Global Marketing, 10e (Green/Keegan)

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

1) Which of the following related to South African Breweries (SAB) PLC is not accurate?
A) SAB had a commanding 98 percent share of the beer market.
B) The company owned more than 100 breweries in 24 countries.
C) Most of its brands, which include Castle Lager, were sold on regional basis.
D) None of its brands had the same status as Heineken or Guinness.
E) The company's brands were popular among the "echo boom" generation in the United States.
Answer: E
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a market-entry
strategy.
AACSB: Analytical thinking

2) Caterpillar merchandise is gaining popularity as consumers make a fashion statement by

donning boots, jeans, and handbags. All of the following statements related to their merchandise
are correct except:
A) Caterpillar's merchandise bears distinctive black-and-yellow Cat label.
B) Caterpillar's merchandise sales are close to $2.1 billion.
C) Cat-branded apparel's are licensed to UK-based Overland Ltd.
D) Caterpillar sells their apparel under a franchise agreement in UK.
E) People do not know the brand but recognize it from their tractors.
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

3) The particular market-entry strategy that company executives choose depends on all of the
following except:
A) their vision.
B) their attitude toward risk.
C) the availability of investment capital.
D) the possibility of significant adaptation.
E) the amount of control sought.
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

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4) A factor which is unrelated to 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

5) Licensing as a market entry mode has several disadvantages and opportunity costs, which do
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

6) ________ 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

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7) ________ 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

8) 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

9) 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

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10) 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

11) 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

12) 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

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13) The agreements that allows McDonald's franchisees around the globe to use McDonald's
trademarked name and menu items represents, in essence, which form of market entry?
A) joint ventures
B) franchising
C) 100 percent 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

14) 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

15) Starbucks' management team have used only licensing at the marketing entry approach.
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

16) Overall, a licensing strategy must be designed to ensure ongoing competitive advantage for
the licensee.
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

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Copyright © 2020 Pearson Education, Inc.
17) Franchising has great appeal to local entrepreneurs who are anxious to learn and apply
Western-style marketing techniques.
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) 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

19) 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

20) 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

21) One of the advantages of a license arrangement is that it can create export market
opportunities and open the door to a competitive 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

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Copyright © 2020 Pearson Education, Inc.
22) 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

23) 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

24) 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

25) 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

26) U.S. President Donald Trump has made intellectual property protection as key elements in
trade negotiations with Beijing.
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

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Copyright © 2020 Pearson Education, Inc.
27) McDonald's headquarters 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 tastes. However, franchising is a market-entry strategy
that is typically executed with more localization than is licensing.
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

28) 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

29) What are the two key advantages that are associated with licensing as a market-entry mode?
Answer: Two key advantages are associated with licensing as a market-entry mode. First,
because the licensee is typically a local business that will produce and market the goods on a
local or regional basis, licensing enables companies to circumvent tariffs, quotas, or similar
export barriers. Second, when appropriate, licensees are granted considerable autonomy and are
free to adapt the licensed goods to local tastes.
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a market-entry
strategy.
AACSB: Analytical thinking

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Copyright © 2020 Pearson Education, Inc.
30) 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

31) McDonald's and other fast food restaurants have benefitted 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

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Copyright © 2020 Pearson Education, Inc.
32) What are some of the questions that a would-be franchisor should ask before using
franchising as a mode of entry?
Answer: Some of the questions that a would-be franchiser should ask include the following:
(1) Will local consumers buy your product?
(2) How tough is the local competition?
(3) Does the government respect trademark and franchiser rights?
(4) Can your profits be easily repatriated?
(5) Can you buy all the supplies you need locally?
(6) Is commercial space available and are rents affordable?
(7) Are your local partners financially sound and do they understand the basics of franchising?

By addressing these issues, franchisers can gain a more realistic understanding of global
opportunities.
Difficulty: 2: Moderate
Chapter LO: 9.1: Explain the advantages and disadvantages of using licensing as a market-entry
strategy.
AACSB: Analytical thinking

33) 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

34) 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

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Copyright © 2020 Pearson Education, Inc.
35) In 2016, one of the largest merger and acquisition deals was the proposed acquisition of
American agricultural giant Monsanto by Germany-based Bayer for $66 billion. This type of
transfer is known as:
A) full ownership.
B) equity stake.
C) greenfield investment.
D) joint venture.
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

36) 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

37) 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

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Copyright © 2020 Pearson Education, Inc.
38) 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

39) 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

40) 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

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Copyright © 2020 Pearson Education, Inc.
41) 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

42) 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

43) 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

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Copyright © 2020 Pearson Education, Inc.
44) 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

45) The 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

46) 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

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Copyright © 2020 Pearson Education, Inc.
47) Ford and Mazda have market entry and expansion in a relationship known as:
A) 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

48) 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

49) 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

50) 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
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Copyright © 2020 Pearson Education, Inc.
51) 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

52) 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

53) 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

54) One of the biggest joint ventures between an American company and a Russian company
linked Cummins with the KamAZ truck company in Tatarstan.
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

55) To succeed in global markets, firms can no longer rely exclusively on the technological
superiority or core competence that brought them past success.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.2: Compare and contrast the different forms that a company's foreign investments
can take.
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Copyright © 2020 Pearson Education, Inc.
56) 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

57) 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

58) 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

59) 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

60) 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

61) 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
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62) 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

63) 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

64) 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

65) 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

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

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

67) 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
18
Copyright © 2020 Pearson Education, Inc.
68) 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

69) 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

70) 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

19
Copyright © 2020 Pearson Education, Inc.
71) 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 a 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

72) 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

20
Copyright © 2020 Pearson Education, Inc.
73) 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

74) 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 investments.
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

75) 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

21
Copyright © 2020 Pearson Education, Inc.
76) 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

77) 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

78) 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

22
Copyright © 2020 Pearson Education, Inc.
79) "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

80) "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

81) "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

23
Copyright © 2020 Pearson Education, Inc.
82) 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

83) 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

84) 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

24
Copyright © 2020 Pearson Education, Inc.
85) 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

86) 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

87) Despite commanding a 37 percent share of the global cellular handset market, Nokia
announced that it would make the source code for handsets 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

88) 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

25
Copyright © 2020 Pearson Education, Inc.
89) 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

90) 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

91) The alliance between GE and Snecma got off to a feeble start due to the personal chemistry
between the top two executives of the 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

92) 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

26
Copyright © 2020 Pearson Education, Inc.
93) 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, sociocultural, and technological
environments of 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

94) 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. The 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

27
Copyright © 2020 Pearson Education, Inc.
95) What factors are necessary for a proposed global strategic partnership to be successful?
Answer: Assuming that a proposed alliance has required attributes, it is necessary to consider six
basic factors deemed to have significant impact on the success of GSPs: mission, strategy,
governance, culture, organization, and management:
1. Mission. Successful GSPs create win-win situations, in which participants pursue objectives
on the basis of mutual need or advantage.
2. Strategy. A company may establish separate GSPs with different partners; strategy must be
thought out upfront to avoid conflicts.
3. Governance. Discussion and consensus must be the norms. Partners must be viewed as equals.
4. Culture. Personal chemistry is important, as is the successful development of a shared set of
values.
5. Organization. Innovative structures and designs may be needed to offset the complexity of
multicountry management.
6. Management. GSPs invariably involve a different type of decision making. Potentially
divisive issues must be identified in advance and clear, unitary lines of authority established that
will result in commitment by all partners.
Difficulty: 3: Challenging
Chapter LO: 9.3: Discuss the factors that contribute to the successful launch of a global strategic
partnership.
AACSB: Analytical thinking

96) 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

28
Copyright © 2020 Pearson Education, Inc.
97) 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

98) Eaton, the then Chrysler chairman believed that in international market the economies of
scale suggests that you can go without a partner.
Answer: FALSE
Difficulty: 2: Moderate
Chapter LO: 9.4: Identify some of the challenges associated with partnerships in developing
countries.
AACSB: Application of knowledge

99) Hungary has the most liberal financial and commercial systems in the Central European
market.
Answer: TRUE
Difficulty: 2: Moderate
Chapter LO: 9.4: Identify some of the challenges associated with partnerships in developing
countries.
AACSB: Application of knowledge

29
Copyright © 2020 Pearson Education, Inc.
100) Russia is an excellent location for a strategic business alliance due to all of the following
factors, except:
A) well-educated workforce
B) importance on quality
C) sound legal system
D) growth in service sector
E) good regulatory system
Answer: C
Difficulty: 2: Moderate
Chapter LO: 9.4: Identify some of the challenges associated with partnerships in developing
countries.
AACSB: Application of knowledge

101) Giving an example, show what are the possible reasons to assume that joint ventures in the
transition economies of Central and Eastern Europe could evolve at a more accelerated pace than
past ventures?
Answer: Assuming that risks can be minimized and problems overcome joint ventures in the
transition economies of Central and Eastern Europe could evolve at a more accelerated pace than
past joint ventures with Asian partners. On the one hand, a number of factors combine to make
Russia an excellent location for an alliance: It has a well-educated workforce, and quality is very
important to Russian consumers. On the other hand, several problems are frequently cited in
connection with joint ventures in Russia—namely, organized crime, supply shortages, and
outdated regulatory and legal systems in a constant state of flux. Despite the risks, the number of
joint ventures in Russia is growing, particularly in the service and manufacturing sectors. In the
early post-Soviet era, most of the manufacturing ventures were limited to assembly work, but
higher value-added activities such as component manufacture are now being performed.
Difficulty: 2: Moderate
Chapter LO: 9.4: Identify some of the challenges associated with partnerships in developing
countries.
AACSB: Application of knowledge

102) 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

30
Copyright © 2020 Pearson Education, Inc.
103) 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

104) 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

105) 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

106) 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

107) Prior to the economic crisis of 1997-1998, 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

31
Copyright © 2020 Pearson Education, Inc.
108) 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

109) 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

110) Saab markets two luxury car models, both prized by drivers for their "quirkiness." About 30
percent of Saab's sales come from the United States, 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

32
Copyright © 2020 Pearson Education, Inc.
111) 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

112) Despite the sometimes problematic nature of the keiretsu, change comes slowly in Japan.
Answer: TRUE
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

113) 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

114) Recently, questions about corporate governance have arisen after some chaebol leaders
were accused of various offenses including colluding with politicians and corruption.
Answer: TRUE
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

33
Copyright © 2020 Pearson Education, Inc.
115) Although Jaguar's identity is closely tied to its British heritage, the first-generation I-Pace is
being assembled in a factory in Austria owned by Canadian carmaker Magna.
Answer: TRUE
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

34
Copyright © 2020 Pearson Education, Inc.