Unit 10: Internationalization Strategies - Practice Quiz

1 Which theory explains internationalization as a gradual process of increasing commitment to foreign markets?

2 According to the Uppsala model, a firm usually begins international expansion with:

3 Which theory focuses on ownership, location, and internalization advantages?

4 In the eclectic paradigm, an ownership advantage refers to:

5 The product life cycle theory suggests that production may move to other countries when a product becomes:

6 The internalization theory explains why a firm may choose to:

7 Which mode of operation involves selling products made in the home country to customers abroad?

8 Licensing allows a foreign company to use another firm's:

9 Franchising is most commonly associated with providing a foreign operator with:

10 A joint venture is a business arrangement in which:

11 Foreign direct investment involves:

12 Which mode generally gives a firm the highest level of control over foreign operations?

13 Contract manufacturing occurs when a firm:

14 A major advantage of exporting compared with foreign direct investment is usually:

15 Direct exporting means that a firm sells to foreign customers through:

16 Indirect exporting occurs when a firm uses:

17 An import is a good or service that is:

18 An export is a good or service that is:

19 A tariff is best described as:

20 Which document commonly provides details about goods being shipped internationally?

21 A small software company first exports to a culturally similar neighboring country. After gaining experience, it establishes sales subsidiaries in more distant markets. Which theory best explains this sequence?

22 A biotechnology firm enters several foreign markets shortly after its formation because its founders have international networks and its product serves a global niche. Which concept best describes the firm?

23 A manufacturer decides to establish a wholly owned foreign subsidiary because licensing would risk the misuse of its proprietary production process. Which theory most directly supports this decision?

24 Under Dunning's eclectic paradigm, a company is most likely to undertake foreign direct investment when it possesses ownership, location, and internalization advantages. Which situation represents a location advantage?

25 A firm uses relationships with foreign distributors, suppliers, and industry associations to identify opportunities and enter new countries. Which perspective best explains its internationalization?

26 A consumer electronics product is initially produced in an advanced economy. After the product becomes standardized, production shifts to lower-cost countries. Which theory best explains this change?

27 A medium-sized firm skips nearby markets and enters a distant country because its chief executive previously developed strong business contacts there. Which observation does this most strongly support?

28 A hotel company allows an overseas business to use its brand and operating system while also providing training, quality standards, and continuing support. Which mode is being used?

29 A pharmaceutical company permits a foreign producer to manufacture a patented medicine in return for royalty payments but does not provide a complete business format. Which entry mode is this?

30 A foreign government requires overseas automobile producers to share ownership with a local company. The entering firm also wants access to the local partner's distribution network. Which mode is most appropriate?

31 A company wants full control over foreign operations and rapid access to an established brand, workforce, and distribution system. Which mode best meets these objectives?

32 A manufacturer wants complete control over facility design, production technology, and organizational culture in a foreign country, and it can accept a slow market entry. Which mode is most suitable?

33 An engineering company designs and constructs a complete power plant abroad, trains local personnel, and transfers the operational facility to the client. Which mode does this illustrate?

34 A clothing brand supplies designs and quality requirements to an independent overseas factory that produces the garments, while the brand retains responsibility for marketing. Which mode is being used?

35 A small manufacturer has no international sales department and wants to test foreign demand with limited financial commitment. Which export approach is most appropriate initially?

36 An exporter quotes a price under which it pays the cost, insurance, and freight required to transport goods to the named destination port. Which Incoterm is being applied?

37 An exporter is dealing with a new foreign buyer in a country with uncertain commercial conditions. The exporter wants a bank's payment commitment after presenting compliant shipping documents. Which method is most suitable?

38 A company expects to receive EUR 500,000 from an export sale in three months and fears that the euro may depreciate against its home currency. Which action most directly manages this risk?

39 A firm imports components from several countries and frequently experiences production delays because shipments arrive late. Which strategic response best reduces this operational risk?

40 An exporter sells a product for $120 per unit. Production and domestic handling cost $75, international freight costs $12, insurance costs $3, and the foreign distributor receives a $15 margin. What is the exporter's contribution before other expenses?

41 A firm with valuable proprietary technology enters a foreign market where transaction costs are high, intellectual-property protection is weak, and local adaptation is limited. Which prediction is most consistent with internalization theory?

42 According to the Uppsala model, a firm has successfully exported to a psychically close country and now faces an attractive but institutionally unfamiliar market. Which next move best reflects the model's logic?

43 A born-global software firm expands rapidly because its platform is digitally transferable, its niche customers are globally distributed, and its founders possess international networks. Which explanation best challenges a purely gradual internationalization view?

44 A multinational's foreign subsidiary combines the parent firm's patented process with a local partner's regulatory knowledge and distribution relationships. Which eclectic-paradigm configuration most directly explains the investment?

45 A firm licenses its production technology abroad, but licensees later become capable competitors. Which theoretical concern is most directly illustrated?

46 Two firms possess similar technologies, but one internationalizes through alliances while the other builds subsidiaries. The alliance-oriented firm's relationships provide market intelligence and legitimacy. Which network-theory inference is strongest?

47 A firm enters a country through a joint venture because local political connections are essential, but it later increases ownership after acquiring regulatory knowledge. Which combined interpretation is most appropriate?

48 A firm has moderate proprietary knowledge, limited international experience, and a product requiring substantial local service support. Which entry mode best balances control, learning, and resource exposure?

49 Which condition most strongly favors a wholly owned subsidiary over a joint venture?

50 A franchisor standardizes its brand and core processes but permits franchisees to modify menus and staffing practices. What is the principal strategic trade-off?

51 A turnkey project allows a contractor to design and construct a foreign facility, train employees, and transfer operations at completion. Which limitation is most strategically significant?

52 A company uses contract manufacturing abroad while retaining product design, quality standards, and marketing. Which risk remains most difficult to eliminate through the contract alone?

53 A firm chooses an acquisition rather than greenfield investment in a foreign market. The target owns distribution relationships but has outdated production technology. What is the strongest rationale?

54 A strategic alliance repeatedly misses targets because both partners interpret performance data differently and neither can verify the other's effort. Which governance response is most appropriate?

55 An exporter sells in a foreign currency while most production costs are in its home currency. The foreign currency is expected to depreciate before payment. Which action most directly reduces transaction-exposure risk?

56 An exporter compares two markets. Market A has lower tariffs but unreliable customs clearance; Market B has higher tariffs but predictable procedures and lower damage rates. Which evaluation is most defensible?

57 A small exporter lacks foreign-market knowledge but receives an order from an overseas buyer. Which arrangement best limits early risk while preserving the opportunity to learn?

58 An importer evaluates a supplier offering the lowest quoted price, but the supplier requires payment before production and has weak quality documentation. Which decision rule is most appropriate?

59 An exporter wants to offer open-account credit to a financially uncertain buyer in a politically unstable market. Which instrument most directly protects against both commercial and political nonpayment?

60 A government imposes an import quota on a component, and the importer can either pay a premium for scarce quota rights or source a higher-cost substitute domestically. What should determine the choice?