Unit 10: Internationalization Strategies - Practice Quiz

1 What does internationalization generally mean for a business?

2 Which theory describes firms as entering foreign markets gradually as they gain knowledge and experience?

3 In the Uppsala model, firms commonly begin international expansion with markets that are:

4 What is a key characteristic of a born-global firm?

5 According to network theory, what can help a firm enter foreign markets?

6 Which mode involves permitting a foreign firm to use intellectual property in return for a fee or royalty?

7 What is a joint venture?

8 Which international operating mode usually gives a company the greatest control over a foreign operation?

9 In franchising, the franchisee normally receives the right to use the franchisor's:

10 Which entry mode involves building or purchasing production facilities in another country?

11 What is exporting?

12 What distinguishes direct exporting from indirect exporting?

13 Which document is commonly used by an exporter to list the goods sold and the amount due?

14 What is one common benefit of exporting as an international entry strategy?

15 Why might an exporter conduct foreign market research?

16 What is importing?

17 What is a tariff?

18 What is an import quota?

19 Why might a company choose to import materials?

20 Before selecting a foreign supplier, an importer should primarily evaluate the supplier's:

21 A small Danish company first exports to Sweden, then establishes a Swedish sales subsidiary, and later enters more culturally distant markets. Which theory best explains this pattern?

22 A pharmaceutical firm owns patented technology, finds a country with strong research talent, and chooses a wholly owned laboratory to protect its knowledge. Which framework jointly explains these conditions?

23 A software company rejects licensing because its knowledge is tacit and easily misused by a foreign partner. It establishes its own subsidiary instead. Which theory most directly supports this decision?

24 A manufacturer enters Brazil after a long-term supplier introduces it to reliable distributors and government contacts there. Which view of internationalization best fits this situation?

25 A digital education start-up begins selling in twelve countries within its first year rather than expanding gradually. Which concept best describes the company?

26 A firm wants to enter several foreign markets with little capital investment, but it is willing to accept limited control over production and marketing. Which mode is most suitable?

27 A restaurant chain allows foreign operators to use its brand and operating system while requiring standardized service and ongoing royalty payments. Which mode is being used?

28 Foreign ownership restrictions require an energy company to share equity with a local enterprise. The company also needs local regulatory knowledge. Which entry mode is most appropriate?

29 A retailer wants rapid access to established stores, employees, and customers in a foreign market. It can afford a large initial investment. Which mode best meets these objectives?

30 A clothing brand hires an overseas factory to produce garments according to its specifications while retaining responsibility for design and international marketing. Which mode does this represent?

31 A small producer has no international sales department and wants to test foreign demand with minimal commitment. Which export approach is most appropriate initially?

32 An experienced manufacturer wants closer relationships with foreign distributors and greater control over pricing and promotion. Which strategy best supports these goals?

33 An appliance exporter discovers that the target country uses different electrical standards and that customers prefer smaller units. What should the exporter do?

34 An exported machine costs $80 to produce, while freight, insurance, and duties total $20. If the exporter applies a 25% markup on total landed cost, what is the selling price?

35 An exporter is concerned that an unfamiliar overseas buyer may fail to pay after shipment. Which payment arrangement best reduces this risk while allowing trade to proceed?

36 Supplier X charges $50 per unit, plus $6 freight and a $5 tariff. Supplier Y charges $57 per unit with freight included and no tariff. Assuming equal quality and reliability, which choice minimizes landed cost?

37 A US importer must pay a European supplier in euros after 90 days and fears that the euro will appreciate. Which action most directly manages this exposure?

38 A manufacturer currently imports a critical component from one low-cost overseas supplier. Political disruption in that country becomes more likely. Which response best improves supply resilience?

39 An importer classifies a product under the wrong customs code even though the physical shipment is accurate. What is the most likely consequence?

40 Supplier A offers the lowest unit price but has frequent defects and late deliveries. Supplier B charges slightly more but performs reliably. Which evaluation method should the importer use?

41 A firm follows the Uppsala model by entering psychically close markets first. It then bypasses several nearby countries and makes a major commitment in a distant market where its long-standing distributor has developed strong government and customer relationships. Which interpretation best reconciles this decision with an updated Uppsala perspective?

42 A pharmaceutical company possesses a patented compound, Country Z offers specialized clinical infrastructure, and enforcing detailed licensing contracts there is unreliable. Under the OLI paradigm, which combination most strongly predicts a wholly owned subsidiary in Country Z?

43 Two firms can produce a component at the same technical cost. Firm A licenses an easily codified design, while Firm B relies on tacit process knowledge that is difficult to monitor and vulnerable to appropriation. According to internalization theory, which outcome is most likely?

44 A small supplier enters several foreign markets rapidly, but almost every entry follows an existing multinational customer rather than independent market research. Which theory most directly explains this pattern?

45 A digital diagnostics start-up derives 70% of revenue from 18 countries within two years of formation, despite limited domestic sales and no gradual sequence of foreign commitments. Which condition best supports a born-global explanation rather than a traditional stage model?

46 A host country limits foreign ownership to 49%, local distribution depends on relationship-based access, and the foreign entrant must protect proprietary manufacturing routines. Which entry mode best balances legal compliance, access, and control?

47 A hotel company supplies its brand, reservation platform, operating format, and continuing quality supervision to independent foreign operators. Which mode most accurately characterizes this arrangement?

48 A firm needs immediate access to scarce local distribution permits and an established workforce. Suitable acquisition targets exist, integration costs are manageable, and speed is more important than designing operations from scratch. Which mode is strategically preferred?

49 A company outsources foreign production but retains product design, trademarks, marketing, and international distribution. The overseas producer receives a fee and obtains no right to sell under the brand. Which mode is being used?

50 A technology owner wants fast expansion with little capital, but product quality is difficult to specify contractually and failures could damage its global reputation. Relative to licensing, what is the strongest strategic case for foreign direct investment?

51 An exporter has a market-entry budget of $120,000. Market A requires a fixed cost of $120,000 and offers expected sales of 6,000 units at a $30 contribution margin. Market B requires $40,000 and offers 4,000 units at a $20 contribution margin. Fixed costs are avoidable, and the firm must select only one market. Which choice maximizes expected incremental profit?

52 A manufacturer replaces an independent foreign distributor with its own sales subsidiary. Demand and production costs remain unchanged, but the distributor had applied a large markup and underinvested in promotion. What is the most defensible strategic rationale?

53 An exporter with limited managerial capacity sells a technically complex product requiring intensive after-sales service. It must choose between adding many small markets and deepening presence in two large markets. Which factor most strongly favors market concentration?

54 An exporter invoices in the buyer's currency to preserve local price competitiveness. Its home currency unexpectedly appreciates before payment, and no hedge exists. Holding the foreign-currency price constant, what is the immediate effect?

55 A firm faces uncertain demand across several weakly correlated foreign markets, but each market requires substantial fixed adaptation expenditure. Which statement best captures the concentration-versus-diversification trade-off?

56 An importer buys 1,000 units at $80 each. Freight is $5,000, insurance is $1,000, duty is 10% of the $86,000 customs value, and domestic handling is $2,400. Import VAT is fully recoverable. What is the economic landed cost per unit?

57 A home-country importer has an irrevocable obligation to pay €2 million in 90 days. Its priority is eliminating exchange-rate uncertainty rather than benefiting from favorable currency movements. Which action best matches that objective?

58 Supplier X quotes $500,000 plus $20,000 freight and has an 8% probability of a disruption costing $200,000. Supplier Y quotes $515,000 plus $10,000 freight and has a 2% probability of the same loss. Assuming risk neutrality and no other differences, which supplier minimizes expected total cost?

59 An importer buys a product from an FTA partner, but most non-originating inputs come from outside the bloc. The product is shipped directly from the partner country. Before claiming preferential duty, what must the importer primarily verify?

60 An importer of containerized goods wants to select and pay the main carrier, while the exporter completes export clearance and bears risk until handing the goods to that carrier at a named terminal. Which Incoterms rule best fits?