: 2Topic: Nonequity modes of entry

67. (p. 451) According to the text, a management contract is useful for: A. joint ventures.B. earning money by providing know-how.C. A and B.D. wholly-owned subsidiaries.E. A, B and D.


68. (p. 451) Hilton and Delta provide assistance to other international companies. That is an example of: A. joint venture.B. management contract.C. strategic alliance.D. contract manufacturing.


15-36


69. (p. 451) International firms employ contract manufacturing A. as a means of entering a foreign market without investing in plant facilities.B. to subcontract assembly work or the production of parts to independent companies overseas.C. A and B.D. as a means of direct foreign investment.


70. (p. 454) Although there are many forms of strategic alliances or competitive alliances, the alliances are often between: A. customers.B. competitors.C. suppliers.D. all of the above.E. B and C.


71. (p. 454) Strategic alliances are A. partnerships between competitors, customers, or suppliers that may take various forms.B. another name for a growth triangle.C. arbitration.D. none of the above.

AACSB: AnalyticBloom: KnowledgeDifficulty: EasyLearning Objective: 2Topic: Equity-based modes of entry

15-37


72. (p. 455) Channels of distribution: A. are systems of agencies through which a product and title pass from producer to user.B. are both controllable and uncontrollable variables.C. are controllable variables.D. A and B.

AACSB: AnalyticBloom: KnowledgeDifficulty: HardLearning Objective: 4Topic: Channels of distribution

73. (p. 456) Although there have been a number of European and American international trading companies in operation for centuries, the most diversified and the largest are the: A. sogo shosha.B. keiretsu.C. chaebol.D. dochakuka.

AACSB: AnalyticBloom: KnowledgeDifficulty: MediumLearning Objective: 4Topic: Channels of distribution

74. (p. 456) What are the functions of an indirect exporter? A. Sell for the manufacturerB. Buy for their overseas customersC. Buy and sell for their own accountD. A and BE. All of the above


15-38


75. (p. 458) The Export Trading Company Act A. permits businesses to join together to export goods and services without fear of violating antitrust laws.B. permits banks to participate in export trading companies.C. benefits are extended to all exporters, not just export trading companies.D. A and B.E. A, B and C.

AACSB: AnalyticBloom: KnowledgeDifficulty: HardLearning Objective: 4Topic: Indirect exporting

76. (p. 459) When a firm chooses to do its own exporting, which of the following middlemen is an option? A. Manufacturer's agents.B. Distributors.C. Retailers.D. Trading companies.E. all of the above.


77. (p. 461) In most cases the marketer will be able to select wholesalers that take title to the goods. Another name for such a wholesaler is: A. merchant wholesalersB. rack jobbersC. drop shippersD. agents or brokersE. a, b and c


15-39


Essay Questions

78. (p. 451) In what way does contract manufacturing resemble direct investment?

Answers may vary.

AACSB: AnalyticBloom: AnalysisDifficulty: MediumLearning Objective: 2Topic: Nonequity modes of entry

79. (p. 452) Explain the various forms that a joint venture may take.

Answers may vary

AACSB: AnalyticBloom: AnalysisDifficulty: EasyLearning Objective: 2Topic: Equity-based modes of entry

80. (p. 452) Why have more of the investment outlays made in the United States by foreign firms been spent on acquiring going companies rather than establishing new ones?

Answers may vary

AACSB: AnalyticBloom: AnalysisDifficulty: HardLearning Objective: 2Topic: Equity-based modes of entry

15-40


81. (p. 448) If a firm wishes to go abroad but is unable to provide all the capital a wholly subsidiary would require, what other means of foreign involvement are available? Describe each one.

Answers may vary

AACSB: AnalyticBloom: AnalysisDifficulty: MediumLearning Objective: 2Topic: Nonequity modes of entry

82. (p. 453) How can a foreign partner control a joint venture even if it has only a minority ownership position in the venture?

Answers may vary.

AACSB: AnalyticBloom: AnalysisDifficulty: EasyLearning Objective: 2Topic: Equity-based modes of entry

83. (p. 447) What are the four basic types of overseas middlemen from which a firm can choose if the firm chooses to do indirect exporting?

Answers may vary.

AACSB: AnalyticBloom: AnalysisDifficulty: MediumLearning Objective: 2Topic: Indirect exporting

15-41


Fill in the Blank Questions

84. (p. 447) _________________ is an excellent means of getting a feel for international business without committing a great amount of human or financial resources. Exporting


85. (p. 449) Through a __________ agreement, one firm may grant to another firm the right to use its expertise, such as manufacturing processes, marketing procedures, or trademarks. licensing

AACSB: AnalyticBloom: ComprehensionDifficulty: MediumLearning Objective: 3Topic: Licensing

86. (p. 448) The exporting of goods and services by the firm that produces them is __________ __________. direct exporting


87. (p. 447) The exporting of goods and services through various home-based exporters is __________ __________. indirect exporting


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88. (p. 448) A __________ __________ is a business established by a direct exporter for purpose of marketing goods in a foreign market, not producing them in that market. sales company


89. (p. 452) A cooperative effort among two or more organizations who share a common interest in a business enterprise or undertaking is a __________ __________. joint venture

AACSB: AnalyticBloom: ComprehensionDifficulty: EasyLearning Objective: 2Topic: Equity-based modes of entry

90. (p. 451) An arrangement by which one firm provides management in all or specific areas to another firm is a __________ __________. management contract


91. (p. 449) __________ is a contractual arrangement in which one firm grants access to its patents, trade secrets, or technology to another for a fee. Licensing


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92. (p. 450) A form of licensing in which one firm contracts with another to operate a certain type of business under an established name according to specific rules is __________. franchising


93. (p. 451) An arrangement in which one firm contracts with another to produce products according to its specifications but assumes responsibility for marketing is __________ __________. contract manufacturing


94. (p. 458) A firm established principally to export domestic goods and services and to help unrelated companies export their products is an __________ __________ __________. export trading company

AACSB: AnalyticBloom: ComprehensionDifficulty: EasyLearning Objective: 4Topic: Indirect exporting

95. (p. 459) Independent sales representatives of various non-competing suppliers are called __________ __________. manufacturers' agents

AACSB: AnalyticBloom: ComprehensionDifficulty: MediumLearning Objective: 4Topic: Direct exporting

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Lee-Final-2

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