GMS 522 FINAL EXAM QUESTIONS
WITH CORRECT ANSWERS
Secondary screening - Answer--firm assesses its own capabilities relative to the market
Final security selection - Answer--conduct site visit
Selecting Foreign Markets - Answer-the end result of the process is the selection of one
country from the universe of potential candidates by a process of elimination
International consumer segmentation - Answer-consumers in cross-national segments
may have more in common with their counterparts in other countries than they do with
citizen of their own countries. If this is the case a two-stage model may be appropriate
in which segmentation is undertaken at both the country and consumer levels
Country Level Screening - Answer-macro-segmentation based on overall market
attractiveness
Consumer level screening - Answer-micro-segmentation based on personal and
societal values
Types of Entry modes - Answer--export
-intermediate
-hierarchical
Export Modes - Answer-low risk-low return modes which provide limited control for the
exporting firm
Intermediate Modes - Answer-modes which provide for the sharing of the risks and
rewards of market entry commensurate with the share of ownership of each partner
Hierarchical Modes - Answer-modes in which firm has complete control of the operation
but also exposure to a higher level of risk
Exporting - Answer-involves the manufacture of a product in one country and its sale in
one or more foreign countries
Two forms of exporting - Answer--direct
-indirect
Direct Exporting - Answer-exporters transact with an intermediary based in the foreign
market
,Indirect Exporting - Answer-exporter transacts with an intermediary based in its home
country. This intermediary takes responsibility for getting the exporter's product into
foreign country. Domestic transaction from standpoint of the exporter
Advantages to exporting - Answer--requires little by way of managerial skills or
knowledge of the foreign market
-carries with it minimal risk for the firm
-does not involve significant costs for the firm
Disadvantages to exporting - Answer--lower returns relative to other entry modes
-little control over how the product is positioned and sold in the foreign market
-little opportunity to develop a deep understanding of the foreign market
Types of Intermediaries - Answer--export buying agents
-export import broker
-export management company
-trading firms
-distributors
-agents
Export buying agents - Answer-these agents are resident in the country of the
manufacturer but work on behalf of a foreign buyer
Export-import broker - Answer-brokers bring buyer and seller together. They are
specialist firms and have deep expertise in a relatively narrow range of product
categories
Export management company - Answer-These are domestic firms which act on behalf
of a # of non-competing exporters .Take title to the production they handle and market
them internationally for their own account or they may act as agents
Trading firms - Answer-find buyers in foreign markets and negotiate distribution
arrangements for other companies. Trade financing and foreign exchange transaction
are also within their scope of activities
Distributors - Answer-independent firms based in the foreign country and are not
affiliated with the manufacturer. They purchase products from the manufacturer and
take responsibility for marketing them in the target foreign country
Agents - Answer-independent companies based in the foreign target country and
provide representation for the manufacturing firm. These intermediaries do not take title
to the products they handle
Licensing - Answer-one firm (the licensor) grants the right to use its intellectual property
to another firm (the licensee) in exchange for financial compensation referred to as a
royalty
, Advantages for the licensor - Answer--no capital requirements
-does not require a deep understanding of the foreign market
-an effective strategy for circumventing the protectionist policies of host-country
governments
Disadvantages for the Licensor - Answer--lack of opportunity to learn about and to
understand the foreign market
-creation of major competitor as a result of info sharing
Advantages for the Licensee - Answer--access to proven technology
-speed to market and the ability to leapfrog the local competition
-ongoing technical support from the licensor
Disadvantage for the licensee - Answer-licensor may not provide its latest or most
innovative technical solutions
Costs in negotiating licensing agreements - Answer--transfer
-R&D
-Opporunity
Transfer costs - Answer-the costs transferring the technology to a company to a
company in a foreign jurisdiction
R&Dcosts - Answer-incurred in the development of the inovation
Opportunity costs - Answer-relate to the opportunities lost to work the technology in
some other manner.
Franchising - Answer-similar to licensing in the that one company (franchisor) grants
another(franchisee) the right to use its intellectual property in a specified jurisdiction
over a defined time period
Foreign sales subsidiaries - Answer-wholly owned by the parent firm which bears all of
the risk of failure but provides the multinational company with greater control over the
sales function in the foreign country
foreign direct investment - Answer-a hierarchical entry mode which involves the
investment of financial capital in a foreign jurisdiction on either to acquire new assets or
expand the company's stake in assets in which it already has an interest.
Firms engage in FDI because of - Answer--market
-trade
-cost
-customer
-government
WITH CORRECT ANSWERS
Secondary screening - Answer--firm assesses its own capabilities relative to the market
Final security selection - Answer--conduct site visit
Selecting Foreign Markets - Answer-the end result of the process is the selection of one
country from the universe of potential candidates by a process of elimination
International consumer segmentation - Answer-consumers in cross-national segments
may have more in common with their counterparts in other countries than they do with
citizen of their own countries. If this is the case a two-stage model may be appropriate
in which segmentation is undertaken at both the country and consumer levels
Country Level Screening - Answer-macro-segmentation based on overall market
attractiveness
Consumer level screening - Answer-micro-segmentation based on personal and
societal values
Types of Entry modes - Answer--export
-intermediate
-hierarchical
Export Modes - Answer-low risk-low return modes which provide limited control for the
exporting firm
Intermediate Modes - Answer-modes which provide for the sharing of the risks and
rewards of market entry commensurate with the share of ownership of each partner
Hierarchical Modes - Answer-modes in which firm has complete control of the operation
but also exposure to a higher level of risk
Exporting - Answer-involves the manufacture of a product in one country and its sale in
one or more foreign countries
Two forms of exporting - Answer--direct
-indirect
Direct Exporting - Answer-exporters transact with an intermediary based in the foreign
market
,Indirect Exporting - Answer-exporter transacts with an intermediary based in its home
country. This intermediary takes responsibility for getting the exporter's product into
foreign country. Domestic transaction from standpoint of the exporter
Advantages to exporting - Answer--requires little by way of managerial skills or
knowledge of the foreign market
-carries with it minimal risk for the firm
-does not involve significant costs for the firm
Disadvantages to exporting - Answer--lower returns relative to other entry modes
-little control over how the product is positioned and sold in the foreign market
-little opportunity to develop a deep understanding of the foreign market
Types of Intermediaries - Answer--export buying agents
-export import broker
-export management company
-trading firms
-distributors
-agents
Export buying agents - Answer-these agents are resident in the country of the
manufacturer but work on behalf of a foreign buyer
Export-import broker - Answer-brokers bring buyer and seller together. They are
specialist firms and have deep expertise in a relatively narrow range of product
categories
Export management company - Answer-These are domestic firms which act on behalf
of a # of non-competing exporters .Take title to the production they handle and market
them internationally for their own account or they may act as agents
Trading firms - Answer-find buyers in foreign markets and negotiate distribution
arrangements for other companies. Trade financing and foreign exchange transaction
are also within their scope of activities
Distributors - Answer-independent firms based in the foreign country and are not
affiliated with the manufacturer. They purchase products from the manufacturer and
take responsibility for marketing them in the target foreign country
Agents - Answer-independent companies based in the foreign target country and
provide representation for the manufacturing firm. These intermediaries do not take title
to the products they handle
Licensing - Answer-one firm (the licensor) grants the right to use its intellectual property
to another firm (the licensee) in exchange for financial compensation referred to as a
royalty
, Advantages for the licensor - Answer--no capital requirements
-does not require a deep understanding of the foreign market
-an effective strategy for circumventing the protectionist policies of host-country
governments
Disadvantages for the Licensor - Answer--lack of opportunity to learn about and to
understand the foreign market
-creation of major competitor as a result of info sharing
Advantages for the Licensee - Answer--access to proven technology
-speed to market and the ability to leapfrog the local competition
-ongoing technical support from the licensor
Disadvantage for the licensee - Answer-licensor may not provide its latest or most
innovative technical solutions
Costs in negotiating licensing agreements - Answer--transfer
-R&D
-Opporunity
Transfer costs - Answer-the costs transferring the technology to a company to a
company in a foreign jurisdiction
R&Dcosts - Answer-incurred in the development of the inovation
Opportunity costs - Answer-relate to the opportunities lost to work the technology in
some other manner.
Franchising - Answer-similar to licensing in the that one company (franchisor) grants
another(franchisee) the right to use its intellectual property in a specified jurisdiction
over a defined time period
Foreign sales subsidiaries - Answer-wholly owned by the parent firm which bears all of
the risk of failure but provides the multinational company with greater control over the
sales function in the foreign country
foreign direct investment - Answer-a hierarchical entry mode which involves the
investment of financial capital in a foreign jurisdiction on either to acquire new assets or
expand the company's stake in assets in which it already has an interest.
Firms engage in FDI because of - Answer--market
-trade
-cost
-customer
-government
