Question 1

Which of the following reflects internalization theory?

Accepted Answer

A)  Licensing gives a firm the tight control over manufacturing,marketing,and strategy in a foreign country that may be required to maximize its profitability.
B)  Licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor.
C)  Licensing has no major drawbacks as a strategy for exploiting foreign market opportunities.
D)  A problem with licensing arises when the firm's competitive advantage is based much on its products rather than on the management,marketing,and manufacturing capabilities that produce those products.
E)  Licensing is more profitable than FDI.F) All of the above
G) A) and B)

Question 2

Incandescent Lightings,a U.S.-based firm does not want to bear the costs of establishing production facilities in a foreign country.Incandescent Lightings should avoid

Accepted Answer

A)  exporting.
B)  FDI.
C)  licensing.
D)  franchising.
E)  outsourcing.F) C) and D)
G) B) and C)

Question 3

Caputo Fine Chemicals,a U.S.company,invested in a manufacturing facility in Mexico.The production from the Mexican facility was entirely used to serve the company's U.S.customers.Caputo Fine Chemicals' activity is called

Accepted Answer

A)  onboard production
B)  offshore production.
C)  licensing.
D)  contract manufacturing.
E)  vertical integration.F) None of the above
G) A) and C)

Question 4

By placing tariffs on imported goods,governments can increase the cost of exporting relative to foreign direct investment and licensing.

Accepted Answer

A) True 
 B)False

Question 5

Despite its advantages,FDI has been described as an "expensive" and "risky" international growth strategy.Other things being equal,why is FDI expensive and risky when compared to licensing and exporting?

Accepted Answer

FDI is expensive because a firm must bea...

Question 6

Coca-Cola and PepsiCo compete against each other not only in the U.S.,but also all across Europe,Asia,and Africa.Coca-Cola and PepsiCo are

Accepted Answer

A)  a monopoly.
B)  engaged in cooperation.
C)  a cartel.
D)  engaged in multipoint competition.
E)  an oligopsony.F) A) and B)
G) A) and E)

Question 7

Countries such as the United States,the United Kingdom,France,Germany,the Netherlands,and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they

Accepted Answer

A)  were the most developed countries postwar and home to the largest and best capitalized enterprises.
B)  pursued a policy of blocking or restricting FDI inflow into their own economies.
C)  provided subsidies for their domestic firms to protect them from foreign competition.
D)  control much of the operating structure of the WTO which governs international trade.
E)  were the governing body of the International Monetary Fund.F) B) and E)
G) A) and C)

Question 8

When a firm exports its products to a foreign country,foreign direct investment occurs.

Accepted Answer

A) True 
 B)False

Question 9

In the context of the internalization theory,explain why licensing may not be an attractive option.

Accepted Answer

According to internalization theory,lice...

Question 10

According to internalization theory,one of the drawbacks of licensing is that

Accepted Answer

A)  it may result in a firm's technological know-how being restricted to a limited knowledge base and stifles any future development.
B)  it does not give a firm the tight control over manufacturing,marketing,and strategy in a foreign country that may be required to maximize its profitability.
C)  when a firm allows another enterprise to produce its products under license,the licensee bears the costs or risks.
D)  its use is restricted by the government through the imposition of tariffs and quotas.
E)  it is less cost-effective than FDI.F) A) and B)
G) B) and D)

Question 11

A current account deficit is also known as a(n)

Accepted Answer

A)  stock deficit.
B)  inventory deficit.
C)  external deficit.
D)  tariff deficit.
E)  trade deficit.F) A) and C)
G) All of the above

Question 12

Indirect effects of FDI on employment in a host country arise when

Accepted Answer

A)  a foreign MNE employs a number of host-country citizens.
B)  jobs are created because of increased local spending by employees of an MNE.
C)  an MNE brings in managers from the home country for its operations in the host country.
D)  an MNE recruits people from the host country for research and development.
E)  an MNE sends home country employees to host countries for training.F) A) and B)
G) A) and D)

Question 13

Which of the following concepts helps explain how location factors affect the direction of FDI?

Accepted Answer

A)  eclectic paradigm
B)  protectionism argument
C)  product life-cycle theory
D)  new trade theory
E)  infant industry argumentF) A) and B)
G) A) and C)

Question 14

When a firm exports,it need not bear the costs associated with FDI,and it can reduce the risks associated with selling abroad by using a native sales agent.Exporting,however,is not without its limitations.Discuss the most common limitations of exporting as compared to FDI.

Accepted Answer

The viability of an exporting strategy i...

Question 15

Multipoint competition arises when two or more enterprises encounter each other in different regional markets,national markets,or industries.

Accepted Answer

A) True 
 B)False

Question 16

Why has FDI grown more rapidly than world trade?

Accepted Answer

A)  The decline in trade barriers has erased the fear of protectionist pressures.
B)  Executives of business firms see FDI as a way of circumventing future trade barriers.
C)  There has been a general shift toward radical and totalitarian political institutions.
D)  Privatization has made developing nations less attractive for multinational enterprises.
E)  There has been a general shift toward centrally planned command economies.F) B) and E)
G) C) and E)

Question 17

In the context of FDI,describe the political ideologies of the radical view,the free market view,and pragmatic nationalism.

Accepted Answer

The radical view of FDI traces its roots...

Question 18

According to the pragmatic nationalist view,no country should ever permit foreign corporations to undertake FDI.

Accepted Answer

A) True 
 B)False

Question 19

The idea behind multipoint competition is to ensure that

Accepted Answer

A)  a rival does not dominate one market and use the profits from there to drive competitive attacks elsewhere.
B)  the competitors cooperate with each other to establish a cartel.
C)  no other competitors can enter the market unless they resort to licensing or franchising with the initial pioneers.
D)  growing technologies or business methods in new markets are transferred to established markets.
E)  the firms in an industry prefer FDI over licensing or exporting.F) A) and E)
G) B) and C)

Question 20

A critical competitive feature of an oligopoly is independence of the major players.

Accepted Answer

A) True 
 B)False

Exam 8: Foreign Direct Investment

Indirect effects of FDI on employment in a host country arise when

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Which of the following reflects internalization theory?

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When a firm exports,it need not bear the costs associated with FDI,and it can reduce the risks associated with selling abroad by using a native sales agent.Exporting,however,is not without its limitations.Discuss the most common limitations of exporting as compared to FDI.

Correct AnswerverifiedThe viability of an exporting strategy i...View AnswerShow Answer

Countries such as the United States,the United Kingdom,France,Germany,the Netherlands,and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they

Correct AnswerverifiedShow Answer

Which of the following concepts helps explain how location factors affect the direction of FDI?

Correct AnswerverifiedShow Answer

Why has FDI grown more rapidly than world trade?

Correct AnswerverifiedShow Answer

According to internalization theory,one of the drawbacks of licensing is that

Correct AnswerverifiedShow Answer

A critical competitive feature of an oligopoly is independence of the major players.

Correct AnswerverifiedShow Answer

Coca-Cola and PepsiCo compete against each other not only in the U.S.,but also all across Europe,Asia,and Africa.Coca-Cola and PepsiCo are

Correct AnswerverifiedShow Answer

The idea behind multipoint competition is to ensure that

Correct AnswerverifiedShow Answer

Caputo Fine Chemicals,a U.S.company,invested in a manufacturing facility in Mexico.The production from the Mexican facility was entirely used to serve the company's U.S.customers.Caputo Fine Chemicals' activity is called

Correct AnswerverifiedShow Answer

A current account deficit is also known as a(n)

Correct AnswerverifiedShow Answer

Incandescent Lightings,a U.S.-based firm does not want to bear the costs of establishing production facilities in a foreign country.Incandescent Lightings should avoid

Correct AnswerverifiedShow Answer

When a firm exports its products to a foreign country,foreign direct investment occurs.

Correct AnswerverifiedShow Answer

In the context of FDI,describe the political ideologies of the radical view,the free market view,and pragmatic nationalism.

Correct AnswerverifiedThe radical view of FDI traces its roots...View AnswerShow Answer

According to the pragmatic nationalist view,no country should ever permit foreign corporations to undertake FDI.

Correct AnswerverifiedShow Answer

In the context of the internalization theory,explain why licensing may not be an attractive option.

Correct AnswerverifiedAccording to internalization theory,lice...View AnswerShow Answer

Multipoint competition arises when two or more enterprises encounter each other in different regional markets,national markets,or industries.

Correct AnswerverifiedShow Answer

By placing tariffs on imported goods,governments can increase the cost of exporting relative to foreign direct investment and licensing.

Correct AnswerverifiedShow Answer

Despite its advantages,FDI has been described as an "expensive" and "risky" international growth strategy.Other things being equal,why is FDI expensive and risky when compared to licensing and exporting?

Correct AnswerverifiedFDI is expensive because a firm must bea...View AnswerShow Answer

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The viability of an exporting strategy i...
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The radical view of FDI traces its roots...
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According to internalization theory,lice...
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FDI is expensive because a firm must bea...
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