D311 Test 2 Chapter 15/16 Questions With
Complete Solutions
Internalization Control through self-handling of operations. The concept comes from
transactions cost theory, which holds that companies should seek the lower cost between
conducting operations internally and contracting another party to do so for them.
self- handling may reduce costs because: 1. different operating units within the same
company are likely to share a common corporate culture, which expedites communications
2. the company can use its own managers, who understand and are committed to carrying out its
objectives
3. the company can avoid protracted negotiations with another company on such matters as how
each will be compensated for contributions
4. the company can avoid possible enforcement problems
appropriability theory The idea of denying rivals access to resources
firms have 2 ways to invest in a foreign country: acquire an interest in an existing
operation or make a greenfield investment
, D311 Test 2 Chapter 15/16 Questions With
Complete Solutions
Advantages to acquiring an existing operation adding no further capacity to the market,
avoiding start up problems, and making financing easier at times
reasons to do not do acquisition local governments may prevent acquisitions because they
want more competitors in the market and fear market dominance by a single foreign enterprise.
In addition, a foreign company may find local financing easier to obtain from development banks
if it builds facilities because of being able to show that it is creating employment. Finally,
companies frequently invest in sectors where there are few, if any, companies operating in their
lines of business
companies choose greenfield expansion if no desired company is available for acquisition,
acquisition will lead to carryover problems, and acquisition is harder to finance
scale alliances aim to provide efficiency by pooling similar assets so that partners can
carry out business activities in which they already have experience
link alliances use complementary resources so that participating companies can expand
into new business areas. Nokia, once a producer of such products as toilet paper and rubber
boots, has used a network of collaborators to develop and market cellular phones.
Complete Solutions
Internalization Control through self-handling of operations. The concept comes from
transactions cost theory, which holds that companies should seek the lower cost between
conducting operations internally and contracting another party to do so for them.
self- handling may reduce costs because: 1. different operating units within the same
company are likely to share a common corporate culture, which expedites communications
2. the company can use its own managers, who understand and are committed to carrying out its
objectives
3. the company can avoid protracted negotiations with another company on such matters as how
each will be compensated for contributions
4. the company can avoid possible enforcement problems
appropriability theory The idea of denying rivals access to resources
firms have 2 ways to invest in a foreign country: acquire an interest in an existing
operation or make a greenfield investment
, D311 Test 2 Chapter 15/16 Questions With
Complete Solutions
Advantages to acquiring an existing operation adding no further capacity to the market,
avoiding start up problems, and making financing easier at times
reasons to do not do acquisition local governments may prevent acquisitions because they
want more competitors in the market and fear market dominance by a single foreign enterprise.
In addition, a foreign company may find local financing easier to obtain from development banks
if it builds facilities because of being able to show that it is creating employment. Finally,
companies frequently invest in sectors where there are few, if any, companies operating in their
lines of business
companies choose greenfield expansion if no desired company is available for acquisition,
acquisition will lead to carryover problems, and acquisition is harder to finance
scale alliances aim to provide efficiency by pooling similar assets so that partners can
carry out business activities in which they already have experience
link alliances use complementary resources so that participating companies can expand
into new business areas. Nokia, once a producer of such products as toilet paper and rubber
boots, has used a network of collaborators to develop and market cellular phones.
