International Business Chapter 12-16
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Questions and Answers

What is a major advantage of International Licensing?

  • Shared revenues
  • Increased complexity
  • Higher financial risk
  • Low financial risk (correct)

    • Which of the following is a disadvantage of International Franchising?

  • Shared revenues
  • Increased quality control
  • Learning opportunities
  • Increased complexity (correct)

    • What is the main benefit of Foreign Direct Investment (FDI)?

  • Reduced control
  • Profit potential (correct)
  • Increased economic risks
  • Reduced profit potential

    • Which of the following is a type of Foreign Direct Investment?

    <p>Joint Ventures</p> Signup and view all the answers

    What is a disadvantage of the Greenfield Strategy?

    <p>Implementation takes time and patience</p> Signup and view all the answers

    Which of the following is an advantage of International Licensing?

    <p>Low financial risk</p> Signup and view all the answers

    What is a challenge of Foreign Direct Investment (FDI)?

    <p>Economic risks</p> Signup and view all the answers

    Which of the following is not a type of Foreign Direct Investment?

    <p>International Franchising</p> Signup and view all the answers

    What is a primary advantage of exporting over foreign direct investment?

    <p>Relatively low financial exposure</p> Signup and view all the answers

    What motivates a firm to enter foreign markets due to opportunities available there?

    <p>Proactive motivations</p> Signup and view all the answers

    What type of exporting involves selling products directly to customers in foreign markets?

    <p>Direct exporting</p> Signup and view all the answers

    What involves the transfer of products within a company's own subsidiaries or affiliates?

    <p>Intracorporate transfers</p> Signup and view all the answers

    What allows a firm to utilize the resources and expertise of a foreign partner?

    <p>International licensing</p> Signup and view all the answers

    What involves the production of goods by a foreign company according to the specifications of the licensing firm?

    <p>Contract manufacturing</p> Signup and view all the answers

    What type of international business involves the right to produce and sell a company's products in a foreign market?

    <p>International franchising</p> Signup and view all the answers

    What is a primary disadvantage of exporting?

    <p>Vulnerability to tariffs and nontariff barriers</p> Signup and view all the answers

    What is one of the primary advantages of Foreign Direct Investment (FDI)?

    <p>Control over the firm's resources</p> Signup and view all the answers

    What is the primary role of an export intermediary?

    <p>To facilitate exporting goods</p> Signup and view all the answers

    What is one of the advantages of international franchising?

    <p>Requires less capital investment</p> Signup and view all the answers

    What is contract manufacturing?

    <p>A manufacturing arrangement in which a firm hires a local manufacturer to produce its products</p> Signup and view all the answers

    What are the three basic forms of Foreign Direct Investment (FDI)?

    <p>Acquisition, Greenfield, and Joint Venture</p> Signup and view all the answers

    What is one of the disadvantages of international licensing?

    <p>Loss of control over the licensed technology</p> Signup and view all the answers

    Study Notes

    International Business: Entry Modes and Strategies

    International Licensing

    • Low financial risk
    • Market assessment opportunities
    • Sales opportunities
    • Disadvantages: limited market opportunities, potential litigation, competitive issues

    International Franchising

    • Product and system reputation
    • Low-cost expansion opportunities
    • Learning opportunities
    • Disadvantages: shared revenues, increased complexity, quality control issues

    Foreign Direct Investment (FDI)

    • Benefits: increased control, profit potential, local factories
    • Challenges: economic risks, political risks, operating complexity, government policies

    Greenfield Strategy

    • Disadvantages: implementation takes time, location may be costly, government regulations, recruiting and training local workforce, stigma as a foreign firm

    Exporting to Foreign Markets

    • Primary advantages: relatively low financial exposure, gradual market entry, acquiring knowledge about local market
    • Primary disadvantages: vulnerability to tariffs and non-tariff barriers, logistical complexities, potential conflicts with distributors

    Motivations for Exporting

    • Proactive motivations: opportunities available in foreign markets
    • Reactive motivations: decreasing opportunities in domestic market

    Forms of Exporting

    • Indirect exporting
    • Direct exporting
    • Intracorporate transfers

    Acquisition Strategy

    • Advantages: control over resources, generates immediate revenues, adds no new capacity to the industry
    • Disadvantages: assumes the firm's liabilities, inherits unresolved problems, requires substantial upfront spending

    Joint Ventures

    • Jointly-owned separate firm
    • Promotes mutual interest

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    Description

    Learn about the advantages and disadvantages of international licensing, including low financial risk, market assessment, and sales opportunities. Understand the potential drawbacks, such as limited market opportunities and competitive issues.

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