Global Marketing, 9e, GE (Keegan)

Chapter 9 Global Market Entry Strategies: Licensing, Investment, and

Strategic Alliances

1) For Starbucks and other companies whose business models include a service component, it is
not recommended that they use one of the following methods for going global.
A) joint ventures
B) licensing
C) 100-percent ownership
D) exporting
E) franchising
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Analytical thinking

2) For Walt Disney Company, the best mode for going global is by:
A) joint ventures.
B) licensing.
C) 100-percent ownership.
D) exporting.
E) franchising.
Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Analytical thinking

3) One of the advantages of licensing is:

A) licensees have limited control.
B) licensees have considerable autonomy.
C) license agreements have short life.
D) licensees can develop similar products.
E) licensees have considerable leverage.
Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

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Copyright © 2017 Pearson Education, Ltd.
4) Licensing as a market entry mode has several disadvantages and opportunity costs,
which does not include:
A) limited market control.
B) agreement may have short life.
C) leveraging and exploiting by licensee.
D) similar product or technology development by licensee.
E) adaptations by licensee to fit local tastes.
Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

5) represents a market entry strategy whereby one company permits a foreign

company to make use of its patents, know-how, technology, company name, or other intangible
assets in return for a royalty payment.
A) A joint venture
B) One-hundred-percent ownership
C) Licensing
D) Exporting
E) A Global strategic alliance
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

6) provides technical specifications to a subcontractor or local manufacturer, who then

oversees production.
A) A joint venture
B) Contract manufacturing
C) Licensing
D) Exporting
E) A Global strategic alliance
Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge
7) In order to prevent a licensor-competitor from gaining unilateral benefit, licensing
agreements should provide for:
A) contract manufacturing.
B) franchising.
C) cross licensing.
D) strategic decision making.
E) adaptation for local tastes.
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

8) The advantages of "contract manufacturing" include all of the following except:

A) access to technical specifications by subcontractors.
B) access to technical specifications by local manufacturers.
C) a licensing firm can specialize in product marketing.
D) limited commitment of financial resources.
E) considerable commitment of management
resources. Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

9) Pollo Campero, a chicken restaurant chain based in Central America, is using the
following method for expanding operations in the United States:
A) joint ventures.
B) licensing.
C) exporting.
D) franchising.
E) acquisition.
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge
10) Would-be franchisors ask all of the following questions except one before expanding
overseas:
A) How tough is the local competition?
B) Does the government respect trademark and copyrights?
C) Can profits be easily repatriated?
D) Can products be easily counterfeited?
E) Is commercial space available?
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

11) The specialty retailing industry, as well as the fast-food industry, favors for global
growth.
A) licensing
B) investment
C) franchising
D) joint ventures
E) strategic alliances
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

12) The agreements that allow McDonald's franchisees around the globe to use
McDonald's trademarked name and menu items represent, in essence, which form of
market entry?
A) joint ventures
B) franchising
C) 100% ownership
D) exporting
E) acquisition
Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge
13) McDonald's success in franchising in global markets can be attributed to several factors
which do not include:
A) a well known global brand name.
B) a business system that can be easily replicated.
C) local market knowledge.
D) cross licensing.
E) granting franchisees leeway to tailor menu offerings to suit local tastes.
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

14) Starbucks founder and Chairman Howard Schultz and his management team have used a
variety of market-entry approaches, direct ownership, licensing, and franchising–to create an
empire of more than 21,000 coffee cafés in 65 countries.
Answer: TRUE
Difficulty: 1: Easy
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

15) Licensing is a contractual agreement whereby one company (the licensor) makes a legally
protected asset available to another company (the licensee) in exchange for royalties, license fees,
or some other form of compensation.
Answer: TRUE
Difficulty: 1: Easy
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

16) Organizations as diverse as Disney, Caterpillar, and the National Basketball Association
make extensive use of licensing in overseas markets.
Answer: TRUE
Difficulty: 1: Easy
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

17) A licensed asset may be a brand name, company name, patent, trade secret, or
product formulation
Answer: TRUE
Difficulty: 1: Easy
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge
18) One of the advantages of a license arrangement is that it can create export
market opportunities and open the door to a high-risk manufacturing relationship.
Answer: FALSE
Difficulty: 1: Easy
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

19) Generally speaking, franchising is a market-entry strategy that is typically executed

with more localization than is licensing.
Answer: FALSE
Difficulty: 1: Easy
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

20) Franchising is a variation of licensing strategy in which there is a contract between the parent
company franchiser and a franchisee that allows the franchisee to operate a business developed
by the franchiser in return for all rights for operations.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

21) According to the international Licensing Industry Merchandisers Association (LIMA),

the United States and Canada account for about 90 percent of licensed goods sales.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

22) Licensing agreements offer limited market control since the licensee typically does not
become involved in the licensor's marketing program.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge
23) In China, regulations require foreign franchisers to directly own two or more stores for
a minimum of one year before franchising.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

24) McDonald's has learned the wisdom of leveraging local market knowledge by granting
franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit
country-specific preferences and taste.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

25) Franchising in a global market is actually a market-entry strategy that is typically executed
with less localization than is licensing.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Application of knowledge

26) Walt Disney Company has successfully adapted licensing as a market entry mode in
different countries. What are the advantages of using licensing as entry mode?
Answer: Walt Disney Company generates nearly $15 billion in annual revenues from licensed
merchandise, thanks to the popularity of their theme parks, movies, and television shows, as well
as Mickey Mouse, Winnie the Pooh, and other popular characters which have gained familiarity
all over the world. Licensing is a contractual arrangement whereby one company (the licensor)
makes a legally protected asset available to another company (the licensee) in exchange for
royalties, license fees, or some other form of compensation. There are two key advantages
associated with licensing as a market entry mode. First of all, because the licensee is typically a
local business that will produce and market the goods or services on a local or regional basis,
companies can circumvent tariffs, quotas, or similar export barriers. Secondly, licensees are
granted considerable autonomy by the licensor to freely adapt the licensed goods to an extent to
suit the local tastes and preferences. Disney licenses trademarked cartoon characters, names, and
logos to producers of clothing, toys, and watches for sale throughout the world. This allows
Disney to create synergies based on its core theme park, motion pictures, and television
businesses. Its licensees have considerable leeway to adapt colors, materials, or other design
elements that fit with the local tastes of a particular country or region.
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Analytical thinking
27) Nike provides technical specifications to a subcontractor or local manufacturer for its
products. What is this arrangement called and what are its major benefits and drawbacks?
Answer: This type of arrangement is referred to as "contract manufacturing." Nike, for
example, provides technical specifications of products to be manufactured to the subcontractor,
who then oversees production. The licensing firm can specialize in product design and marketing,
while transferring responsibility for ownership of manufacturing facilities to contractors and
subcontractors. Other advantages include limited commitment of financial and managerial
resources and quick entry into target countries. This is especially helpful when the target market
is too small to justify full- scale investment. Also, there is the possible advantage of securing
labor and resources at less cost than in the licensor's home country or manufacturing plant. One
disadvantage would be that the licensed companies may become subject to public scrutiny and
criticism for several reasons. Nike has to face this problem if workers in the contracted
companies are underpaid. Inhumane working conditions and hiring underage workers have also
been points of criticism by many governmental and private organizations. Violations of
sustainable business practices have also come under scrutiny.
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Analytical thinking

28) McDonald's and other fast food restaurants have benefitted tremendously by using
franchising as a mode of entry into different countries. What are the benefits of franchising
and how does it differ from other modes of entry?
Answer: Franchising involves a contract between a parent company (franchiser) and a
franchisee that allows a franchisee to operate a business developed by the franchiser in return for
a fee and adherence to franchise-wide policies and practices. This definition is very similar to
that of licensing since franchising itself is another variation of licensing strategy. McDonald's is
a good example of the success that can be achieved through franchising. It has great appeal to
local entrepreneurs who are very anxious to learn and apply franchising, which has been found to
be very successful in the United States. The specialty retailing industry favors franchising as a
market entry mode. Many of the famous American restaurant chains have used franchising to
enter and to develop in other countries. McDonald's has a well-known global brand name and a
business system that can be easily replicated in multiple country markets. It also provides its
franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit
country-specific preferences and tastes. Franchising is a market entry strategy that is typically
executed with less localization than licensing.
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a
market-entry strategy.
AACSB: Analytical thinking
29) Honda has invested $550 million in building an assembly plant in Greensburg,
Indiana; IKEA spent nearly $2 billion to open stores in Russia; and South Korea's LG
Electronics purchased a 58% stake in Zenith Electronics. All of these are examples of:
A) acquisition.
B) licensing.
C) franchising.
D) FDI.
E) exporting.
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

30) Strictly speaking, a (n) is an entry strategy for a single target country in which the
partners share ownership of a newly created business entity.
A) acquisition
B) licensing
C) franchising
D) joint venture
E) exporting
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

31) Disadvantages of joint venturing can include all of the following except:
A) joint venture partners must share rewards as well as risks.
B) joint ventures allow partners to achieve synergy.
C) joint ventures can have the potential for conflict between partners.
D) a dynamic joint venture partner can evolve into a strong competitor.
E) a company incurs very significant costs by joint venturing.
Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking
32) The strategy to use joint ventures has several advantages which do not include:
A) risk sharing.
B) reduced financial risk.
C) reward sharing.
D) achieve synergy.
E) the only way to enter a country or region.
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Analytical thinking

33) Which of the following does not fit into the sequence of experiences Anheuser-Busch had in
Japan?
A) Anheuser-Busch first entered Japan by means of a licensing agreement with Suntory, the
smallest brewery in Japan.
B) Anheuser-Busch created a joint venture with Kirin Brewery, the market leader.
C) Anheuser-Busch dissolved the joint venture with Kirin Brewery.
D) Anheuser-Busch entered into a joint venture with Kirin Brewery.
E) Anheuser-Busch reverted to a licensing agreement with Kirin
Brewery. Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

34) As a general rule, the Chinese government allows foreign companies to participate in
its market only if those companies agree to establish operations with local Chinese
enterprises. Which market entry mode would be the appropriate choice under these
circumstances?
A) acquisition
B) licensing
C) joint venture
D) exporting
E) franchising
Answer: C
Difficulty: 3: Challenging
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking
35) The president of a Mexican company recently remarked, "Business in Mexico is done on a
consensus basis, very genteel and sometimes slow by U.S. standards." A few months later, the
Mexican company and its U.S. joint venture partner parted company. Judging by the president's
remark, one important reason for the "divorce" was:
A) failure of one partner to live up to the terms of the contract.
B) cultural differences.
C) the cancellation of NAFTA.
D) the U.S. government's insistence on quick negotiations.
E) the language barrier.
Answer: B
Difficulty: 3: Challenging
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

36) Toyota learned many things from its partnership with GM, however American managers
involved in the venture complained that:
A) Toyota learned many things about the U.S. supply system.
B) Toyota learned about the U.S. transport system.
C) Toyota learned about managing American workers.
D) Toyota did not apply manufacturing expertise at GM plant.
E) Toyota applied its expertise at its Camry plant.
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

37) GM executives are looking for a joint venture with AvtoVAZ, the largest carmaker in:
A) Germany.
B) Lithuania.
C) Russia.
D) Kazakhstan.
E) Turkey.
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking
38) In a joint venture with Russian manufacturer AvtoVAZ, GM executives were planning to
have a stripped-down reengineered car based on its Opel model. However, the market
research revealed that a "Made-in-Russia" car would only be acceptable if:
A) it has a German name.
B) it sported a very low sticker price.
C) it has an American name.
D) it has a very high sticker price.
E) it has a Russian name.
Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Analytical thinking

39) The Russian market for imported premium vehicles is exploding as the number of
households that can afford luxury products exhibit rapid growth. The luxury cars include all of
the following except:
A) Porsche.
B) Lexus.
C) BMW.
D) Rolls-Royce.
E) Infiniti.
Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

40) Ford Motor Company (United States) has a 50-50 joint venture to build Ford Fiestas with:
A) Toyota (Japan).
B) Shanghai Automotive Industry (China).
C) BMW (Germany).
D) Mahindra & Mahindra (India).
E) Mazda (Japan).
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking
41) Which automaker currently has a joint venture with Hindustan Motors (India)?
A) Volkswagen
B) Ford
C) GM
D) Renault
E) Mazda
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

42) Ford and Mazda have market entry and expansion in a relationship known as:
A) joint venture.
B) licensorship.
C) franchising.
D) contract manufacturing.
E) none of the above
Answer: A
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

43) Which of the following currently owns a 70 percent stake in Skoda, the Czech automaker?
A) GM
B) Volkswagen
C) Ford
D) DaimlerChrysler
E) Renault
Answer: B
Difficulty: 1: Easy
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Analytical thinking

44) Which automaker owns an equity stake in Japan's Nissan Motor?

A) GM
B) Volkswagen
C) Ford
D) DaimlerChrysler
E) Renault
Answer: E
Difficulty: 1: Easy
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking
45) Tata Motors (India) acquired the following auto company:
A) Volkswagen AG (Germany).
B) Volvo (Sweden).
C) Jaguar (UK).
D) Toyota (Japan).
E) Hyundai (South Korea).
Answer: C
Difficulty: 1: Easy
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

46) Avon Products uses to enter developing markets.

A) franchising and licensing
B) joint venture and licensing
C) acquisition and franchising
D) licensing and franchising
E) acquisition and joint ventures
Answer: E
Difficulty: 3: Challenging
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Analytical thinking

47) Foreign direct investment figures reflect investment flows out of the home country
as companies invest in or acquire plants, equipment, or other assets.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

48) Foreign investments may take the form of minority or majority shares in joint ventures,
minority or majority equity stake in another company, or outright acquisition.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge
49) By pursuing a joint venture entry strategy, a company can limit its financial risk as well as
its exposure to political uncertainty.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Application of knowledge

50) A joint venture with a local partner represents a more extensive form of strategy that
is similar to exporting and licensing.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Application of knowledge

51) A joint venture with a local partner represents a more extensive form of strategy that
is similar to exporting and licensing.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

52) Anheuser-Busch created a joint venture with Kirin Brewery, the market leader.
Anheuser-Busch's 90 percent stake in the venture entitled it to market and distribute beer
produced in Los Angeles.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

53) A lesson that can be learned from Anheuser-Busch's experience in Japan is that it is better to
give control to a local partner via a licensing agreement rather than making a major investment.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

54) A dynamic joint venture partner can evolve into a strong competitor.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Application of knowledge
15
Copyright © 2017 Pearson Education, Ltd.
55) The joint venture between Corning Glass and Mexican manufacturer Vitro failed primarily
due to conflicts arising from cultural differences.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

56) GM and South Korea's Daewoo Group formed a joint venture which helped Daewoo
improve its competitiveness. The venture was terminated since Daewoo prevented the import of
GM cars to Korea.
Answer: FALSE
Difficulty: 3: Challenging
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Application of knowledge

57) In 2008, the largest merger and acquisition deal in the pharmaceutical industry,
Roche's acquisition of Genentech, is an example of an equity stake.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

58) Companies may move from licensing or joint venture strategies to ownership in order to
achieve faster expansion in a market, greater control, and/or higher profits.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

59) If government restrictions prevent 100 percent ownership by foreign companies,

the investing company will have to settle for a majority or minority equity stake.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Application of knowledge

60) The driving force behind many business acquisitions is globalization.

Answer: TRUE
Difficulty: 2: Moderate
61) Japan's Fuji Photo Film Company invested hundreds of millions of dollars in the
United States after the U.S. government ruled that Fuji was guilty of dumping.
Answer: TRUE
Difficulty: 3: Challenging
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

62) Licensing, joint ventures, minority or majority equity stake, and ownership are points along a
continuum of alternative strategies for global market entry and expansion.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

63) Avon Products uses both acquisition and joint ventures to enter developing markets.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Application of knowledge

64) Joint ventures are becoming very popular as an entry mode into foreign markets. Why is
this strategy so attractive to companies interested in entering other markets in the world?
Answer: A joint venture with a local partner represents a more extensive form of participation
in foreign markets than either exporting or licensing. A joint venture is an entry strategy for a
single target country in which the partners share ownership of a newly created business entity.
This strategy is attractive for several reasons such as the sharing of risk. Sharing of risk is a very
important advantage when a company is entering a new and unfamiliar region. Also, by pursuing
joint venture entry strategies, a company can limit its financial risks as well as exposure to
political uncertainty. A company can also use the joint venture experience to learn about a new
market environment. Joint ventures also allow partners to achieve synergy by combining
different value chain strengths. One company may be helpful in providing knowledge about local
markets and availability of resources, and the other company may have a brand name and
well-established reputation in the market. Thus, there can be a complimentary effect by linking
the attributes of both the companies. Joint venture is recommended for companies which lack
enough resources or technical know-how. Also, in cases where the governmental policies restrict
the full ownership of the companies by foreign businesses, joint venture is the only option to
enter.
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's
foreign investments can take.
AACSB: Analytical thinking

17
Copyright © 2017 Pearson Education, Ltd.
65) Companies like Anheuser-Busch, Corning Glass, and GM have learned a lot by using joint
venture as a mode of entry into a foreign market. Some of their experiences are not very positive.
What are the disadvantages of joint venturing?
Answer: Many companies have experienced difficulties, some serious, when working with
partners under joint venture agreement. Anheuser-Busch first entered the Japanese market in
order to cross the difficult barrier by entering into a licensing agreement with Suntory, the
smallest of the brewers in Japan. Although Budweiser became popular, it had a minuscule share
of the market. Anheuser-Busch then created a joint venture with Kirin Brewery, the market
leader with a 90 percent stake in the venture. Kirin's distribution channel was very helpful, and
Anheuser-Busch was able to use some of Kirin's facilities. On the other hand, Kirin gained a lot
of knowledge about the beer market globally. The beer market did not increase substantially for
Anheuser-Busch, and the joint venture was losing money. Finally, Anheuser-Busch decided to
dissolve the joint venture and reverted to a licensing agreement with Kirin. Thus, joint venture
does not work in all circumstances and at times licensing works as well. In order for the joint
venture relationship to work well, both partners must share rewards as well as risks. The main
disadvantage associated with joint venture is that a company may incur very significant costs
associated with control and coordination issues that arise when working with partners in another
country. Another disadvantage is that of potential for conflict between partners. These often arise
out of cultural differences. Corning Glass and Vitro, Mexico's largest industrial manufacturer
had a joint venture. Mexican managers viewed the Americans as too direct and aggressive,
whereas the American managers believed Mexicans took too much time to make important
decisions. Another disadvantage is that a dynamic joint venture partner can evolve as a stronger
competitor. GM and South Korea's Daewoo had joint venture to produce cars for the Korean
market. GM developed Daewoo's competitiveness, and finally Daewoo terminated the venture
since their cars were not allowed for exportation. Thus, all the disadvantages have to be taken
into account when entering into a joint venture agreement.
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign
investments can take.
AACSB: Analytical thinking

66) A competitive business environment is now characterized by all of the following

characteristics except:
A) unprecedented degrees of turbulence.
B) dynamism.
C) unpredictability.
D) inadaptability.
E) environmental responsiveness.
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking
67) Which of the following is not a characteristic of global strategic partnership?
A) Participants maintain independence outside the framework of alliance.
B) Participants share benefits of the alliance.
C) Participants share control over the performance of the assigned tasks.
D) Participants make ongoing contributions in technology, products, and other areas.
E) Participants agree not to compete in areas unrelated to the alliance.
Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge

68) Which of the following is not a characteristic of global strategic alliances?

A) Participants maintain independence outside the framework of alliance.
B) Participants share benefits as well as control.
C) Participants make ongoing contributions in technology, products, and other areas.
D) Participants focus on an individual country market.
E) Participants share benefits of the alliance.
Answer: D
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge

69) The terminology used to describe the new forms of cooperation strategies varies widely
and the phrases used include all of the following except:
A) collaborative agreements.
B) strategic alliances.
C) global strategic partnerships.
D) strategic international alliances.
E) Greenfield operations.
Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge
70) GSPs (Global Strategic Partnerships) are attractive for several reasons which do not include:
A) sharing high product development costs.
B) sharing technological developments.
C) securing access to national and regional markets.
D) continuous transfer of technology between partners.
E) focus on a single national market or a specific problem.
Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge

71) Which of the following does not fit in with the factors that should be considered by
companies forming GSPs?
A) Partners are competitors to each other.
B) Harmony is the most important measure of success.
C) All employees and managers must understand where cooperation ends and
competitive compromise begins.
D) Learning from partners is critically important.
E) none of the above
Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge

72) Having partners from another country can have advantages which include all of
the following except:
A) reducing product development costs.
B) securing technology.
C) access to capital.
D) shared risks.
E) increased competition.
Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge
73) An attribute which does not represent true global partnership is:
A) achieving world leadership by differentiation.
B) achieving a reciprocal relationship.
C) relationship is organized vertical lines.
D) continual transfer of resources.
E) retaining national identities.
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

74) "Corporate amnesia" in global partnership is a term which refers to:

A) achieving world leadership by differentiation.
B) short-term goals with no memory on how to compete.
C) a relationship which is short lived.
D) discontinuation of a partnership due to personal chemistry.
E) losing national identity and
ideology. Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

75) "Discussion and consensus must be the norms. Partners must be viewed as equals." When
applied to global strategic partnerships, this statement indicates the importance of which factor?
A) mission
B) strategy
C) governance
D) culture
E) organization
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking
76) "Successful GSPs create win-win situations, where participants pursue objectives on the
basis of mutual advantage." When applied to global strategic partnerships, this statement
indicates the importance of which factor?
A) mission
B) strategy
C) governance
D) culture
E) organization
Answer: A
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

77) According to a 1991 report by McKinsey & Co., problems of alliances between Western
and Japanese firms were related to all of the following factors except:
A) objective levels of performance.
B) a feeling of mutual disillusionment.
C) difference in expectations.
D) balance between partners.
E) frictional loss.
Answer: A
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

78) The success of CFM International (the strategic partnership between GE and Snecma) can be
attributed to which of the following?
A) compatibility of the partners
B) capability of the partners
C) commitment of the partners
D) personal chemistry between executives
E) all of the above
Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking
79) Critics warn that employees of a company that become reliant on an outside supplier
for critical components will:
A) encourage outsourcing
B) become used to value-added components
C) lose expertise and engineering skills
D) use time for developing other skills
E) look for employment with competitors
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

80) Boeing developed the wide-bodied aircraft, the 777, with about of the work
subcontracted out to Mitsubishi, Fuji, and Kawasaki.
A) 50%
B) 25%
C) 20%
D) 60%
E) 75%
Answer: C
Difficulty: 1: Easy
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

81) A number of factors combine to make Russia an excellent location for an alliance which do
not include:
A) a well-educated workforce.
B) quality is important to Russian consumers.
C) abundance of supplies.
D) potential for economic growth.
E) potential for growth in service sector.
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

82) Despite commanding a 37 percent share of the global cellular handset market, Nokia
announced that it would make the source code for handset manufactured by Siemens
AG. Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge
83) To succeed in global markets, firms can now rely exclusively on the
technological superiority or core competence that brought them past success.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge

84) Sony entered into a strategic partnership with Samsung in order to produce flat-panel TV
screens due to the high product development costs.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge

85) The failure of partnership between Great Britain's General Electric Company was blamed in
part due to the fact that it was run by engineers.
Answer: FALSE
Difficulty: 3: Challenging
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge

86) The alliance between GE and Snecma got off with a feeble start due to the
personal chemistry between the top two executives of respective companies.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge

87) Eventually, an affiliate-based strategy gives way to an export-driven strategy.

Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Application of knowledge
88) Why would any firm, whether global or otherwise, seek to collaborate with another firm,
be it local or foreign?
Answer: Recent changes in the political, economic, socio-cultural, and technological
environments of the global firms have prompted the need for strategies that are more current
rather than the traditional strategies. Trade barriers are less, global markets are more accessible,
consumer needs and wants have changed, product life cycles have shortened, and new
communication technologies and trends have emerged. These factors may provide unprecedented
opportunities. However, there are strong strategic implications for the global organizations and
new challenges for the global marketer. All these converging environmental forces or changes
require different unprecedented global strategies that take into account collaborations which
were not thought of at any period of time. Today's competitive environment is described as
turbulent, dynamic, and unpredictable. Global firms are under intense pressure to respond and
adapt quickly. They have to pursue "entrepreneurial globalization" by developing unique and
flexible organizational capabilities, innovation, and updating global strategies that take care of
the demands.
Difficulty: 3: Challenging
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

89) A true global strategic partnership is unique and different. Using the example of Sony's
strategic alliance with Samsung, discuss attributes that are needed for a productive working
partnership.
Answer: A true global strategic partnership requires a mutual collaboration between partners.
There are five attributes that are described as important for this type of collaboration. (1) Two or
more companies should develop a joint long-term strategy aimed at achieving world leadership
by pursuing cost-leadership, differentiation, or a combination of the two. Samsung and Sony are
two major companies jockeying for leadership in the global television market. Flat-panel TV
market is the newest market that has a great potential. (2) The relationship should be reciprocal
with each partner bringing in specific strengths that can prove to be mutually beneficial. Also,
both sides should be able to learn from each other. Samsung is the leader in the manufacturing
technology into world-class products. They can learn from Sony how the present technology can
be advanced. (3) The partners' vision and effort are truly global, extending beyond home
countries and the home regions to the rest of the world. Sony and Samsung are both global
companies that market global brands throughout the world. (4) The relationship should be
organized along horizontal not vertical lines. Also, continual transfer of resources laterally
between partners is required, with resource pooling representing norms. Both Sony and Samsung
are in direct contact with each other and there is good sharing of resources. (5) When competing
in markets excluded from the partnership, the participants retain their national and ideological
identities. Both Sony and Samsung are well established and have sufficient key products in the
world market that they will be able to retain their national and ideological identities as well as
competitive edge.
Difficulty: 3: Challenging
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking
90) What are important considerations that will result in a successful global strategic alliance
between two countries?
Answer: There are five attributes that are important while considering global strategic alliances
as illustrated by the example of Sony and Samsung. These can be listed as follows:
1. Two or more companies develop a joint long-term strategy aimed at achieving world
leadership by pursuing cost leadership, differentiation, or a combination of the two.
2. The relationship is reciprocal. Each partner possesses specific strengths that it shares with
the other; learning must take place on both sides.
3. The partners' vision and efforts are truly global, extending beyond home countries and
the home regions to the rest of the world.
4. When competing in markets excluded from the partnership, the participants retain
their national and ideological identities.
5. The relationship is organized along horizontal, not vertical, lines. Continual transfer of
resources laterally between partners is required, with technology sharing and resource pooling
representing norms.
Difficulty: 3: Challenging
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking

91) Why are alliances between Western companies and Asian competitors different as well
as difficult? What are some of the concerns, and how can those concerns be addressed?
Answer: Western companies may find themselves to be at a disadvantage in GSPs with an
Asian competitor. To limit transparency, some companies involved in GSPs establish a
"collaboration section." This department is designed to serve as a gatekeeper through which
requests for access to people and information must be channeled. Unintended transfers are
therefore guarded and controlled. A study by McKinsey & Co. identified four common problem
areas that have gone wrong in alliances between Japanese and Western firms. The Japanese
partner saw itself emerging from the alliance as a leader in its business or building a new basis
for the future, whereas the Western partner sought relatively quick and risk-free financial returns.
The second area of concern related to the balance between partners. Each must contribute to the
alliance and each must depend on the other to a degree that justifies participation in the alliance.
Another common cause of problems was found to be due to friction. This mainly stemmed from
differences in management philosophy, expectations, and approaches. Lastly, the study found
that short-term goals can result in the foreign partner limiting the number of people allocated to
the joint venture. The original goals of the venture are lost as each new manager takes their turn.
There is little original corporate memory or reminder of the initial intent of the venture. These
concerns, if addressed adequately and before any formal agreement is signed, will be helpful in
taking care of later concerns, frictions and unnecessary problems.
Difficulty: 3: Challenging
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global
strategic partnership.
AACSB: Analytical thinking
92) Which of the following is not true of Japanese keiretsu?
A) promotes risk sharing
B) promotes long-term employment
C) ensures low prices for Japanese consumers
D) blocks foreign suppliers from the Japanese market
E) relationships are cemented by bank ownership
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.5: Describe the special forms of cooperative strategies found in Asia.
AACSB: Application of knowledge

93) Which of the following is true about Japanese keiretsu?

A) Toyota is a vertical keiretsu, Mitsubishi is a horizontal keiretsu.
B) Toyota is a horizontal keiretsu, Mitsubishi is a vertical keiretsu.
C) Toyota and Mitsubishi are both horizontal keiretsu.
D) Toyota and Mitsubishi are both vertical keiretsu.
E) none of the above
Answer: A
Difficulty: 2: Moderate
Chapter LO: 9.5: Describe the special forms of cooperative strategies found in Asia.
AACSB: Application of knowledge

94) Another perspective on the future of cooperative strategies envisions the emergence of:
A) mergers and acquisition.
B) virtual corporations.
C) franchising.
D) joint ventures.
E) keiretsu.
Answer: B
Difficulty: 2: Moderate
Chapter LO: 9.5: Describe the special forms of cooperative strategies found in Asia.
AACSB: Application of knowledge

95) Japanese keiretsu executives can legally sit on each other's boards, share information,
and coordinate prices in closed-door meetings of "presidents' councils."
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.5: Describe the special forms of cooperative strategies found in Asia.
AACSB: Application of knowledge

96) The South Korean government has recently abandoned the "chaebol" industry structure in
favor of the "keiretsu" structure.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.5: Describe the special forms of cooperative strategies found in Asia.
AACSB: Application of knowledge
97) Prior to the economic crisis of 1997-1998, the South Korea's "chaebol" had become bloated
and heavily in debt.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.5: Describe the special forms of cooperative strategies found in Asia.
AACSB: Application of knowledge

98) Japanese keiretsu is considered to be a strong cooperative strategy that will have an impact
in global marketing. Describe what it is and how it can affect U.S. businesses.
Answer: Japan's keiretsu represents a special category of cooperative strategy which is an
interbusiness alliance or enterprise group. It exists in a broad spectrum of markets, including the
capital market, primary goods markets, and component parts markets. Keiretsu relationships are
often cemented by bank ownership of large blocks of stock and by cross-ownership of stock
between a company and its buyers and nonfinancial suppliers. Also, keiretsu executives can
legally sit on each other's boards, share information, and coordinate prices. Thus, keiretsu serves
as a cartel that has the government's blessing. Although it is not a market entry strategy per se, it
played an integral part in the international success of the Japanese companies as they sought
new markets. Clyde Prestowitz provided the following example to show how keiretsu
relationships have a potential impact on U.S. businesses. In the 1980s, Nissan was in the market
for a supercomputer to use in car design. Two vendors under consideration were Cray and
Hitachi.
Cray was the worldwide leader in supercomputers, and Hitachi had no functional product to offer.
When it appeared that the purchase of a Cray computer was pending, Hitachi executives called
for solidarity since both Nissan and Hitachi were members of the same big six keiretsu. Hitachi
was pushing Nissan to show preference for Hitachi, and the United States had to put pressure on
both Nissan and the Japanese government to have the sale proceed with Cray. Because keiretsu
relationships are crossing the Pacific and directly affecting the American market, the U.S.
companies have a reason for concern. In California alone, keiretsu owns more than half of the
Japanese businesses. Other keiretsu businesses are moving into different parts of the United
States.
Difficulty: 3: Challenging
Chapter LO: 9.5: Describe the special forms of cooperative strategies found in Asia.
AACSB: Diverse and multicultural work environment

99) The virtual corporation will seem to be a single entity with vast capabilities but will really
be the result of numerous collaborations assembled only when needed.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.6: Explain the evolution of cooperative strategies in the twenty-first century.
AACSB: Analytical thinking
100) Saab markets two luxury car models, both prized by drivers for their "quirkiness." About
30 percent of Saab's sales come from the USA, with most of the rest from Western Europe.
Which strategy does Saab appear to be using?
A) country concentration/market segment concentration
B) country diversification/market segment concentration
C) country concentration/market segment diversification
D) country diversification/market segment diversification
E) none of the above
Answer: A
Difficulty: 2: Moderate
Chapter LO: 9.7: Use the market expansion strategies matrix to explain the strategies used by
the world's biggest global companies.
AACSB: Application of knowledge

101) In a country and market concentration strategy, a company serves many markets in a
few countries.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.7: Use the market expansion strategies matrix to explain the strategies used by
the world's biggest global companies.
AACSB: Analytical thinking

102) Companies are faced with the decision whether to expand by seeking new markets in
existing countries or seeking new country markets for already identified and served market
segments. Faced with these situations, what are the strategies that can be followed?
Answer: There are four different dimensions that emerge in combination to produce four
different sets of strategies that are described as follows. (1) Country and market concentration,
which involves targeting a limited number of customer segments in a few countries. This is
typically a starting point for most companies and it matches with limited company resources and
market investment needs. (2) Country concentration and market diversification, in which a
company serves many markets in a few countries. Many European companies have followed this
strategy. American companies that decide to diversify in the U.S. market as opposed to going
international have also followed this strategy. (3) Country diversification and market
concentration is the classic global strategy whereby a company seeks out the world market for a
product. This strategy is desirable since it serves the world customer, and a company can achieve
a greater accumulated volume at a lower cost. It also has a competitive advantage due to cost.
This is the strategy followed by well-managed businesses that serve a distinct need and customer
category. (4) Country and market diversification is the corporate strategy of a global,
multi-business company such as Matsushita. Thus, based on the level of involvement desired and
available resources, one of the above-mentioned strategies should be selected.
Difficulty: 3: Challenging
Chapter LO: 9.7: Use the market expansion strategies matrix to explain the strategies used by
the world's biggest global companies.
AACSB: Analytical thinking