Global Strategy 3rd Edition Peng Test Bank

Global Strategy 3rd Edition Peng Test
Bank
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GLOBAL STRATEGY: Test Bank/ Chapter Six
CHAPTER 6 – ENTERING FOREIGN MARKETS

TEST BANK
TRUE/FALSE QUESTIONS
1. The Liability of Foreignness is the inherent disadvantage foreign firms experience

in host countries because of their nonnative status.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Environmental Influence
LO: 6-1; Bloom’s: Knowledge; Difficulty: Easy
2. An underlying reason for firms to NOT go abroad is the size of the firm.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 6-1; Bloom’s: Comprehension; Difficulty: Moderate
3. An underlying reason for firms to NOT go abroad is the size of the domestic
market.
a. True b. False
4. In regards to industry-based considerations, the higher the entry barriers, the more
intensely firms will attempt to compete abroad.
a. True b. False
5. Backward vertical integration refers to vertical integration that has not been
updated.
a. True b. False
6. The bargaining power of suppliers may prompt backward vertical integration.

a. True b. False
LO: 6-2; Bloom’s: Comprehension; Difficulty: Easy
7. The bargaining power of buyers may lead to forward vertical integration.

a. True b. False
1
8. The market potential of substitute products may encourage firms to bring them
abroad.
a. True b. False
LO: 6-2; Bloom’s: Knowledge; Difficulty: Moderate
9. Currency risks can be reduced by speculation and hedging.

a. True b. False
10. Under the Stage Model school of thought firms will enter culturally similar
countries during their first stage of internationalization.
a. True b. False
11. One of the drawbacks of large-scale entries is limited strategic flexibility.

a. True b. False
12. MNEs that enter foreign markets through foreign direct investment do not have
OLI advantages.
a. True b. False
13. For small volume of exports, direct export is not optimal.

a. True b. False
14. Indirect exports avoids exporting through domestically based intermediaries.

a. True b. False
2
15. Turnkey projects reduce the competitiveness of foreign clients and increase their
dependence when selling state of the art technology.
a. True b. False
16. Acquisition adds no new capacity.

a. True b. False
17. Entry strategies may change over time.

a. True b. False
18. Some foreignness is never an asset.

a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
19. MNEs are firms that are truly global.

a. True b. False
20. International agreements have established whose “rules of the game” e-commerce
follow.
a. True b. False
3
MULTIPLE CHOICE QUESTIONS
1. The differences in formal and informal institutions that govern the rules of the game
in different countries include _______ differences.
a. Regulatory
b. Language
c. Cultural
d. All of the above
e. None of the above
2. As firms expand into more countries, they should recognize:

a. Foreign firms are still often discriminated against.
b. Foreign firms primarily deploy overwhelming resources and capabilities that offset
the liability of foreignness.
c. Foreign firms are able to offset the liability of foreignness and still have some
competitive advantage.
d. All of the above.
e. None of the above.
LO: 6-1; Bloom’s: Knowledge; Difficulty: Challenging
3. Small firms in a large domestic market are referred to as:

a. Enthusiastic internationalizers.
b. Follower internationalizers.
c. Slow internationalizers.
d. Occasional internationalizers.
e. Domestic internationalizers.
4. The lower the value of firm-specific resources and capabilities such as________ the
more likely firms will aggressively leverage them overseas.
a. Tangible assets
b. Know-how
c. Software
d. All of the above
e. None of the above
5. Firms may choose not to enter certain countries if:
4
a. They possess rare firm-specific assets.

b. The transaction costs are be too low.
c. There are dissemination risks.
d. There is an authorized diffusion of firm-specific assets.
e. All of the above.
6. Organizing firm-specific resources and capabilities as a bundle:

a. Favors firms with strong complementary assets.
b. Prevents having assets integrated s a system.
c. Discourages using them overseas.
d. Is counterproductive.
e. Occurs only in domestic markets.
LO: 6 -2; Bloom’s: Knowledge; Difficulty: Moderate
7. Which of the following are not regulatory risks?

a. An obsolescing bargain.
b. Deals that have been struck by MNEs and host governments.
c. Nationalization.
d. Recent trends among host governments regarding their relationships with
MNEs.
e. B and C above.
LO: 6-2; Bloom’s: Comprehension; Difficulty: Challenging
8. Which of the following exemplify trade barriers?

a. Tariffs.
b. Local content requirements.
c. Restrictions on certain entry modes.
d. A and C above.
9. Which of the following is not a location specific advantage?

a. Agglomeration.
b. Knowledge spillovers.
c. A skilled labor force.
d. A pool of specialized suppliers and buyers.
e. All of the above are location advantages.
5
10. The strategic goal of __________ involves going after countries that offer the highest
price.
a. Natural resources-seeking
b. Market-seeking
c. Efficiency-seeking
d. Innovation-seeking
e. Profit-seeking
11. Institutional Distance involves all of the following except that which is:
a. Regulatory.
b. Normative.
c. Cognitive.
d. Cultural.
e. B and C above.
LO: 6-3; Bloom’s: Analysis; Difficulty: Challenging
12. First mover advantages do not include:

a. Developing proprietary, technological leadership.
b. Preempting scarce assets.
c. Establishing entry barriers.
d. Successful clashes with dominant firms in domestic markets.
e. Creating good relationships with key stakeholders.
LO: 6-4; Bloom’s: Analysis; Difficulty: Moderate
6
13. Late mover advantages do not include:

a. Taking a free ride on first movers’ investments.
b. Joining the game with massive firepower when some of the uncertainties are
removed.
c. Preempting scarce assets.
d. Taking advantage of first movers’ inflexibility by leapfrogging over them.
e. Choice of Strategy.
14. Large-scale entries do which of the following?

a. Benefit from a strategic commitment.
b. Assure local customers and suppliers.
c. Deter potential entrants.
d. A and B above.
15. Small-scale entries normally benefit by their:

a. Focus on accumulating experience.
b. Emphasis on “learning by doing.”
c. Strong strategic commitment.
d. First mover advantages.
e. A and B above.
16. Non-equity modes of entry typically involve:

a. Exports and contractual agreements.
b. Larger, harder-to-reverse commitments.
c. Establishing independent organizations overseas.
d. Joint ventures (JVs).
e. Wholly owned subsidiaries.
17. All of the follow are true of direct exports except:

a. Most basic mode of entry.
b. Capitalizes on economies of scale in production concentrated in the home
country.
c. Affords better control over distribution.
d. The agendas and objectives of the intermediaries and exporters are the same.
e. Designs and productions geared for the domestic market first and foremost.
7

18. Selling the rights to intellectual property for a royalty fee is involved in:
a. Licensing/franchising.
b. Turnkey projects.
c. R&D contracts.
d. Comarketing.
8
19. Which is not true of joint ventures?

a. They are jointly owned by two or more parent companies.
b. They share risks with local partners.
c. They gain access o the local partner’s knowledge about the host country.
d. They are politically less acceptable than wholly owned subsidiaries.
e. The goals of partners may diverge.
LO: 65; Bloom’s: Analysis; Difficulty: Moderate
20. Greenfield operations refers to:

a. Licensing/franchising.
b. Turnkey projects.
c. R&D contracts.
d. Co marketing.
e. Wholly owned subsidiaries.
9
SHORT ANSWER ESSAY QUESTIONS
1. Is “foreignness” a liability or an asset? What causes it to be one or the other?

In terms of the “liability of foreignness,” one contrasting view argues that under
certain circumstances, being foreign can be an asset (that is, a competitive
advantage). Japanese and German cars are viewed as of higher quality in the United
States. Many American movies rake in more money overseas than at home. American
cigarettes are “cool” among smokers in Central and Eastern Europe. Anything
Korean—ranging from handsets and TV shows to kimchi (pickled cabbage)-flavored
instant noodles—are considered hip in Southeast Asia. Conceptually, this is known as
the country-of-origin effect.
AACSB: BUSPROG: Reflective Thinking; DISC: Environmental Influence

2. Schmaltz argues: “If a company wishes to be a global corporation it should truly

globalize, not just operate within the so-called Triad.” What might Schmaltz be
overlooking?
Schmaltz is implying that many global corporations are not truly global but it would
be pointless for a company to develop a strategy simply so it could meet the strictest
definition of the word “global.” Schmaltz is focused on the meaning of words and
most so-called global corporations are focused on profit objectives. There are
reasons why an MNE may not be truly global. First, most MNEs know what they are
doing in regards to achieving their profit objectives and their current geographic
scope is the maximum they can manage in the most profitable manner. Second,
globalization is a trend and many will likely become more “globalized” over time.

LO: 6-6; Bloom’s: Evaluation; Difficulty: Challenging
3. J. Lee disagrees with M. Schmaltz (above): “If a company wishes to be a global

corporation, it does not need to locate in every continent – it should focus on those
locations that are most profitable.” What do you think?
Again, the debate is over the meaning of words. J. Lee has a point. One should not
expand globally just for the prestige of being recognized as global corporation. The
firm has a responsibility to its shareholders.

LO: 6-6; Bloom’s: Evaluation; Difficulty: Challenging
4. The text points out that from a resource-based view, you and your firm need to
develop overwhelming capabilities to offset the liability of foreignness. However, how
does a small firm do that?
Answers will vary but possible responses will relate to how the firm may be able use
the resources of larger firms in achieving its objectives. This may be done through
franchising or licensing intellectual property to larger firms with greater resources,
using intermediaries who have overwhelming capabilities, and entering a joint
10
venture with another domestic company (which has the capabilities needed) in which
the small firm puts up intellectual property as its share of the venture.

5. Discussion of strategies for MNEs focus on growth and global expansion. Under what
circumstances can downsizing and withdrawing from countries make sense? Why
might some firms fail to withdraw or downsize?
The quick answer is that firms that wish to maximize profitability may find that
resources used in a given country or in a particular product can be used more
profitably elsewhere (including domestic instead of a foreign country) or on a
different product. With constant changes in politics, economies, and technologies,
opportunities and threats may require changes in the magnitude and dispersion of the
firm’s operations.
Students will have various ideas as to why some firms may fail to downsize or
withdraw but explanations would likely include entrenched management that feels no
threat from stockholders and is more concerned about the status involved in extensive
global operations or who are unwilling to admit that an error was made by going into
a particular product or country.

LO: 6-7; Bloom’s: Analysis; Difficulty: Challenging
11

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Global Strategy 3rd Edition Peng Test

CHAPTER 6 – ENTERING FOREIGN MARKETS

1. The Liability of Foreignness is the inherent disadvantage foreign firms experience

6. The bargaining power of suppliers may prompt backward vertical integration.

7. The bargaining power of buyers may lead to forward vertical integration.

LO: 6-2; Bloom’s: Comprehension; Difficulty: Easy

9. Currency risks can be reduced by speculation and hedging.

11. One of the drawbacks of large-scale entries is limited strategic flexibility.

13. For small volume of exports, direct export is not optimal.

14. Indirect exports avoids exporting through domestically based intermediaries.

16. Acquisition adds no new capacity.

17. Entry strategies may change over time.

18. Some foreignness is never an asset.

19. MNEs are firms that are truly global.

MULTIPLE CHOICE QUESTIONS

2. As firms expand into more countries, they should recognize:

3. Small firms in a large domestic market are referred to as:

5. Firms may choose not to enter certain countries if:

a. They possess rare firm-specific assets.

6. Organizing firm-specific resources and capabilities as a bundle:

7. Which of the following are not regulatory risks?

8. Which of the following exemplify trade barriers?

9. Which of the following is not a location specific advantage?

12. First mover advantages do not include:

13. Late mover advantages do not include:

14. Large-scale entries do which of the following?

15. Small-scale entries normally benefit by their:

16. Non-equity modes of entry typically involve:

17. All of the follow are true of direct exports except:

AACSB: BUSPROG: Analytic; DISC: Strategy

19. Which is not true of joint ventures?

20. Greenfield operations refers to:

SHORT ANSWER ESSAY QUESTIONS

1. Is “foreignness” a liability or an asset? What causes it to be one or the other?

AACSB: BUSPROG: Reflective Thinking; DISC: Environmental Influence

2. Schmaltz argues: “If a company wishes to be a global corporation it should truly

AACSB: BUSPROG: Analytic; DISC: Strategy

3. J. Lee disagrees with M. Schmaltz (above): “If a company wishes to be a global

AACSB: BUSPROG: Analytic; DISC: Strategy

AACSB: BUSPROG: Analytic; DISC: Strategy

AACSB: BUSPROG: Analytic; DISC: Strategy

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