Which of the following observations is true of a management contract?

Which of the following observations is true of a management contract?

a.
For the supplier, the risk of participating in an international venture is substantially increased.
b.
The supplier will be unable to exercise any amount of operational control.
c.
For the client, expertise that is built up is provided.
d.
For the client, organizational skills that are not available locally can be provided.


Answer: D

In a _____, the supplier brings together a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership.

In a _____, the supplier brings together a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership.

a.
joint venture
b.
full ownership mechanism
c.
management contract
d.
portfolio investment


Answer: C

One special form of joint ventures consists of _____, which are arrangements between two or more companies with a common business objective.

One special form of joint ventures consists of _____, which are arrangements between two or more companies with a common business objective.

a.
wholly owned subsidiaries
b.
strategic alliances
c.
franchises
d.
reverse mergers


Answer: B

The collaboration of two or more organizations for more than a transitory period to share assets, risks, and profits is referred to as a(n) _____.

The collaboration of two or more organizations for more than a transitory period to share assets, risks, and profits is referred to as a(n) _____.

a.
sole proprietorship
b.
acquisition
c.
portfolio investment
d.
joint venture


Answer: D

Which of the following is a major deterrent to full ownership of FDI?

Which of the following is a major deterrent to full ownership of FDI?

a.
Profitability
b.
Product differentiation
c.
Market instability
d.
Competition


Answer: C

A major concern for governments about full ownership by multinational firms is profit _____, which is the transfer of profits from the new foreign market back to the domestic country.

A major concern for governments about full ownership by multinational firms is profit _____, which is the transfer of profits from the new foreign market back to the domestic country.

a.
repatriation
b.
sharing
c.
abolition
d.
disbursement


Answer: A

Multinational firms are accused of causing _____, when they deprive domestic firms of talent by employing the brightest locals and moving them to another country.

Multinational firms are accused of causing _____, when they deprive domestic firms of talent by employing the brightest locals and moving them to another country.

a.
a brain drain
b.
cross-subsidization
c.
NIH syndrome
d.
profit repatriation


Answer: A

____ incentives consist of guaranteed government purchases; special protection from competition through tariffs, import quotas, and local content requirements; and investments in infrastructure facilities.

____ incentives consist of guaranteed government purchases; special protection from competition through tariffs, import quotas, and local content requirements; and investments in infrastructure facilities.

a.
Financial
b.
Fiscal
c.
Nonfiscal
d.
Nonfinancial


Answer: D

____ incentives offer special funding for the investor by providing land or buildings, loans, loan guarantees, or wage subsidies.

____ incentives offer special funding for the investor by providing land or buildings, loans, loan guarantees, or wage subsidies.

a.
Financial
b.
Fiscal
c.
Nonfiscal
d.
Nonfinancial


Answer: A

____ incentives are specific tax measures designed to attract the foreign investor.

____ incentives are specific tax measures designed to attract the foreign investor.

a.
Financial
b.
Fiscal
c.
Nonfiscal
d.
Nonfinancial

Answer: B

Which of the following types of incentives consist of special depreciation allowances, tax credits or rebates, special deductions for capital expenditures, tax holidays, and other reductions of the tax burden on the investor?

Which of the following types of incentives consist of special depreciation allowances, tax credits or rebates, special deductions for capital expenditures, tax holidays, and other reductions of the tax burden on the investor?

a.
Financial incentives
b.
Fiscal incentives
c.
Nonfiscal incentives
d.
Nonfinancial incentives


Answer: B

___ demand is said to occur when large multinational firms who would like to maintain their established business relationships, encourage their suppliers to follow them abroad.

___ demand is said to occur when large multinational firms who would like to maintain their established business relationships, encourage their suppliers to follow them abroad.

a.
Derived
b.
Overfull
c.
Latent
d.
Irregular


Answer: A

Which of the following is the negative effect of foreign direct investments by multinational companies?

Which of the following is the negative effect of foreign direct investments by multinational companies?

a.
Lower wage rates compared to the average domestically oriented firms
b.
Economic instability in the host countries
c.
Decrease in the number of jobs in the host countries
d.
Entry of imports on an ongoing basis


Answer: D

The United Nations defines _____ as "enterprises which own or control production or service facilities outside the country in which they are based."

The United Nations defines _____ as "enterprises which own or control production or service facilities outside the country in which they are based."

a.
trading companies
b.
multinational corporations
c.
shell corporations
d.
export management companies


Answer: B

Which of the following best describes portfolio investment?

Which of the following best describes portfolio investment?

a.
It refers to direct investment in foreign entities.
b.
It is the purchase of a manufacturing plant in a foreign market.
c.
It is the outright purchase of a competing company.
d.
It focuses on the purchase of stocks and bonds internationally.


Answer: D

Which of the following is true about franchising?

Which of the following is true about franchising?

a.
From a government perspective, franchising replaces exports and export jobs.
b.
From a recipient-country view, franchising requires substantial outflow of foreign exchange.
c.
Typically, there is no need for standardization in franchising.
d.
A key concern of franchising is the issue of selection and training of franchisees.


Answer: D

Which of the following is a key impediment to international franchising?

Which of the following is a key impediment to international franchising?

a.
The protection of the total business system that a franchise offers
b.
The franchisee's concern about increased risks upon implementing a proven concept
c.
Increased outflow of foreign exchange from recipient nations
d.
The government's concern regarding replacement of export jobs


Answer: A

In _____, a parent company grants an independent entity the right to do business in a specified manner that includes the right to sell the parent company's products and use its name, along with its production, preparation, and marketing techniques.

In _____, a parent company grants an independent entity the right to do business in a specified manner that includes the right to sell the parent company's products and use its name, along with its production, preparation, and marketing techniques.

a.
leasing
b.
a joint venture
c.
hire purchasing
d.
franchising


Answer: D

____ permits use of the names or logos of designers, literary characters, sports teams, and movie stars on merchandise such as clothing.

____ permits use of the names or logos of designers, literary characters, sports teams, and movie stars on merchandise such as clothing.

a.
Copyright licensing
b.
Trademark licensing
c.
Patent licensing
d.
Utility licensing


Answer: B

While negotiating licensing agreements, which of the following refers to the costs incurred in the foreclosure of other sources of profit, such as exports or direct investment?

While negotiating licensing agreements, which of the following refers to the costs incurred in the foreclosure of other sources of profit, such as exports or direct investment?

a.
Opportunity costs
b.
Transfer costs
c.
R&D costs
d.
Sunk costs


Answer: A