Sony Chapter 9
Chapter 9 Global Market Entry Strategies Licensing, Investment, and Strategic Alliances 1) Companies like Bill Blass, Hugo Boss, and other global design icons typically generate more revenue from licensing deals for jeans, fragrances, and watches than from their high-priced couture lines. Answer TRUE Diff 2 Page Ref 265-267 AACSB Reflective Thinking 2) Licensing is a contractual agreement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation. Answer TRUE Diff 1 Page Ref 265 3) Licensing enables companies to circumvent tariffs, quotas, or similar export barriers. Answer TRUE Diff 2 Page Ref 266 AACSB Reflective Thinking 4) Licensing agreements offer unlimited market control. Answer FALSE Diff 2 Page Ref 266 AACSB
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Reflective Thinking 5) Apples failure to license its technology in the pre-Windows era arguably cost the company tens of billions of dollars. Answer TRUE Diff 2 Page Ref 267 6) Companies may find that the upfront easy money obtained from licensing turns out to be a very expensive source of revenue.
Answer TRUE Diff 2 Page Ref 267 AACSB Reflective Thinking 7) Sony was the first company to manufacture and market a transistor radio. Answer FALSE Diff 2 Page Ref 267 AACSB Reflective Thinking 8) Sonys worldwide success in manufacturing and marketing transistor radios in the 1950s stemmed from its joint venture arrangement with an American corporation. Answer TRUE Diff 1 Page Ref 267 9) One of the cornerstones of Apple Computers business strategy has been licensing its famed operating system. Answer TRUE Diff 2 Page Ref 267 AACSB Reflective Thinking 10) Starbucks relentless pursuit of new market opportunities in Germany and other countries illustrates the fact that most firms face a limited range of strategy alternatives. Answer FALSE Diff 1 Page Ref 265 AACSB Reflective Thinking 11) A company that emphasizes direct investment as a market entry strategy is subject to a higher degree of political risk than a company that relies heavily on
exporting. Answer TRUE Diff 1 Page Ref 265 AACSB Reflective Thinking 12) Franchising is a variation of licensing strategy in which there is a contract between the parent company franchiser and a franchisee that allows the franchisee to operate a business developed by the franchiser in return for all rights for operations. Answer FALSE Diff 2 Page Ref 267 AACSB Reflective Thinking 13) In China, regulations require foreign franchisers to directly own two or more stores for a minimum of one year before franchising. Answer TRUE Diff 1 Page Ref 269 AACSB Analytic Skills 14) McDonalds has the largest number of overseas sites according to a listing in the Wall Street Journal (2006). Answer FALSE Diff 1 Page Ref 268 15) Franchising in a global market is actually a market entry strategy that is typically executed with less localization than licensing. Answer TRUE Diff 2 Page Ref 269 AACSB Reflective Thinking 16) Foreign direct investment figures reflect investment flows out of the home country as companies invest in or acquire plants, equipment, or other assets. Answer TRUE Diff 2 Page Ref 269-270 AACSB Reflective Thinking 17) Foreign investment can take the form of outright acquisition. Answer TRUE Diff 2 Page Ref 270 AACSB Reflective Thinking 18) A joint venture with a local partner represents another form of strategy that is similar to exporting and licensing. Answer FALSE Diff 2 Page Ref 270-271 AACSB Reflective Thinking 19) A lesson that can be learned from Anheuser-Buschs experience in Japan is that it is better to give control to a local partner via a licensing agreement rather than making a major investment. Answer TRUE Diff 2 Page Ref 271-272 AACSB Analytic Skills 20) The joint venture between Corning Glass and Mexican manufacturer Vitro failed primarily due to conflicts arising out of cultural differences. Answer TRUE Diff 2 Page Ref 272 21) GM and South Koreas Daewoo Group formed a joint venture which helped Daewoo improve its competitiveness. The venture was terminated since Daewoo prevented the import of GM cars to Korea. Answer FALSE Diff 2 Page Ref 272-273 22) An example of a successful joint venture is Ericssons cell phone alliance with Sony. Answer TRUE Diff 2 Page Ref 273 AACSB Analytic Skills 23) Greenfield investment is a phrase sometimes used interchangeably with the phrase licensing agreement. Answer FALSE Diff 2 Page Ref 274-275 AACSB Reflective Thinking 24) In 2008 the largest merger and acquisition deal in the pharmaceutical industry, Roches acquisition of Genentech, is an example of an equity stake. Answer FALSE Diff 2 Page Ref 276 25) Companies may move from licensing or joint venture strategies to ownership in order to achieve faster expansion in a market, greater control, or higher profits. Answer TRUE Diff 2 Page Ref 274 AACSB Reflective Thinking 26) Monsanto and the German pharmaceutical company, Bayer AG, recently entered a joint venture. Answer FALSE Diff 2 Page Ref 274 AACSB Reflective Thinking 27) If government restrictions prevent majority or 100 percent ownership by foreign companies, the investing company will have to settle for a minority equity stake. Answer TRUE Diff 2 Page Ref 274 AACSB Reflective Thinking 28) Japans Fuji Photo Film Company invested hundreds of millions of dollars in the United States after the U.S. government ruled that Fuji was guilty of dumping. Answer TRUE Diff 2 Page Ref 275 AACSB Reflective Thinking 29) Following its bankruptcy filing in 2009, GM divested itself of several non-core businesses and brands, including Saab. Answer TRUE Diff 2 Page Ref 276 AACSB Reflective Thinking 30) Borden ended licensing and joint venture arrangements for branded food products in Japan and set up its own production, distribution, and marketing capabilities for dairy products. For non-food products, Borden has maintained joint venture relationships with Japanese partners in flexible packaging and foundry materials. All this indicates that strategy preference may change over time. Answer TRUE Diff 2 Page Ref 277 AACSB Analytic Skills 31) To succeed in global markets, firms can rely exclusively on the technological superiority or core competence which made them successful in the past. Answer FALSE Diff 2 Page Ref 279 AACSB Reflective Thinking 32) Sony entered into a strategic partnership with Samsung in order to produce flat-panel TV screens due to the high product development costs. Answer TRUE Diff 2 Page Ref 280 AACSB Reflective Thinking 33) Some companies prefer global strategic partnerships to joint ventures because, with a GSP, there is less risk of strengthening a competitor. Answer FALSE Diff 2 Page Ref 279-280 AACSB Reflective Thinking 34) The CFM partnership between General Electric (USA) and Snecma (France) is a notable example of a successful GSP. Answer TRUE Diff 2 Page Ref 283 AACSB Reflective Thinking 35) In Japan, a horizontal keir etsu is a form of business alliance between companies in a particular group headed by a trading company, bank, or other cash-rich entity. Answer TRUE Diff 2 Page Ref 286-289 AACSB Reflective Thinking 36) Because keir etsu relationships are crossing the Pacific and directly affecting the American market, U.S. companies have reason to be concerned. Answer TRUE Diff 2 Page Ref 286-289 AACSB Reflective Thinking 37) The South Korean government has recently abandoned the chaebol industry structure in favor of the keiretsu structure. Answer FALSE Diff 1 Page Ref 286-289 38) Digital keiretsu refers to alliances between companies in several industries that are undergoing transformation and convergence. Answer TRUE Diff 2 Page Ref 286-289 AACSB Reflective Thinking 39) In a country and market concentration strategy, a company serves many markets in a few countries. Answer FALSE Diff 2 Page Ref 290-291 AACSB Reflective Thinking 40) In country and market diversification strategy, a company seeks out the world market for a product. Answer FALSE Diff 2 Page Ref 290-291 AACSB Reflective Thinking 41) For Starbucks and other companies whose business models include a service component it is not recommended that they use this method for going global. A) joint ventures B) licensing C) 100 percent ownership D) exporting E) franchising Answer D Diff 2 Page Ref 265 AACSB Reflective Thinking 42) Licensing as a market entry mode has several disadvantages and opportunity costs, which does not include A) limited market control. B) agreement may have short life. C) leveraging and exploiting by licensee. D) similar product or technology development by licensee. E) adaptations by licensee to fit local tastes. Answer E Diff 2 Page Ref 265-267 AACSB Reflective Thinking 43) In order to prevent a licensor-competitor from gaining unilateral benefit, licensing agreements should provide for A) contract manufacturing. B) franchising. C) cross licensing. D) strategic decision-making. E) adaptation for local tastes. Answer C Diff 2 Page Ref 267 AACSB Reflective Thinking 44) ________ represent(s) a market entry strategy whereby one company permits a foreign company to make use of its patents, know-how, technology, company name, or other intangible assets in return for a royalty payment. A) Joint ventures B) One hundred percent ownership C) Licensing D) Exporting E) Global strategic alliances Answer C Diff 2 Page Ref 265-267 AACSB Reflective Thinking 45) Pollo Campero, a chicken restaurant chain based in Central America is using the following method for expanding operation in the United States. A) joint ventures B) licensing C) exporting D) franchising E) acquisition Answer D Diff 2 Page Ref 267 AACSB Reflective Thinking 46) In the mid-1990s, NCR signed an agreement allowing two South Korean companies, Samsung and Hyundai, to build computers based on NCRs parallel processing technology. Samsung and Hyundai can sell the new computers everywhere except the U.S., Western Europe, Japan, and Australia. This arrangement is typical of which entry strategy A) joint ventures B) licensing C) 100 ownership D) exporting E) global strategic alliances Answer B Diff 2 Page Ref 265-267 AACSB Reflective Thinking 47) The specialty retailing industry, as well as the fast-food industry, favors ________ for global growth A) licensing B) investment C) franchising D) joint ventures E) strategic alliances Answer C Diff 2 Page Ref 269 AACSB Reflective Thinking 48) The agreements that allow McDonalds franchisees around the globe to use McDonalds trademarked name and menu items represent, in essence, which form of market entry A) joint ventures B) franchising C) 100 ownership D) exporting E) acquisition Answer B Diff 2 Page Ref 269 AACSB Reflective Thinking 49) McDonalds success in franchising in global markets can be attributed to several factors which does not include A) a well known global brand name. B) a business system that can be easily replicated. C) local market knowledge. D) cross licensing. E) granting franchisees leeway to tailor menu offerings to suit local tastes. Answer D Diff 3 Page Ref 269 AACSB Analytic Skills 50) Based on rankings by the Wall Street Journal (2006) the company which has the most overseas franchised sites is A) Dominos Pizza. B) Subway. C) 7-Eleven. D) McDonalds. E) Yum Brands. Answer C Diff 2 Page Ref 268 51) Honda has invested 550 million in building an assembly plant in Greensburg, Indiana IKEA spent nearly 2 billion to open stores in Russia and South Koreas LG Electronics purchased a 58 stake in Zenith Electronics. All of these are examples of A) acquisition. B) licensing. C) franchising. D) FDI. E) exporting. Answer D Diff 2 Page Ref 269-270 AACSB Reflective Thinking 52) Starbucks has been successful in various global markets however, it has to face tough competition in several countries. In China the challenge comes from the traditional Chinese tea house. Starbucks found that the Chinese consumers have different tastes and behavior patterns which include all of the following except A) Chinese consumers prefer drinking in the cafes. B) Chinese consumers prefer carry-out. C) Chinese consumers go to cafes to socialize. D) store traffic is heaviest in the afternoon. E) Chinese need to be educated about coffee. Answer B Diff 2 Page Ref 264-265 AACSB Reflective Thinking 53) Which of the following does not fit into the sequence of experiences Anheuser-Busch had in Japan A) Anheuser-Busch first entered Japan by means of a licensing agreement with Suntory, the smallest brewery in Japan. B) Anheuser-Busch created a joint venture with Kirin Brewery, the market leader. C) Anheuser-Busch dissolved the joint venture with Kirin Brewery. D) Anheuser-Busch entered into a joint venture with Kirin Brewery. E) Anheuser-Busch reverted to a licensing agreement with Kirin Brewery. Answer D Diff 2 Page Ref 270-271 AACSB Reflective Thinking 54) GM executives are looking for a joint venture with AvtoVAZ, the largest carmaker in A) Germany. B) Lithuania. C) Russia. D) Kazakhstan. E) Turkey. Answer C Diff 2 Page Ref 271 AACSB Reflective Thinking 55) In a joint venture with Russian manufacturer AvtoVAZ, GM executives were planning to have a stripped-down reengineered car based on its Opel model. However, the market research revealed that a Made-in-Russia car would only be acceptable if A) it has a German name. B) it sported a very low sticker price. C) it has an American name. D) it has a very high sticker price. E) it has a Russian name. Answer B Diff 2 Page Ref 271 AACSB Reflective Thinking 56) Joint ventures have proven successful for many companies. However, there are certain disadvantages which does not include A) risk sharing. B) market knowledge. C) achieve synergy. D) control and coordination. E) market entry. Answer D Diff 2 Page Ref 270-272 AACSB Reflective Thinking 57) Sony Ericsson is a ________ Swedens Telefonaktiebolaget LM and Japanese consumer electronics giant Sony Corporation. A) a joint venture between B) licensor for C) licensee for D) franchisee for E) franchisor for Answer A Diff 2 Page Ref 273 AACSB Reflective Thinking 58) The president of a Mexican company recently remarked, Business in Mexico is done on a consensus basis, very genteel and sometimes slow by U.S. standards. A few months later, the Mexican company and its U.S. joint venture partner parted company. Judging by the presidents remark, one important reason for the divorce was A) failure of one partner to live up to the terms of the contract. B) cultural differences. C) the cancellation of NAFTA. D) the U.S. governments insistence on quick negotiations. E) the language barrier. Answer B Diff 2 Page Ref 272 AACSB Multicultural and Diversity 59) As a general rule, the Chinese government allows foreign companies to participate in its market only if those companies agree to establish operations with local Chinese enterprises. Which market entry mode would be the appropriate choice under these circumstances A) acquisition B) licensing C) joint venture D) exporting E) franchising Answer C Diff 2 Page Ref 272-273 AACSB Reflective Thinking 60) Which automaker currently has a joint venture with Hindustan Motors (India) A) Volkswagen B) Ford C) GM D) Renault E) Mazda Answer C Diff 3 Page Ref 272 AACSB Reflective Thinking 61) Which of the following currently owns a 70 stake in Skoda, the Czech automaker A) GM B) Volkswagen C) Ford D) DaimlerChrysler E) Renault Answer B Diff 3 Page Ref 275 62) Which automaker owns an equity stake in Japans Nissan Motor A) GM B) Volkswagen C) Ford D) DaimlerChrysler E) Renault Answer E Diff 3 Page Ref 275 63) Gerbers woes in France illustrate some of the disadvantages of which market entry strategy A) joint ventures B) licensing C) 100 ownership D) exporting E) franchising Answer B Diff 2 Page Ref 277 AACSB Reflective Thinking 64) ________ is a market entry mode that traditionally has been used by companies that, for one reason or another, needed a partner to manufacture products for sale in the partners home country market. A) Acquisition B) Strategic alliance C) Joint venture D) Exporting E) Licensing Answer C Diff 2 Page Ref 277 AACSB Reflective Thinking 65) Which of the following is not a characteristic of global strategic alliances A) Participants maintain independence outside the framework of alliance. B) Participants share benefits of the alliance. C) Participants share control over the performance of the assigned tasks. D) Participants make ongoing contributions in technology, products, and other areas. E) Participants agree not to compete in areas unrelated to the alliance. Answer E Diff 2 Page Ref 279-281 AACSB Reflective Thinking 66) Which of the following is not a characteristic of global strategic alliances A) Participants maintain independence outside the framework of alliance. B) Participants share benefits as well as control. C) Participants make ongoing contributions in technology, products, and other areas. D) Participants focus on an individual country market. E) Participants share benefits of the alliance. Answer D Diff 2 Page Ref 279-281 AACSB Reflective Thinking 67) The terminology used to describe the new forms of cooperation strategies varies widely and the phrases used include all of the following except A) collaborative agreements. B) strategic alliances. C) global strategic partnerships. D) strategic international alliances. E) Greenfield operations. Answer E Diff 2 Page Ref 279 AACSB Reflective Thinking 68) GSPs (Global Strategic Partnerships) are attractive for several reasons which does not include A) sharing high product development costs. B) sharing technological developments. C) securing access to national and regional markets. D) continuous transfer of technology between partners. E) focus on a single national market or a specific problem. Answer E Diff 2 Page Ref 279-281 AACSB Reflective Thinking 69) Which of the following does not fit in with the factors that should be considered by companies forming GSPs A) Partners are competitors to each other. B) Harmony is not the most important measure of success. C) All employees and managers must understand where cooperation ends and competitive compromise begins. D) Learning from partners is critically important. E) none of the above Answer E Diff 2 Page Ref 279-281 AACSB Reflective Thinking 70) Discussion and consensus must be the norms. Partners must be viewed as equals. When applied to global strategic partnerships, this statement indicates the importance of which factor A) mission B) strategy C) governance D) culture E) organization Answer C Diff 2 Page Ref 281 AACSB Reflective Thinking 71) Successful GSPs create win-win situations, where participants pursue objectives on the basis of mutual advantage. When applied to global strategic partnerships, this statement indicates the importance of which factor A) mission B) strategy C) governance D) culture E) organization Answer A Diff 2 Page Ref 281-282 AACSB Reflective Thinking 72) According to a 1991 report by McKinsey Co. problems of alliances between Western and Japanese firms were related to all of the following factors except A) objective levels of performance. B) a feeling of mutual disillusionment. C) difference in expectations. D) balance between partners. E) frictional loss. Answer A Diff 3 Page Ref 282 AACSB Analytic Skills 73) Boeing developed the wide bodied aircraft, the 777 with about ________ percent of the work subcontracted out to Mitsubishi, Fuji, and Kawasaki. A) 50 B) 25 C) 20 D) 60 E) 75 Answer C Diff 3 Page Ref 283 74) The success of CFM International (the strategic partnership between GE and Snecma) can be attributed to which of the following A) compatibility of the partners B) capability of the partners C) commitment of the partners D) all of the above E) none of the above Answer D Diff 2 Page Ref 283 AACSB Reflective Thinking 75) A number of factors combine to make Russia an excellent location for an alliance which does not include A) a well-educated workforce. B) quality is important to Russian consumers. C) abundance of supplies. D) potential for economic growth. E) potential for growth in service sector. Answer C Diff 2 Page Ref 284-286 AACSB Reflective Thinking 76) Which of the following is NOT true of Japanese keiretsu A) promotes risk sharing B) promotes long-term employment C) ensures low prices for Japanese consumers D) blocks foreign suppliers from the Japanese market E) relationships are cemented by bank ownership Answer E Diff 3 Page Ref 286-289 AACSB Analytic Skills 77) Which of the following is true about Japanese keiretsu A) Toyota is a vertical keiretsu, Mitsubishi is a horizontal keiretsu. B) Toyota is a horizontal keir etsu, Mitsubishi is a vertical keiretsu. C) Toyota and Mitsubishi are both horizontal keiretsu. D) Toyota and Mitsubishi are both vertical keiretsu. E) none of the above Answer A Diff 3 Page Ref 286-289 AACSB Analytic Skills 78) Which of the following statements most accurately describes the extent to which GM and Toyota outsource components A) GM and Toyota each outsource approximately 50 percent of their components. B) Toyota outsources about 50 percent of its components GM outsources about 75 percent. C) GM outsources about 50 percent of its components Toyota outsources about 75 percent. D) Neither GM nor Toyota outsources a significant proportion of its components. E) GM and Toyota each outsource approximately 25 percent of their components. Answer C Diff 3 Page Ref 287-288 AACSB Analytic Skills 79) The next stage in the evolution of the global strategic alliance is predicted to be in the form of A) mergers and acquisition. B) relationship enterprise. C) franchising. D) joint ventures. E) keiretsu. Answer B Diff 2 Page Ref 290 AACSB Reflective Thinking 80) Saab markets two luxury car models, both prized by drivers for their quirkiness. Thirty percent of Saabs sales come from the USA, with most of the rest from Western Europe. Which strategy does Saab appear to be using A) country concentration/market segment concentration B) country diversification/market segment concentration C) country concentration/market segment diversification D) country diversification/market segment diversification E) none of the above Answer A Diff 2 Page Ref 290-291 AACSB Reflective Thinking 81) Walt Disney Company has successfully adapted licensing as a market entry mode in different countries. What are the advantages of using licensing as entry mode Answer Walt Disney Company generates nearly 15 billion in annual revenues from licensed merchandise, thanks to the popularity of their theme parks, movies, and television shows, as well as Mickey Mouse, Winnie the Pooh, and other popular characters which have gained familiarity all over the world. Licensing is a contractual arrangement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation. There are two key advantages associated with licensing as a market entry mode. First of all, because the licensee is typically a local business that will produce and market the goods or services on a local or regional basis, companies can circumvent tariffs, quotas, or similar export barriers. Secondly, licensees are granted considerable autonomy by the licensor to freely adapt the licensed goods to an extent to suit the local tastes and preferences. Disney licenses trademarked cartoon characters, names and logos to producers of clothing, toys, and watches for sale throughout the world. This allows Disney to create synergies based on its core theme park, motion pictures, and television businesses. Its licensees have considerable leeway to adapt colors, materials, or other design elements that fit with the local tastes of a particular country or region. Diff 2 Page Ref 265-267 AACSB Reflective Thinking 82) Nike provides technical specifications to a subcontractor or local manufacturer for its products. What is this arrangement called and what are its major benefits and drawbacks Answer This type of arrangement is referred to as contract manufacturing. Nike, for example, provides technical specifications of products to be manufactured to the subcontractor who then oversees production. The licensing firm can specialize in product design and marketing, while transferring responsibility for ownership of manufacturing facilities to contractors and subcontractors. Other advantages include limited commitment of financial and managerial resources and quick entry into target countries. This is especially helpful when the target market is too small to justify full- scale investment. Also, there is the possible advantage of securing labor and resources at less cost than in the licensors home country or manufacturing plant. One disadvantage would be that the licensed companies may become subject to public scrutiny and criticism for several reasons. Nike has to face this problem if workers in the contracted companies are underpaid. Inhumane working conditions and hiring underage workers have also been points of criticism by many governmental and private organizations. Violations of sustainable business practices have also come under scrutiny. Diff 2 Page Ref 267-269 AACSB Reflective Thinking 83) McDonalds and other fast food restaurants have benefitted tremendously by using franchising as a mode of entry into different countries. What are the benefits of franchising and how does it differ from other modes of entry Answer Franchising involves a contract between a parent company (franchiser) and a franchisee that allows a franchisee to operate a business developed by the franchiser in return for a fee and adherence to franchise-wide policies and practices. This definition is very similar to that of licensing since franchising itself is another variation of licensing strategy. McDonalds is a very good example of the success that can be achieved through franchising. It has great appeal to local entrepreneurs who are very anxious to learn and apply franchising, which has been found to be very successful in the United States. The specialty retailing industry favors franchising as a market entry mode. Many of the famous American restaurant chains have used franchising to enter and to develop in other countries. McDonalds has a well-known global brand name and a business system that can be easily replicated in multiple country markets. It also provides it franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific preferences and tastes. Franchising is a market entry strategy that is typically executed with less localization than licensing. Diff 2 Page Ref 267-269 AACSB Reflective Thinking 84) Joint ventures are becoming very popular as entry mode into foreign markets. Why is this strategy so attractive to companies interested in entering other markets in the world Answer A joint venture with a local partner represents a more extensive form of participation in foreign markets than either exporting or licensing. A joint venture is an entry strategy for a single target country in which the partners share ownership of a newly created business entity. This strategy is attractive for several reasons such as the sharing of risk. Sharing of risk is a very important advantage when a company is entering a new and unfamiliar region. Also, by pursuing joint venture entry strategies, a company can limit its financial risks as well as exposure to political uncertainty. A company can also use the joint venture experience to learn about a new market environment. Joint ventures also allow partners to achieve synergy by combining different value chain strengths. One company may be helpful in providing knowledge about local markets and availability of resources and the other company may have a brand name and well established reputation in the market. Thus, there can be a complimentary effect by linking the attributes of both the companies. Joint venture is recommended for companies which lack enough resources or technical know-how. Also, in cases where the governmental policies restrict the full ownership of the companies by foreign businesses, joint venture is the only option to enter. Diff 2 Page Ref 270-273 AACSB Reflective Thinking 85) Companies like Anheuser-Busch, Corning Glass, and GM have learned a lot by using joint venture as a mode of entry into a foreign market. Some of their experiences are not very positive. What are the disadvantages of joint venturing Answer Many companies have experienced difficulties, some serious, when working with partners under joint venture agreement. Anheuser-Busch first entered the Japanese market in order to cross the difficult barrier by entering into a licensing agreement with Suntory, the smallest of the brewers in Japan. Although Budweiser became popular, it had a minuscule share of the market. Anheuser-Busch then created a joint venture with Kirin Brewery, the market leader with a 90 stake in the venture. Kirins distribution channel was very helpful and Anheuser-Busch was able to use some of Kirins facilities. On the other hand, Kirin gained a lot of knowledge about the beer market globally. The beer market did not increase substantially for Anheuser-Busch and the joint venture was losing money. Finally, Anheuser-Busch decided to dissolve the joint venture and reverted to a licensing agreement with Kirin. Thus, joint venture does not work in all circumstances and at times licensing works as well. In order for the joint venture relationship to work well both partners must share rewards as well as risks. The main disadvantage associated with joint venture is that a company may incur very significant costs associated with control and coordination issues that arise when working with partners in another country. Another disadvantage is that of potential for conflict between partners. These often arise out of cultural differences. Corning Glass and Vitro, Mexicos largest industrial manufacturer, had a joint venture. Mexican managers viewed the Americans as too direct and aggressive, whereas the American managers believed Mexicans took too much time to make important decisions. Another disadvantage is that a dynamic joint venture partner can evolve as a stronger competitor. GM and South Koreas Daewoo had joint venture to produce cars for the Korean market. GM developed Daewoos competitiveness and finally Daewoo terminated the venture since their cars were not allowed for exportation. Thus, all the disadvantages have to be taken into account when entering into a joint venture agreement. Diff 3 Page Ref 272-273 AACSB Reflective Thinking 86) Why would any firm, whether global or otherwise, seek to collaborate with another firm, be it local or foreign Answer Recent changes in the political, economic, sociocultural, and technological environments of the global firms have prompted the need for strategies that are more current rather than the traditional strategies. Trade barriers are less global markets are more accessible consumer needs and wants have changed product life cycles have shortened and new communication technologies and trends have emerged. These factors may provide unprecedented opportunities. However there are strong strategic implications for the global organizations and new challenges for the global marketer. All these converging environmental forces or changes require different unprecedented global strategies that take into account collaborations which were not thought of at any period of time. Todays competitive environment is described as turbulent, dynamic, and unpredictable. Global firms are under intense pressure to respond and adapt quickly. They have to pursue entrepreneurial globalization by developing unique and flexible organizational capabilities, innovation, and updating global strategies that takes care of the demands. Diff 2 Page Ref 278-279 AACSB Reflective Thinking 87) A true global strategic partnership is unique and different. Using the example of Sonys strategic alliance with Samsung, discuss attributes that are needed for a fine working partnership. Answer A true global strategic partnership requires a mutual collaboration between partners. There are five attributes that are described as important for this type of collaboration. (1) Two or more companies should develop a joint long-term strategy aimed at achieving world leadership by pursuing cost-leadership, differentiation, or a combination of two. Samsung and Sony are two major companies jockeying for leadership in the global television market. Flat-panel TV market is the newest market that has a great potential. (2) The relationship should be reciprocal with each partner bringing in specific strengths that can prove to be mutually beneficial. Also, both sides should be able to learn from each other. Samsung is the leader in the manufacturing technology into world-class products. They can learn from Sony how the present technology can be advanced. (3) The partners vision and effort are truly global, extending beyond home countries and the home regions to the rest of the world. Sony and Samsung are both global companies that market global brands throughout the world. (4) The relationship should be organized along horizontal not vertical lines. Also, continual transfer of resources laterally between partners is required, with resource pooling representing norms. Both Sony and Samsung are in direct contact with each other and there is good sharing of resources. (5) When competing in markets excluded from the partnership, the participants retain their national and ideological identities. Both Sony and Samsung are well established and have sufficient key products in the world market that they will be able to retain their national and ideological identities as well as competitive edge. Diff 2 Page Ref 279-281 AACSB Reflective Thinking 88) Why are alliances between Western companies and Asian competitors so different if not difficult What are some of the concerns and how can those be addressed Answer Western companies may find themselves to be at a disadvantage in GSPs with an Asian competitor. To limit transparency, some companies involved in GSPs establish a collaboration section. This department is designed to serve as a gatekeeper through which requests for access to people and information must be channeled. Unintended transfers are therefore guarded and controlled. A study by McKinsey Co. identified four common problem areas that have gone wrong in alliances between Japanese and Western firms. The Japanese partner saw itself emerging from the alliance as a leader in its business or building a new basis for the future, whereas the Western partner sought relatively quick and risk-free financial returns. The second area of concern related to the balance between partners. Each must contribute to the alliance and each must depend on the other to a degree that justifies participation in the alliance. Another common cause of problems was found to be due to friction. This mainly stemmed from differences in management philosophy, expectations, and approaches. Lastly, the study found that short-term goals can result in the foreign partner limiting the number of people allocated to the joint venture. The original goals of the venture are lost as each new manager takes their turn. There is little original corporate memory or reminder of the initial intent of the venture. These concerns if addressed adequately and before any formal agreement is signed will be helpful in taking care of later concerns, frictions and unnecessary problems. Diff 2 Page Ref 282-283 AACSB Reflective Thinking 89) Japanese keiretsu is considered to be a strong cooperative strategy that will have an impact in global marketing. Describe what it is and how it can affect U.S. businesses. Answer Japans keiretsu represents a special category of cooperative strategy which is an interbusiness alliance or enterprise group. It exists in a broad spectrum of markets, including the capital market, primary goods markets, and component parts markets. Keiretsu relationships are often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and nonfinancial suppliers. Also, keiretsu executives can legally sit on each others boards, share information, and coordinate prices. Thus, keiretsu serves as a cartel that have the governments blessing. Although it is not a market entry strategy per se, it played an integral part in the international success of the Japanese companies as they sought new markets. Clyde Prestowitz provided the following example to show how keiretsu relationships have a potential impact on U.S. businesses. In the1980s Nissan was in the market for a supercomputer to use in car design. Two vendors under consideration were Cray and Hitachi. Cray was the worldwide leader in supercomputers and Hitachi had no functional product to offer. When it appeared that the purchase of Cray computer was pending, Hitachi executives called for solidarity since both Nissan and Hitachi were members of the same big six keiretsu. Hitachi was pushing Nissan to show preference for Hitachi and the U.S. had to put pressure on both Nissan and the Japanese government to have the sale proceed with Cray. Because keiretsu relationships are crossing the Pacific and directly affecting the American market, the U.S. companies have a reason for concern. In California alone, keiretsu owns more than half of the Japanese businesses. Other keiretsu businesses are moving into different parts of the United States. Diff 2 Page Ref 286-289 AACSB Analytic Skills 90) Companies are faced with the decision whether to expand by seeking new markets in existing countries or seeking new country markets for already identified and served market segments. Faced with these situations what are the strategies that can be followed Answer There are four different dimensions that emerge in combination to produce four different sets of strategies that are described as follows. (1) Country and market concentration, which involves targeting a limited number of customer segments in a few countries. This is typically a starting point for most companies and it matches with limited company resources and market investment needs. (2) Country concentration and market diversification, in which a company serves many markets in a few countries. Many European companies have followed this strategy. American companies that decide to diversify in the U.S. market as opposed to going international have also followed this strategy. (3) Country diversification and market concentration is the classic global strategy whereby a company seeks out the world market for a product. This strategy is desirable since it serves the world customer as well as a company can achieve a greater accumulated volume at a lower cost. It also has a competitive advantage due to cost. This is the strategy followed by well-managed businesses that serve a distinct need and customer category. (4) Country and market diversification is the corporate strategy of a global, multibusiness company such as Matsushita. Thus, based on the level of involvement desired and available resources one of the above-mentioned strategies should be selected. Diff 2 Page Ref 290-291 AACSB Reflective Thinking PAGE 21 Copyright 2011 Pearson Education, Inc.
Reflective Thinking 5) Apples failure to license its technology in the pre-Windows era arguably cost the company tens of billions of dollars. Answer TRUE Diff 2 Page Ref 267 6) Companies may find that the upfront easy money obtained from licensing turns out to be a very expensive source of revenue.
Answer TRUE Diff 2 Page Ref 267 AACSB Reflective Thinking 7) Sony was the first company to manufacture and market a transistor radio. Answer FALSE Diff 2 Page Ref 267 AACSB Reflective Thinking 8) Sonys worldwide success in manufacturing and marketing transistor radios in the 1950s stemmed from its joint venture arrangement with an American corporation. Answer TRUE Diff 1 Page Ref 267 9) One of the cornerstones of Apple Computers business strategy has been licensing its famed operating system. Answer TRUE Diff 2 Page Ref 267 AACSB Reflective Thinking 10) Starbucks relentless pursuit of new market opportunities in Germany and other countries illustrates the fact that most firms face a limited range of strategy alternatives. Answer FALSE Diff 1 Page Ref 265 AACSB Reflective Thinking 11) A company that emphasizes direct investment as a market entry strategy is subject to a higher degree of political risk than a company that relies heavily on
exporting. Answer TRUE Diff 1 Page Ref 265 AACSB Reflective Thinking 12) Franchising is a variation of licensing strategy in which there is a contract between the parent company franchiser and a franchisee that allows the franchisee to operate a business developed by the franchiser in return for all rights for operations. Answer FALSE Diff 2 Page Ref 267 AACSB Reflective Thinking 13) In China, regulations require foreign franchisers to directly own two or more stores for a minimum of one year before franchising. Answer TRUE Diff 1 Page Ref 269 AACSB Analytic Skills 14) McDonalds has the largest number of overseas sites according to a listing in the Wall Street Journal (2006). Answer FALSE Diff 1 Page Ref 268 15) Franchising in a global market is actually a market entry strategy that is typically executed with less localization than licensing. Answer TRUE Diff 2 Page Ref 269 AACSB Reflective Thinking 16) Foreign direct investment figures reflect investment flows out of the home country as companies invest in or acquire plants, equipment, or other assets. Answer TRUE Diff 2 Page Ref 269-270 AACSB Reflective Thinking 17) Foreign investment can take the form of outright acquisition. Answer TRUE Diff 2 Page Ref 270 AACSB Reflective Thinking 18) A joint venture with a local partner represents another form of strategy that is similar to exporting and licensing. Answer FALSE Diff 2 Page Ref 270-271 AACSB Reflective Thinking 19) A lesson that can be learned from Anheuser-Buschs experience in Japan is that it is better to give control to a local partner via a licensing agreement rather than making a major investment. Answer TRUE Diff 2 Page Ref 271-272 AACSB Analytic Skills 20) The joint venture between Corning Glass and Mexican manufacturer Vitro failed primarily due to conflicts arising out of cultural differences. Answer TRUE Diff 2 Page Ref 272 21) GM and South Koreas Daewoo Group formed a joint venture which helped Daewoo improve its competitiveness. The venture was terminated since Daewoo prevented the import of GM cars to Korea. Answer FALSE Diff 2 Page Ref 272-273 22) An example of a successful joint venture is Ericssons cell phone alliance with Sony. Answer TRUE Diff 2 Page Ref 273 AACSB Analytic Skills 23) Greenfield investment is a phrase sometimes used interchangeably with the phrase licensing agreement. Answer FALSE Diff 2 Page Ref 274-275 AACSB Reflective Thinking 24) In 2008 the largest merger and acquisition deal in the pharmaceutical industry, Roches acquisition of Genentech, is an example of an equity stake. Answer FALSE Diff 2 Page Ref 276 25) Companies may move from licensing or joint venture strategies to ownership in order to achieve faster expansion in a market, greater control, or higher profits. Answer TRUE Diff 2 Page Ref 274 AACSB Reflective Thinking 26) Monsanto and the German pharmaceutical company, Bayer AG, recently entered a joint venture. Answer FALSE Diff 2 Page Ref 274 AACSB Reflective Thinking 27) If government restrictions prevent majority or 100 percent ownership by foreign companies, the investing company will have to settle for a minority equity stake. Answer TRUE Diff 2 Page Ref 274 AACSB Reflective Thinking 28) Japans Fuji Photo Film Company invested hundreds of millions of dollars in the United States after the U.S. government ruled that Fuji was guilty of dumping. Answer TRUE Diff 2 Page Ref 275 AACSB Reflective Thinking 29) Following its bankruptcy filing in 2009, GM divested itself of several non-core businesses and brands, including Saab. Answer TRUE Diff 2 Page Ref 276 AACSB Reflective Thinking 30) Borden ended licensing and joint venture arrangements for branded food products in Japan and set up its own production, distribution, and marketing capabilities for dairy products. For non-food products, Borden has maintained joint venture relationships with Japanese partners in flexible packaging and foundry materials. All this indicates that strategy preference may change over time. Answer TRUE Diff 2 Page Ref 277 AACSB Analytic Skills 31) To succeed in global markets, firms can rely exclusively on the technological superiority or core competence which made them successful in the past. Answer FALSE Diff 2 Page Ref 279 AACSB Reflective Thinking 32) Sony entered into a strategic partnership with Samsung in order to produce flat-panel TV screens due to the high product development costs. Answer TRUE Diff 2 Page Ref 280 AACSB Reflective Thinking 33) Some companies prefer global strategic partnerships to joint ventures because, with a GSP, there is less risk of strengthening a competitor. Answer FALSE Diff 2 Page Ref 279-280 AACSB Reflective Thinking 34) The CFM partnership between General Electric (USA) and Snecma (France) is a notable example of a successful GSP. Answer TRUE Diff 2 Page Ref 283 AACSB Reflective Thinking 35) In Japan, a horizontal keir etsu is a form of business alliance between companies in a particular group headed by a trading company, bank, or other cash-rich entity. Answer TRUE Diff 2 Page Ref 286-289 AACSB Reflective Thinking 36) Because keir etsu relationships are crossing the Pacific and directly affecting the American market, U.S. companies have reason to be concerned. Answer TRUE Diff 2 Page Ref 286-289 AACSB Reflective Thinking 37) The South Korean government has recently abandoned the chaebol industry structure in favor of the keiretsu structure. Answer FALSE Diff 1 Page Ref 286-289 38) Digital keiretsu refers to alliances between companies in several industries that are undergoing transformation and convergence. Answer TRUE Diff 2 Page Ref 286-289 AACSB Reflective Thinking 39) In a country and market concentration strategy, a company serves many markets in a few countries. Answer FALSE Diff 2 Page Ref 290-291 AACSB Reflective Thinking 40) In country and market diversification strategy, a company seeks out the world market for a product. Answer FALSE Diff 2 Page Ref 290-291 AACSB Reflective Thinking 41) For Starbucks and other companies whose business models include a service component it is not recommended that they use this method for going global. A) joint ventures B) licensing C) 100 percent ownership D) exporting E) franchising Answer D Diff 2 Page Ref 265 AACSB Reflective Thinking 42) Licensing as a market entry mode has several disadvantages and opportunity costs, which does not include A) limited market control. B) agreement may have short life. C) leveraging and exploiting by licensee. D) similar product or technology development by licensee. E) adaptations by licensee to fit local tastes. Answer E Diff 2 Page Ref 265-267 AACSB Reflective Thinking 43) In order to prevent a licensor-competitor from gaining unilateral benefit, licensing agreements should provide for A) contract manufacturing. B) franchising. C) cross licensing. D) strategic decision-making. E) adaptation for local tastes. Answer C Diff 2 Page Ref 267 AACSB Reflective Thinking 44) ________ represent(s) a market entry strategy whereby one company permits a foreign company to make use of its patents, know-how, technology, company name, or other intangible assets in return for a royalty payment. A) Joint ventures B) One hundred percent ownership C) Licensing D) Exporting E) Global strategic alliances Answer C Diff 2 Page Ref 265-267 AACSB Reflective Thinking 45) Pollo Campero, a chicken restaurant chain based in Central America is using the following method for expanding operation in the United States. A) joint ventures B) licensing C) exporting D) franchising E) acquisition Answer D Diff 2 Page Ref 267 AACSB Reflective Thinking 46) In the mid-1990s, NCR signed an agreement allowing two South Korean companies, Samsung and Hyundai, to build computers based on NCRs parallel processing technology. Samsung and Hyundai can sell the new computers everywhere except the U.S., Western Europe, Japan, and Australia. This arrangement is typical of which entry strategy A) joint ventures B) licensing C) 100 ownership D) exporting E) global strategic alliances Answer B Diff 2 Page Ref 265-267 AACSB Reflective Thinking 47) The specialty retailing industry, as well as the fast-food industry, favors ________ for global growth A) licensing B) investment C) franchising D) joint ventures E) strategic alliances Answer C Diff 2 Page Ref 269 AACSB Reflective Thinking 48) The agreements that allow McDonalds franchisees around the globe to use McDonalds trademarked name and menu items represent, in essence, which form of market entry A) joint ventures B) franchising C) 100 ownership D) exporting E) acquisition Answer B Diff 2 Page Ref 269 AACSB Reflective Thinking 49) McDonalds success in franchising in global markets can be attributed to several factors which does not include A) a well known global brand name. B) a business system that can be easily replicated. C) local market knowledge. D) cross licensing. E) granting franchisees leeway to tailor menu offerings to suit local tastes. Answer D Diff 3 Page Ref 269 AACSB Analytic Skills 50) Based on rankings by the Wall Street Journal (2006) the company which has the most overseas franchised sites is A) Dominos Pizza. B) Subway. C) 7-Eleven. D) McDonalds. E) Yum Brands. Answer C Diff 2 Page Ref 268 51) Honda has invested 550 million in building an assembly plant in Greensburg, Indiana IKEA spent nearly 2 billion to open stores in Russia and South Koreas LG Electronics purchased a 58 stake in Zenith Electronics. All of these are examples of A) acquisition. B) licensing. C) franchising. D) FDI. E) exporting. Answer D Diff 2 Page Ref 269-270 AACSB Reflective Thinking 52) Starbucks has been successful in various global markets however, it has to face tough competition in several countries. In China the challenge comes from the traditional Chinese tea house. Starbucks found that the Chinese consumers have different tastes and behavior patterns which include all of the following except A) Chinese consumers prefer drinking in the cafes. B) Chinese consumers prefer carry-out. C) Chinese consumers go to cafes to socialize. D) store traffic is heaviest in the afternoon. E) Chinese need to be educated about coffee. Answer B Diff 2 Page Ref 264-265 AACSB Reflective Thinking 53) Which of the following does not fit into the sequence of experiences Anheuser-Busch had in Japan A) Anheuser-Busch first entered Japan by means of a licensing agreement with Suntory, the smallest brewery in Japan. B) Anheuser-Busch created a joint venture with Kirin Brewery, the market leader. C) Anheuser-Busch dissolved the joint venture with Kirin Brewery. D) Anheuser-Busch entered into a joint venture with Kirin Brewery. E) Anheuser-Busch reverted to a licensing agreement with Kirin Brewery. Answer D Diff 2 Page Ref 270-271 AACSB Reflective Thinking 54) GM executives are looking for a joint venture with AvtoVAZ, the largest carmaker in A) Germany. B) Lithuania. C) Russia. D) Kazakhstan. E) Turkey. Answer C Diff 2 Page Ref 271 AACSB Reflective Thinking 55) In a joint venture with Russian manufacturer AvtoVAZ, GM executives were planning to have a stripped-down reengineered car based on its Opel model. However, the market research revealed that a Made-in-Russia car would only be acceptable if A) it has a German name. B) it sported a very low sticker price. C) it has an American name. D) it has a very high sticker price. E) it has a Russian name. Answer B Diff 2 Page Ref 271 AACSB Reflective Thinking 56) Joint ventures have proven successful for many companies. However, there are certain disadvantages which does not include A) risk sharing. B) market knowledge. C) achieve synergy. D) control and coordination. E) market entry. Answer D Diff 2 Page Ref 270-272 AACSB Reflective Thinking 57) Sony Ericsson is a ________ Swedens Telefonaktiebolaget LM and Japanese consumer electronics giant Sony Corporation. A) a joint venture between B) licensor for C) licensee for D) franchisee for E) franchisor for Answer A Diff 2 Page Ref 273 AACSB Reflective Thinking 58) The president of a Mexican company recently remarked, Business in Mexico is done on a consensus basis, very genteel and sometimes slow by U.S. standards. A few months later, the Mexican company and its U.S. joint venture partner parted company. Judging by the presidents remark, one important reason for the divorce was A) failure of one partner to live up to the terms of the contract. B) cultural differences. C) the cancellation of NAFTA. D) the U.S. governments insistence on quick negotiations. E) the language barrier. Answer B Diff 2 Page Ref 272 AACSB Multicultural and Diversity 59) As a general rule, the Chinese government allows foreign companies to participate in its market only if those companies agree to establish operations with local Chinese enterprises. Which market entry mode would be the appropriate choice under these circumstances A) acquisition B) licensing C) joint venture D) exporting E) franchising Answer C Diff 2 Page Ref 272-273 AACSB Reflective Thinking 60) Which automaker currently has a joint venture with Hindustan Motors (India) A) Volkswagen B) Ford C) GM D) Renault E) Mazda Answer C Diff 3 Page Ref 272 AACSB Reflective Thinking 61) Which of the following currently owns a 70 stake in Skoda, the Czech automaker A) GM B) Volkswagen C) Ford D) DaimlerChrysler E) Renault Answer B Diff 3 Page Ref 275 62) Which automaker owns an equity stake in Japans Nissan Motor A) GM B) Volkswagen C) Ford D) DaimlerChrysler E) Renault Answer E Diff 3 Page Ref 275 63) Gerbers woes in France illustrate some of the disadvantages of which market entry strategy A) joint ventures B) licensing C) 100 ownership D) exporting E) franchising Answer B Diff 2 Page Ref 277 AACSB Reflective Thinking 64) ________ is a market entry mode that traditionally has been used by companies that, for one reason or another, needed a partner to manufacture products for sale in the partners home country market. A) Acquisition B) Strategic alliance C) Joint venture D) Exporting E) Licensing Answer C Diff 2 Page Ref 277 AACSB Reflective Thinking 65) Which of the following is not a characteristic of global strategic alliances A) Participants maintain independence outside the framework of alliance. B) Participants share benefits of the alliance. C) Participants share control over the performance of the assigned tasks. D) Participants make ongoing contributions in technology, products, and other areas. E) Participants agree not to compete in areas unrelated to the alliance. Answer E Diff 2 Page Ref 279-281 AACSB Reflective Thinking 66) Which of the following is not a characteristic of global strategic alliances A) Participants maintain independence outside the framework of alliance. B) Participants share benefits as well as control. C) Participants make ongoing contributions in technology, products, and other areas. D) Participants focus on an individual country market. E) Participants share benefits of the alliance. Answer D Diff 2 Page Ref 279-281 AACSB Reflective Thinking 67) The terminology used to describe the new forms of cooperation strategies varies widely and the phrases used include all of the following except A) collaborative agreements. B) strategic alliances. C) global strategic partnerships. D) strategic international alliances. E) Greenfield operations. Answer E Diff 2 Page Ref 279 AACSB Reflective Thinking 68) GSPs (Global Strategic Partnerships) are attractive for several reasons which does not include A) sharing high product development costs. B) sharing technological developments. C) securing access to national and regional markets. D) continuous transfer of technology between partners. E) focus on a single national market or a specific problem. Answer E Diff 2 Page Ref 279-281 AACSB Reflective Thinking 69) Which of the following does not fit in with the factors that should be considered by companies forming GSPs A) Partners are competitors to each other. B) Harmony is not the most important measure of success. C) All employees and managers must understand where cooperation ends and competitive compromise begins. D) Learning from partners is critically important. E) none of the above Answer E Diff 2 Page Ref 279-281 AACSB Reflective Thinking 70) Discussion and consensus must be the norms. Partners must be viewed as equals. When applied to global strategic partnerships, this statement indicates the importance of which factor A) mission B) strategy C) governance D) culture E) organization Answer C Diff 2 Page Ref 281 AACSB Reflective Thinking 71) Successful GSPs create win-win situations, where participants pursue objectives on the basis of mutual advantage. When applied to global strategic partnerships, this statement indicates the importance of which factor A) mission B) strategy C) governance D) culture E) organization Answer A Diff 2 Page Ref 281-282 AACSB Reflective Thinking 72) According to a 1991 report by McKinsey Co. problems of alliances between Western and Japanese firms were related to all of the following factors except A) objective levels of performance. B) a feeling of mutual disillusionment. C) difference in expectations. D) balance between partners. E) frictional loss. Answer A Diff 3 Page Ref 282 AACSB Analytic Skills 73) Boeing developed the wide bodied aircraft, the 777 with about ________ percent of the work subcontracted out to Mitsubishi, Fuji, and Kawasaki. A) 50 B) 25 C) 20 D) 60 E) 75 Answer C Diff 3 Page Ref 283 74) The success of CFM International (the strategic partnership between GE and Snecma) can be attributed to which of the following A) compatibility of the partners B) capability of the partners C) commitment of the partners D) all of the above E) none of the above Answer D Diff 2 Page Ref 283 AACSB Reflective Thinking 75) A number of factors combine to make Russia an excellent location for an alliance which does not include A) a well-educated workforce. B) quality is important to Russian consumers. C) abundance of supplies. D) potential for economic growth. E) potential for growth in service sector. Answer C Diff 2 Page Ref 284-286 AACSB Reflective Thinking 76) Which of the following is NOT true of Japanese keiretsu A) promotes risk sharing B) promotes long-term employment C) ensures low prices for Japanese consumers D) blocks foreign suppliers from the Japanese market E) relationships are cemented by bank ownership Answer E Diff 3 Page Ref 286-289 AACSB Analytic Skills 77) Which of the following is true about Japanese keiretsu A) Toyota is a vertical keiretsu, Mitsubishi is a horizontal keiretsu. B) Toyota is a horizontal keir etsu, Mitsubishi is a vertical keiretsu. C) Toyota and Mitsubishi are both horizontal keiretsu. D) Toyota and Mitsubishi are both vertical keiretsu. E) none of the above Answer A Diff 3 Page Ref 286-289 AACSB Analytic Skills 78) Which of the following statements most accurately describes the extent to which GM and Toyota outsource components A) GM and Toyota each outsource approximately 50 percent of their components. B) Toyota outsources about 50 percent of its components GM outsources about 75 percent. C) GM outsources about 50 percent of its components Toyota outsources about 75 percent. D) Neither GM nor Toyota outsources a significant proportion of its components. E) GM and Toyota each outsource approximately 25 percent of their components. Answer C Diff 3 Page Ref 287-288 AACSB Analytic Skills 79) The next stage in the evolution of the global strategic alliance is predicted to be in the form of A) mergers and acquisition. B) relationship enterprise. C) franchising. D) joint ventures. E) keiretsu. Answer B Diff 2 Page Ref 290 AACSB Reflective Thinking 80) Saab markets two luxury car models, both prized by drivers for their quirkiness. Thirty percent of Saabs sales come from the USA, with most of the rest from Western Europe. Which strategy does Saab appear to be using A) country concentration/market segment concentration B) country diversification/market segment concentration C) country concentration/market segment diversification D) country diversification/market segment diversification E) none of the above Answer A Diff 2 Page Ref 290-291 AACSB Reflective Thinking 81) Walt Disney Company has successfully adapted licensing as a market entry mode in different countries. What are the advantages of using licensing as entry mode Answer Walt Disney Company generates nearly 15 billion in annual revenues from licensed merchandise, thanks to the popularity of their theme parks, movies, and television shows, as well as Mickey Mouse, Winnie the Pooh, and other popular characters which have gained familiarity all over the world. Licensing is a contractual arrangement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation. There are two key advantages associated with licensing as a market entry mode. First of all, because the licensee is typically a local business that will produce and market the goods or services on a local or regional basis, companies can circumvent tariffs, quotas, or similar export barriers. Secondly, licensees are granted considerable autonomy by the licensor to freely adapt the licensed goods to an extent to suit the local tastes and preferences. Disney licenses trademarked cartoon characters, names and logos to producers of clothing, toys, and watches for sale throughout the world. This allows Disney to create synergies based on its core theme park, motion pictures, and television businesses. Its licensees have considerable leeway to adapt colors, materials, or other design elements that fit with the local tastes of a particular country or region. Diff 2 Page Ref 265-267 AACSB Reflective Thinking 82) Nike provides technical specifications to a subcontractor or local manufacturer for its products. What is this arrangement called and what are its major benefits and drawbacks Answer This type of arrangement is referred to as contract manufacturing. Nike, for example, provides technical specifications of products to be manufactured to the subcontractor who then oversees production. The licensing firm can specialize in product design and marketing, while transferring responsibility for ownership of manufacturing facilities to contractors and subcontractors. Other advantages include limited commitment of financial and managerial resources and quick entry into target countries. This is especially helpful when the target market is too small to justify full- scale investment. Also, there is the possible advantage of securing labor and resources at less cost than in the licensors home country or manufacturing plant. One disadvantage would be that the licensed companies may become subject to public scrutiny and criticism for several reasons. Nike has to face this problem if workers in the contracted companies are underpaid. Inhumane working conditions and hiring underage workers have also been points of criticism by many governmental and private organizations. Violations of sustainable business practices have also come under scrutiny. Diff 2 Page Ref 267-269 AACSB Reflective Thinking 83) McDonalds and other fast food restaurants have benefitted tremendously by using franchising as a mode of entry into different countries. What are the benefits of franchising and how does it differ from other modes of entry Answer Franchising involves a contract between a parent company (franchiser) and a franchisee that allows a franchisee to operate a business developed by the franchiser in return for a fee and adherence to franchise-wide policies and practices. This definition is very similar to that of licensing since franchising itself is another variation of licensing strategy. McDonalds is a very good example of the success that can be achieved through franchising. It has great appeal to local entrepreneurs who are very anxious to learn and apply franchising, which has been found to be very successful in the United States. The specialty retailing industry favors franchising as a market entry mode. Many of the famous American restaurant chains have used franchising to enter and to develop in other countries. McDonalds has a well-known global brand name and a business system that can be easily replicated in multiple country markets. It also provides it franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific preferences and tastes. Franchising is a market entry strategy that is typically executed with less localization than licensing. Diff 2 Page Ref 267-269 AACSB Reflective Thinking 84) Joint ventures are becoming very popular as entry mode into foreign markets. Why is this strategy so attractive to companies interested in entering other markets in the world Answer A joint venture with a local partner represents a more extensive form of participation in foreign markets than either exporting or licensing. A joint venture is an entry strategy for a single target country in which the partners share ownership of a newly created business entity. This strategy is attractive for several reasons such as the sharing of risk. Sharing of risk is a very important advantage when a company is entering a new and unfamiliar region. Also, by pursuing joint venture entry strategies, a company can limit its financial risks as well as exposure to political uncertainty. A company can also use the joint venture experience to learn about a new market environment. Joint ventures also allow partners to achieve synergy by combining different value chain strengths. One company may be helpful in providing knowledge about local markets and availability of resources and the other company may have a brand name and well established reputation in the market. Thus, there can be a complimentary effect by linking the attributes of both the companies. Joint venture is recommended for companies which lack enough resources or technical know-how. Also, in cases where the governmental policies restrict the full ownership of the companies by foreign businesses, joint venture is the only option to enter. Diff 2 Page Ref 270-273 AACSB Reflective Thinking 85) Companies like Anheuser-Busch, Corning Glass, and GM have learned a lot by using joint venture as a mode of entry into a foreign market. Some of their experiences are not very positive. What are the disadvantages of joint venturing Answer Many companies have experienced difficulties, some serious, when working with partners under joint venture agreement. Anheuser-Busch first entered the Japanese market in order to cross the difficult barrier by entering into a licensing agreement with Suntory, the smallest of the brewers in Japan. Although Budweiser became popular, it had a minuscule share of the market. Anheuser-Busch then created a joint venture with Kirin Brewery, the market leader with a 90 stake in the venture. Kirins distribution channel was very helpful and Anheuser-Busch was able to use some of Kirins facilities. On the other hand, Kirin gained a lot of knowledge about the beer market globally. The beer market did not increase substantially for Anheuser-Busch and the joint venture was losing money. Finally, Anheuser-Busch decided to dissolve the joint venture and reverted to a licensing agreement with Kirin. Thus, joint venture does not work in all circumstances and at times licensing works as well. In order for the joint venture relationship to work well both partners must share rewards as well as risks. The main disadvantage associated with joint venture is that a company may incur very significant costs associated with control and coordination issues that arise when working with partners in another country. Another disadvantage is that of potential for conflict between partners. These often arise out of cultural differences. Corning Glass and Vitro, Mexicos largest industrial manufacturer, had a joint venture. Mexican managers viewed the Americans as too direct and aggressive, whereas the American managers believed Mexicans took too much time to make important decisions. Another disadvantage is that a dynamic joint venture partner can evolve as a stronger competitor. GM and South Koreas Daewoo had joint venture to produce cars for the Korean market. GM developed Daewoos competitiveness and finally Daewoo terminated the venture since their cars were not allowed for exportation. Thus, all the disadvantages have to be taken into account when entering into a joint venture agreement. Diff 3 Page Ref 272-273 AACSB Reflective Thinking 86) Why would any firm, whether global or otherwise, seek to collaborate with another firm, be it local or foreign Answer Recent changes in the political, economic, sociocultural, and technological environments of the global firms have prompted the need for strategies that are more current rather than the traditional strategies. Trade barriers are less global markets are more accessible consumer needs and wants have changed product life cycles have shortened and new communication technologies and trends have emerged. These factors may provide unprecedented opportunities. However there are strong strategic implications for the global organizations and new challenges for the global marketer. All these converging environmental forces or changes require different unprecedented global strategies that take into account collaborations which were not thought of at any period of time. Todays competitive environment is described as turbulent, dynamic, and unpredictable. Global firms are under intense pressure to respond and adapt quickly. They have to pursue entrepreneurial globalization by developing unique and flexible organizational capabilities, innovation, and updating global strategies that takes care of the demands. Diff 2 Page Ref 278-279 AACSB Reflective Thinking 87) A true global strategic partnership is unique and different. Using the example of Sonys strategic alliance with Samsung, discuss attributes that are needed for a fine working partnership. Answer A true global strategic partnership requires a mutual collaboration between partners. There are five attributes that are described as important for this type of collaboration. (1) Two or more companies should develop a joint long-term strategy aimed at achieving world leadership by pursuing cost-leadership, differentiation, or a combination of two. Samsung and Sony are two major companies jockeying for leadership in the global television market. Flat-panel TV market is the newest market that has a great potential. (2) The relationship should be reciprocal with each partner bringing in specific strengths that can prove to be mutually beneficial. Also, both sides should be able to learn from each other. Samsung is the leader in the manufacturing technology into world-class products. They can learn from Sony how the present technology can be advanced. (3) The partners vision and effort are truly global, extending beyond home countries and the home regions to the rest of the world. Sony and Samsung are both global companies that market global brands throughout the world. (4) The relationship should be organized along horizontal not vertical lines. Also, continual transfer of resources laterally between partners is required, with resource pooling representing norms. Both Sony and Samsung are in direct contact with each other and there is good sharing of resources. (5) When competing in markets excluded from the partnership, the participants retain their national and ideological identities. Both Sony and Samsung are well established and have sufficient key products in the world market that they will be able to retain their national and ideological identities as well as competitive edge. Diff 2 Page Ref 279-281 AACSB Reflective Thinking 88) Why are alliances between Western companies and Asian competitors so different if not difficult What are some of the concerns and how can those be addressed Answer Western companies may find themselves to be at a disadvantage in GSPs with an Asian competitor. To limit transparency, some companies involved in GSPs establish a collaboration section. This department is designed to serve as a gatekeeper through which requests for access to people and information must be channeled. Unintended transfers are therefore guarded and controlled. A study by McKinsey Co. identified four common problem areas that have gone wrong in alliances between Japanese and Western firms. The Japanese partner saw itself emerging from the alliance as a leader in its business or building a new basis for the future, whereas the Western partner sought relatively quick and risk-free financial returns. The second area of concern related to the balance between partners. Each must contribute to the alliance and each must depend on the other to a degree that justifies participation in the alliance. Another common cause of problems was found to be due to friction. This mainly stemmed from differences in management philosophy, expectations, and approaches. Lastly, the study found that short-term goals can result in the foreign partner limiting the number of people allocated to the joint venture. The original goals of the venture are lost as each new manager takes their turn. There is little original corporate memory or reminder of the initial intent of the venture. These concerns if addressed adequately and before any formal agreement is signed will be helpful in taking care of later concerns, frictions and unnecessary problems. Diff 2 Page Ref 282-283 AACSB Reflective Thinking 89) Japanese keiretsu is considered to be a strong cooperative strategy that will have an impact in global marketing. Describe what it is and how it can affect U.S. businesses. Answer Japans keiretsu represents a special category of cooperative strategy which is an interbusiness alliance or enterprise group. It exists in a broad spectrum of markets, including the capital market, primary goods markets, and component parts markets. Keiretsu relationships are often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and nonfinancial suppliers. Also, keiretsu executives can legally sit on each others boards, share information, and coordinate prices. Thus, keiretsu serves as a cartel that have the governments blessing. Although it is not a market entry strategy per se, it played an integral part in the international success of the Japanese companies as they sought new markets. Clyde Prestowitz provided the following example to show how keiretsu relationships have a potential impact on U.S. businesses. In the1980s Nissan was in the market for a supercomputer to use in car design. Two vendors under consideration were Cray and Hitachi. Cray was the worldwide leader in supercomputers and Hitachi had no functional product to offer. When it appeared that the purchase of Cray computer was pending, Hitachi executives called for solidarity since both Nissan and Hitachi were members of the same big six keiretsu. Hitachi was pushing Nissan to show preference for Hitachi and the U.S. had to put pressure on both Nissan and the Japanese government to have the sale proceed with Cray. Because keiretsu relationships are crossing the Pacific and directly affecting the American market, the U.S. companies have a reason for concern. In California alone, keiretsu owns more than half of the Japanese businesses. Other keiretsu businesses are moving into different parts of the United States. Diff 2 Page Ref 286-289 AACSB Analytic Skills 90) Companies are faced with the decision whether to expand by seeking new markets in existing countries or seeking new country markets for already identified and served market segments. Faced with these situations what are the strategies that can be followed Answer There are four different dimensions that emerge in combination to produce four different sets of strategies that are described as follows. (1) Country and market concentration, which involves targeting a limited number of customer segments in a few countries. This is typically a starting point for most companies and it matches with limited company resources and market investment needs. (2) Country concentration and market diversification, in which a company serves many markets in a few countries. Many European companies have followed this strategy. American companies that decide to diversify in the U.S. market as opposed to going international have also followed this strategy. (3) Country diversification and market concentration is the classic global strategy whereby a company seeks out the world market for a product. This strategy is desirable since it serves the world customer as well as a company can achieve a greater accumulated volume at a lower cost. It also has a competitive advantage due to cost. This is the strategy followed by well-managed businesses that serve a distinct need and customer category. (4) Country and market diversification is the corporate strategy of a global, multibusiness company such as Matsushita. Thus, based on the level of involvement desired and available resources one of the above-mentioned strategies should be selected. Diff 2 Page Ref 290-291 AACSB Reflective Thinking PAGE 21 Copyright 2011 Pearson Education, Inc.