BUSI 303 TEST 4 CHAPTERS 13-14 | BUSI 303 TEST 4 STUDY GUIDE | PRACTICE
QUESTIONS & ANSWERS
Licensing Advantages/Disadvantages - ANS ✔✔Advantages: Low to no cost, moderate involvement and
commitment
Disadvantages: Loss of control, no location or experience curve economies, inability to engage in global
strategic coordination
Six modes for serving foreign markets - ANS ✔✔1) Exporting
2) licensing
3) franchising to host-country firms
4) establishing joint ventures with a host-country firm
5) wholly owned subsidiary in host country'
6) acquiring an established enterprise in host country
Foreign expansion questions - ANS ✔✔1 - which markets to enter
2 - when to enter
3 - at what scale
Long-run economic benefits of doing business - ANS ✔✔size of market, present wealth (purchasing
power), likely wealth of consumers, living standards and economic growth
Timing of Entry - ANS ✔✔entry is early when a firm enters a foreign market before other foreign firms
and late when a firm enters after other international businesses have established themselves
first-mover advantage - ANS ✔✔advantages accruing to the first to enter a market
First Mover Disadvantages - ANS ✔✔Disadvantages associated with entering a foreign market before
other international businesses.
pioneering costs - ANS ✔✔Costs an early entrant bears that later entrants avoid, such as the time and
effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.
Entering a market on a large scale implies - ANS ✔✔significant resources and rapid entry
Exporting Advantages - ANS ✔✔ability to realize location, scale, and experience curve economies; avoid
high costs of establishing manufacturing operations
turnkey project - ANS ✔✔A project in which a firm agrees to set up an operating plant for a foreign client
and hand over the "key" when the plant is fully operational.
licensing agreement - ANS ✔✔arrangement in which a licensor grants the rights to intangible property to
the licensee for a specified period and receives a royalty fee in return
, Franchising - ANS ✔✔A specialized form of licensing in which the franchiser sells intangible property to
the franchisee and insists on rules to conduct the business
joint venture - ANS ✔✔A cooperative undertaking between two or more firms
wholly owned subsidiary - ANS ✔✔A subsidiary in which the firm owns 100 percent of the stock
Exporting Advantages/Disadvantages - ANS ✔✔Advantages
-makes company less dependent on domestic sales
-gives company more control
-location and curve economies
Disadvantages
-goods subject to trade barriers
-transportation costs
-problems with local marketing agents
Turnkey Advantages/Disadvantages - ANS ✔✔Advantages
- able to earn returns from process tech skills in countries where FDI is restricted
Disadvantages
-lack of long-term market presence
-creation of efficient competitors
Franchising Advantages/Disadvantages - ANS ✔✔Advantages
-low cost and risk
-potential circumvention of import barriers and improvement of sales
Joint Venture Advantages/Disadvantages - ANS ✔✔Advantages: Access to new markets, shared costs and
risks, politically acceptable, and usually no ownership restrictions
Disadvantages: loss of technology, sharing profits, inability to realize local and experience economies, or
to engage in global strategic coordination
Wholly Owned Subsidiaries advantages/disadvantages - ANS ✔✔Advantages
- protection of technology
- able to engage in global strategic coordination
- able to realize location and experience economies
Disadvantages
- high costs and risk
- need for more resources and interaction and integration with local employees
Greenfield Strategy - ANS ✔✔build a subsidiary from the ground up
Acquisitions - ANS ✔✔1) quick to execute
2) to preempt competitors
3) some managers believe that it's less risky than greenfield ventures
QUESTIONS & ANSWERS
Licensing Advantages/Disadvantages - ANS ✔✔Advantages: Low to no cost, moderate involvement and
commitment
Disadvantages: Loss of control, no location or experience curve economies, inability to engage in global
strategic coordination
Six modes for serving foreign markets - ANS ✔✔1) Exporting
2) licensing
3) franchising to host-country firms
4) establishing joint ventures with a host-country firm
5) wholly owned subsidiary in host country'
6) acquiring an established enterprise in host country
Foreign expansion questions - ANS ✔✔1 - which markets to enter
2 - when to enter
3 - at what scale
Long-run economic benefits of doing business - ANS ✔✔size of market, present wealth (purchasing
power), likely wealth of consumers, living standards and economic growth
Timing of Entry - ANS ✔✔entry is early when a firm enters a foreign market before other foreign firms
and late when a firm enters after other international businesses have established themselves
first-mover advantage - ANS ✔✔advantages accruing to the first to enter a market
First Mover Disadvantages - ANS ✔✔Disadvantages associated with entering a foreign market before
other international businesses.
pioneering costs - ANS ✔✔Costs an early entrant bears that later entrants avoid, such as the time and
effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.
Entering a market on a large scale implies - ANS ✔✔significant resources and rapid entry
Exporting Advantages - ANS ✔✔ability to realize location, scale, and experience curve economies; avoid
high costs of establishing manufacturing operations
turnkey project - ANS ✔✔A project in which a firm agrees to set up an operating plant for a foreign client
and hand over the "key" when the plant is fully operational.
licensing agreement - ANS ✔✔arrangement in which a licensor grants the rights to intangible property to
the licensee for a specified period and receives a royalty fee in return
, Franchising - ANS ✔✔A specialized form of licensing in which the franchiser sells intangible property to
the franchisee and insists on rules to conduct the business
joint venture - ANS ✔✔A cooperative undertaking between two or more firms
wholly owned subsidiary - ANS ✔✔A subsidiary in which the firm owns 100 percent of the stock
Exporting Advantages/Disadvantages - ANS ✔✔Advantages
-makes company less dependent on domestic sales
-gives company more control
-location and curve economies
Disadvantages
-goods subject to trade barriers
-transportation costs
-problems with local marketing agents
Turnkey Advantages/Disadvantages - ANS ✔✔Advantages
- able to earn returns from process tech skills in countries where FDI is restricted
Disadvantages
-lack of long-term market presence
-creation of efficient competitors
Franchising Advantages/Disadvantages - ANS ✔✔Advantages
-low cost and risk
-potential circumvention of import barriers and improvement of sales
Joint Venture Advantages/Disadvantages - ANS ✔✔Advantages: Access to new markets, shared costs and
risks, politically acceptable, and usually no ownership restrictions
Disadvantages: loss of technology, sharing profits, inability to realize local and experience economies, or
to engage in global strategic coordination
Wholly Owned Subsidiaries advantages/disadvantages - ANS ✔✔Advantages
- protection of technology
- able to engage in global strategic coordination
- able to realize location and experience economies
Disadvantages
- high costs and risk
- need for more resources and interaction and integration with local employees
Greenfield Strategy - ANS ✔✔build a subsidiary from the ground up
Acquisitions - ANS ✔✔1) quick to execute
2) to preempt competitors
3) some managers believe that it's less risky than greenfield ventures
