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Questions and Answers
Exporting is usually more feasible when transportation costs are high rather than low in relation to production costs.
Exporting is usually more feasible when transportation costs are high rather than low in relation to production costs.
False
Excess home-country capacity usually favors exporting rather than direct investment.
Excess home-country capacity usually favors exporting rather than direct investment.
True
The more a product must be altered for foreign markets, the less likely some production will shift abroad.
The more a product must be altered for foreign markets, the less likely some production will shift abroad.
False
In a short essay, discuss how transportation, trade restrictions, domestic capacity, and country-of-origin affect companies' decisions about modes of operating internationally.
In a short essay, discuss how transportation, trade restrictions, domestic capacity, and country-of-origin affect companies' decisions about modes of operating internationally.
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Appropriability theory describes a firm's desire to deny rivals access to its competitive resources.
Appropriability theory describes a firm's desire to deny rivals access to its competitive resources.
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Wholly owned operations abroad inhibit a company's ability to pursue a global strategy.
Wholly owned operations abroad inhibit a company's ability to pursue a global strategy.
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Foreign acquisitions are more advantageous than start-ups when the industry has little excess capacity than when it has a lot of excess capacity.
Foreign acquisitions are more advantageous than start-ups when the industry has little excess capacity than when it has a lot of excess capacity.
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Governments sometimes prohibit foreign acquisitions because they fear market dominance by foreign enterprises.
Governments sometimes prohibit foreign acquisitions because they fear market dominance by foreign enterprises.
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Home Depot made an acquisition investment when it entered the Mexican market by purchasing Home Mart, a domestic store chain.
Home Depot made an acquisition investment when it entered the Mexican market by purchasing Home Mart, a domestic store chain.
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Host-country governments often pressure MNEs to undertake acquisition over greenfield investments.
Host-country governments often pressure MNEs to undertake acquisition over greenfield investments.
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There are two ways companies can invest in a foreign country. They can either acquire an interest in an existing operation or construct new facilities. In a short essay, describe the advantages and disadvantages of each alternative.
There are two ways companies can invest in a foreign country. They can either acquire an interest in an existing operation or construct new facilities. In a short essay, describe the advantages and disadvantages of each alternative.
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Collaborative agreements allow companies to specialize more in those activities that best fit their competencies.
Collaborative agreements allow companies to specialize more in those activities that best fit their competencies.
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An advantage of collaborative agreements is the ability to spread faster geographically.
An advantage of collaborative agreements is the ability to spread faster geographically.
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The more a company engages in collaborative agreements, the more it loses control over decisions and their implementation.
The more a company engages in collaborative agreements, the more it loses control over decisions and their implementation.
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What motives do businesses have for entering into collaborative arrangements? What are some of the problems associated with collaborative arrangements?
What motives do businesses have for entering into collaborative arrangements? What are some of the problems associated with collaborative arrangements?
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What are the various types of collaborative arrangement options available to international businesses? How can firms most effectively manage international collaborative arrangements?
What are the various types of collaborative arrangement options available to international businesses? How can firms most effectively manage international collaborative arrangements?
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Study Notes
International Business Chapter 15 Study Notes
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Domestic Product Preference: Consumers prefer domestically made products over imports due to nationalism, perceived quality of domestic products, or concerns about import delivery time. Subsidies aren't the least likely reason for domestically made product preference.
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Export vs. Production Shift: A U.S. firm shifting production to China from exporting is often driven by reaching capacity in the U.S. plant, not currency appreciation or low transportation costs compared to production.
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Feasibility of Exporting: Exporting is generally less feasible when transportation costs are high relative to production costs.
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Exporting vs. Direct Investment: Domestic capacity favors exporting over direct investment.
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Product Adaptation: A product needing significant alteration for foreign markets is less likely to be produced abroad.
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International Modes of Operations: Transportation costs, trade restrictions, domestic capacity, and country-of-origin considerations influence international operating decisions. Companies may ship products abroad if they meet consumer demands in that particular country, account for transportation costs, and consider if they are financially competitive or not.
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Coca-Cola Collaborative Strategies: Coca-Cola avoids collaboration that might compromise their core competencies. They frequently use franchising, but typically avoid joint ventures for this reason.
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Small Economies and FDI: Small economies often struggle to attract FDI due to a lack of large-scale production markets, not import restrictions.
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Ownership Strategy: A U.S. firm owning 100% of its production facility in Brazil indicates a comprehensive ownership strategy, rather than an internalization strategy or a vertical integration strategy.
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Production Facility in Brazil: A U.S. firm using its own personnel in Brazil for operational activities to handle almost all activities rather than outsource means that they are likely avoiding more expensive costs associated with outside contract personnel.
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Appropriability Theory: Appropriability theory focuses on a firm's desire to maintain control of resources to prevent rivals from accessing them.
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Global Strategy and Ownership: Companies owning 100% of foreign operations are more likely to pursue a global strategy as opposed to a focused strategy.
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Reasoning for Wholy Foreign Owned Businesses: Foreign investment in wholly owned foreign operations is motivated by preventing miscommunications in another country, controlling currency fluctuations, or optimizing results in one country by sub-optimizing globally if necessary.
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Justification for Acquiring Existing Companies: Companies often acquire existing businesses rather than starting their own operations in foreign countries because of the availability of skilled workers already in place. Acquiring an existing business avoids the costs associated with building a new one and establishing operations.
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Collaborative Arrangements: A key motivation is spreading costs, maximizing competencies through division of labor, and reducing reliance on a single firm. Problems associated with such arrangements include conflicting priorities and differing objectives among partners and differing cultural norms among firms.
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Forms of Collaborative Arrangements: Licensing, Joint ventures, franchising, management contracts, and turnkey operations are among the various methods by firms.
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Key Factors for Collaboration: Effective management of partners, clear objectives, avoiding interference, and open communication regarding expectations and tasks enhance the chances of success of collaborative arrangements.
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Description
Test your understanding of key concepts from Chapter 15 of International Business. Explore the dynamics of domestic product preference, the export vs. production shift, and the feasibility of exporting. This quiz will help reinforce your knowledge of international operations and market strategies.
