Vocabulary
This is a mode of entry that happens when two companies from different countries team up to share profits, risks, and resources.
a. Exporting
b. Franchising
c. Licensing
d. Joint Venture
What is a joint venture?
This type of risk happens when a partner in a business deal doesn’t follow through, causing problems.
a) Partner Risk
b) Co-Company Risk
c) Counterparty Risk
d) Compliance Risk
What is Partner Risk?
A common legal requirement for entering a foreign market through direct investment is:
a. Establishing a joint venture with a local partner
b. Securing approval from foreign trade regulators
c. Adopting local employment policies
d. Adhering to local currency exchange laws
What is Securing approval from foreign trade regulators?
This cultural factor might influence whether a company uses direct or indirect exporting.
a. language
b. spendable income
c. communication style
d. power distance
What is Language OR communication style?
This entry mode costs the least to start.
a) Direct Investment
b) Exporting
c) Joint Venture
d) Franchising
What is exporting?
It is called _____ when a company sells goods to another country.
a. Exporting
b. Contract Manufacturing
c. Licensing
d. Outsourcing
What is Exporting?
This risk occurs when government changes or instability in another country hurt a company’s investment.
a) Economic Risk
b) Market Entry Risk
c) Regulatory Risk
d) Political Risk
What is Political Risk?
Licensing agreements are often governed by:
a. Domestic trade laws of the exporting country
b. Intellectual property laws of the host country
c. Multinational corporate regulations
d. Joint venture agreements
What is Intellectual property laws of the host country?
In collectivist cultures, this entry mode often works best:
a. Wholly-owned subsidiaries
b. Joint ventures with local firms
c. Direct exporting without intermediaries
d. Licensing agreements
What is Joint Ventures with local firms?
_____ is the name for the extra money companies pay to ship products to another country.
a) Logistics Tariff
b) Freight Differential
c) Export Premium
d) Transportation Cost
What is Transportation Costs?
This entry method lets a company rent out its idea or brand to another business.
a. Contract Manufacturing
b. Brand Alliance
c. Franchising
d. Licensing
What is Licensing?
The entry mode requiring the most significant financial and resource investment is:
a. Wholly-owned subsidiaries
b. Licensing
c. Indirect exporting
d. Franchising
What is Wholly-owned subsidiaries?
This contract lets a company allow another to use its trademarks or patents in exchange for payment.
a) Joint Venture Agreement
b) Licensing Agreement
c) Franchise Agreement
d) Partnership Agreement
What is a Licensing Agreement?
In low-context cultures, businesses prioritize direct communication, making which entry mode more effective?
a. Licensing agreements
b. Joint ventures
c. Exporting with intermediaries
d. Franchising with detailed contracts
What is Franchising with detailed contracts?
____ is the best financial metric a company would evaluate before selecting a mode of entry.
a) Capital Utilization Ratio
b) Foreign Exchange Rate
c) Return on Investment
d) Entry Barrier Cost
What is return on investment?
This method involves using someone else’s business system, like a McDonald’s abroad.
a. Licensing
b. Franchising
c. Joint Venture
d. Merger
What is Franchising?
A disadvantage of licensing related to the loss of proprietary knowledge is called:
a. Theft of brand secrets
b. Insider trading
c. Intellectual property theft
d. Management conflict
What is Intellectual property theft
Local labor laws typically affect which entry mode the most?
a. Exporting
b. Licensing
c. Franchising
d. Foreign direct investment
What is Foreign Direct Investment?
Countries with a strong preference for personal relationships might resist:
a. Franchising from foreign brands
b. Licensing agreements from distant companies
c. Exporting without local intermediaries
d. Wholly-owned subsidiaries
What is Wholly-owned subsidiaries? (due to minimal local involvement)
What is the term for money spent to meet local government rules?
a) Regulatory Capital
b) Market Adjustment Expense
c) Compliance Costs
d) Permit Fees
What is Compliance Costs?
This entry strategy involves local production through a foreign company’s facilities.
a) Licensing
b) Foreign Direct Investment
c) Direct Investment
d) Dropshipping
What is Foreign Direct Investment?
The main political risk faced by firms with wholly-owned subsidiaries is:
a. Corporate tax hikes
b. Expropriation of assets
c. Currency devaluation
d. Import-export embargoes
What is Expropriation of assets?
Countries often limit foreign ownership in which entry mode?
a. Licensing agreements
b. Joint ventures
c. Franchising
d. Wholly-owned subsidiaries
What is Wholly-owned subsidiaries?
In a culture where loyalty to local products and traditions is deeply ingrained, the success of a wholly-owned subsidiary may depend on:
a. Hiring local executives and adapting branding to cultural norms
b. Increasing direct control over local operations to ensure compliance
c. Offering aggressive pricing strategies to outcompete local brands
d. Avoiding any changes to the product or service offered globally
What is Hiring local executives and adapting branding to cultural norms?
____ is the term for costs incurred from exiting a market due to failed entry.
a. sunk costs
b. financial fallacy costs
c. lost cause costs
d. bankrupcy costs
What is Sunk Costs?