True / False Questions1.(p. 488)The long-run benefits of doing business in a country are a function of factors such asthe size ofthe market, the present wealth of consumers in that market and the likely futurewealth ofcustomers.
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Difficulty: Medium2.(p. 489)The costs and risks associated with doing business in a foreign country are typicallyhigh in aneconomically advanced and politically stable democratic nation.
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3.(p. 489)First-mover advantages are the advantages associated with entering a market early.
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Difficulty: Easy4.(p. 489)Costs that an early entrant has to bear that a later entrant can avoid are known as first-movercosts.
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Difficulty: Medium5.(p. 491)Large strategic commitments limit strategic flexibility.
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Intermediate Accounting: Reporting and Analysis
Jones/Wahlen
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Difficulty: Medium6.(p. 492)A small-scale entrant is more likely than a large-scale entrant to capture first-mover advantagesassociated with demand preemption, scale economies and switching costs.
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Difficulty: Medium7.(p. 492)Small-scale entry allows a firm to learn about a foreign market while limiting thefirm's exposureto that market.
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Difficulty: Medium8.(p. 493)Exporting is advantageous because it avoids the cost of establishing manufacturingoperations inthe host country and because it may help a firm achieve experience curve andlocationeconomies.
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Difficulty: Medium9.(p. 493)Exporting may not be appropriate if lower-cost locations for manufacturing the product can befound abroad.
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Difficulty: Easy10.(p. 495)In a turnkey project, the contractor agrees to handle every detail of the project for aforeign client.
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Difficulty: Easy11.(p. 496)An advantage of turnkey projects is that the firm that enters into a turnkey deal willhave no long-term interest in the foreign country.
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Difficulty: Medium12.(p. 496)Tangible property includes patents, designs, copyrights and trademarks.
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Difficulty: Easy13.(p. 497)Licensing increases a firm's ability to realize experience curve and locationeconomies byproducing its product in a centralized location.
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Difficulty: Medium14.(p. 497)By its very nature, licensing increases a firm's ability to utilize a coordinatedstrategy.
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Difficulty: Medium15.(p. 498)Franchising enables a firm to quickly build a global presence.
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Difficulty: Easy16.(p. 499)The most typical joint venture is a 25/75 venture.
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Difficulty: Medium17.(p. 499)An advantage of joint ventures with a local partner is the knowledge of the localenvironment thelocal partner contributes to the venture.
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Difficulty: Medium18.(p. 500)A wholly owned subsidiary limits a firm's control over operations in differentcountries.
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Difficulty: Medium19.(p. 501)Firms entering a market via a wholly owned subsidiary must bear all the costs andrisksassociated with the venture.
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