[Solved] Modes of entry into international business MCQ [Free PDF] - Objective Question Answer for Modes of entry into international business Quiz - Download Now! (2024)

1. Acquisition
2. Strategic Alliance
3. Joint Venture
4. Exporting
5. None of the above

Exporting is the most appropriate mode of entry in international business to an enterprise with little experience in international markets.

Explanation:

1. One of the critical decisions in international marketing is the mode of entering the foreign market.
2. At one extreme, a company may decide to produce the product domestically and export it to the foreign market.
3. In this case, the company need not make any investment overseas.
4. On the other extreme, the company may establish manufacturing facilities by mode of acquisition, strategic alliance, or joint venture in a foreign country to sell the product there.
5. This strategy requires direct foreign investment from the company.
6. Thus, exporting is the cheapest mode available among the rest and is preferable to a business enterprise with little experience of international markets.
7. Exporting to a foreign marketis a quite common entry strategy many firms follow for at least some of their market.
8. Under this strategy, the company exports the product from its home base, without any marketing or production or organization overseas.

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1. Grant
2. Morality
3. Franchise
4. More than one of the above
5. None of the above

Key Points

Franchise:

• A franchise is a kind of licence that enables a franchisee to use the franchisor's brand name to sell goods and services by having access to the franchisor's secret business techniques, procedures, and trademarks.
• The franchisee can market and sell these goods and services by acting as a parent company branch. It might even employ franchising rights to offer these goods through its own company.
• McDonald's,Levi's, dominos etc use same model for expansion

Important PointsAdvantages of franchising:

• Franchising lowers the danger of a company failing. Your company is built on a tested concept. Before investing, you might research previous franchises' track records of success.
• Products and services will already have a market share established. Therefore, market research won't be necessary.
• You may employ a well-known brand name or trademark. Any marketing efforts made by the franchise's owner, or "franchisor," are to your advantage.

Disadvantages of franchising:

• Costs can exceed your expectations. You may be required to agree to acquire products from the franchisor in addition to paying ongoing management service fees when you purchase a franchise.
• Typically, there are limitations on how you may operate the firm in the franchise agreement. It's possible that you won't be able to adjust for your regional market.
• You may find that after some time, ongoing franchisor monitoring becomes intrusive.

Hence, an exclusive right granted to a businessperson to sell a company's products (such as McDonald's Levi's) isFranchise

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1. Carry on exporting activities on behalf of several producers
2. Buy the manufacturer's product and then sell them abroad
3. Buy foreign products and sell them in the domestic country
4. Seek and negotiate foreign purchases for a commission
5. None of the above

Key Points

• An import or export agent acts as a middle person for the purchase or sale of products between both domestic and overseas companies.
• Responsibilities for this career vary depending on the field and type of company for which the agent works.
• Duties may also be different depending on where the agent is in the supply chain.

Important PointsPrimary functions ofDomestic-based export agentsare as follows:

• The agent may travel abroad, do research, prepare an export plan, advise the exporter on how to adapt their marketing mix, make contact with potential buyers, negotiate deals with the buyers, take care of all promotional activities, handle the logistics and documentation, and much more.
• All of these tasks, the export will do on the exporter’s behalf.
• The exporter normally pays the agent for the expenses they have incurred marketing the firm’s products and handling the export administration, and will generally earn a commission on any sales generated.
• In essence, the export agent becomes the exporter’s export department. In some cases, the principal will want to keep tight control over the agent’s activities, while in other instances, the agent is given free rein.

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1. Take charge
2. Acquisition
3. Merger
4. Joint Venture
5. None of the above

The correct answer is Joint Venture.

Key PointsA joint venture (JV) is an agreement between two or more parties to combine their resources in order to carry out a certain objective. A new project or any other type of commercial activity can be this task.

Important PointsJoint Venture

• A temporary legal partnership between two or more people or organisations to accomplish a specific goal is known as a joint venture (JV).
• The formation of a business unit by two or more firms together, characterized by shared ownership, risk, returns and governance, is called joint venture.
• In order to form a joint venture, the cooperating parties give their resources, including material, financial, technological, and human ones.
• The terms and conditions are discussed and accepted by both parties. The partnership has a set duration and automatically ends after its intended objective has been achieved.

Hence, it can be concluded that the formation of a business unit by two or more firms together, characterized by shared ownership, risk, returns and governance, is called Joint Venture.

Additional Information

1. Acquisition:An acquisition is a business combination that occurs when one company buys most or all of another company's shares.
2. Merger:A merger is an agreement that unites two existing companies into one new company.
3. Take-Charge:To take responsibility, authority, or control over (someone or something), especially after having not done so initially.

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1. Management Contract
2. International Licensing
3. International Leasing
4. More than one of the above
5. None of the above

The correct answer isManagement Contract

Key Points

Management Contracting

• Management Contracting is a low-risk method of getting into a foreign market and it starts yielding income right from the beginning.
• The arrangement is especially attractive if the contracting firm is given theoption to purchase some shares in the managed company within a stated period.
• It may obtain the business of exporting or selling otherwise of the product of the managed company or supply the inputs required by the managed company.
• A management contract can involve a wide range of functions, such as the technical operation of a production facility, management of personnel, accounting, marketing services, and training.

Additional InformationInternational Licensing

• An international business licensing agreement involves two firms from different countries, with the licensee receiving the rights or resources to manufacture in the foreign country.
• Rights or resources may include patents, copyrights, technology, managerial skills, or other factors necessary to manufacture the good.

International Leasing

• International leasing meansa transaction where the lease itself crosses a border i.e, where the lessor and lessee are in different countries.
• International leasing provides the lessee with additional flexibility in his use of resources, the ability to better plan his budgets, financial convenience, taxation-proof advantages, risk matching, and flexibility in dealing with replacement decisions in the face of rapid technological change.

Portfolio Investment

• Portfolio investment is defined as cross-border transactions and positions involving equity or debt securities, other than those included in direct investment or reserve assets.

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Modes of entry into international business Question 6

1. International Franchising
2. Licensing
3. Contract manufacturing
4. Joint ownership

Modes of entry into international business Question 6 Detailed Solution

The correct answer isLicensing

Key PointsLicensing:

• Thecompanies which want to establish a retail presence in an overseas market with minimal risk, the licensingstrategy allows another person or business to assume the risk on behalf of the company.
• Licensing allows a business in the target nation to utilise the licensor's assets.
• These assets are typically immaterial and include production methods, patents, and trademarks.
• The use of the intangible property is granted to the licensee in exchange for a fee called royalty, which may include cover technical support.

Additional InformationInternational Franchising:

• The growth of a domestic company into global markets and nations is referred to as international franchising.
• The process of franchising internationally is intricate and calls for careful analysis of a variety of aspects, including viability, adaptability, and advantages vs disadvantages.

Contract manufacturing:

• Contract manufacturing is when two businesses come to an arrangement to produce parts or goods over a predetermined period of time.
• Manufacturing outsourcing is similar to outsourcing personnel in that it enables businesses to compete in markets they couldn't before.

Joint ownership:

• When two or more people share title to the same property, this is known as co-ownership or joint ownership.
• When two or more people jointly own property, they have the right to share possession and use of that property.

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Modes of entry into international business Question 7

1. Acquisition
2. Strategic Alliance
3. Joint Venture
4. Exporting

Modes of entry into international business Question 7 Detailed Solution

Exporting is the most appropriate mode of entry in international business to an enterprise with little experience in international markets.

Explanation:

1. One of the critical decisions in international marketing is the mode of entering the foreign market.
2. At one extreme, a company may decide to produce the product domestically and export it to the foreign market.
3. In this case, the company need not make any investment overseas.
4. On the other extreme, the company may establish manufacturing facilities by mode of acquisition, strategic alliance, or joint venture in a foreign country to sell the product there.
5. This strategy requires direct foreign investment from the company.
6. Thus, exporting is the cheapest mode available among the rest and is preferable to a business enterprise with little experience of international markets.
7. Exporting to a foreign marketis a quite common entry strategy many firms follow for at least some of their market.
8. Under this strategy, the company exports the product from its home base, without any marketing or production or organization overseas.

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Modes of entry into international business Question 8

1. Manufacturing organisations
2. Services organisations
3. Agribusiness enterprises
4. Trading enterprises

Modes of entry into international business Question 8 Detailed Solution

Uppasala model for internationalisation of business operations is not valid for Services organiations.

• TheUppsala modelis one of the theories describing theinternationalization processof firms. Themodelstates that firms first choose to enter nearby markets with low market commitment.
• TheUppsala modelis based on four core concepts: market commitment, market knowledge, current activities and commitment decisions.
• The 1977 model is grounded in the broader research program on international business, led by ProfessorSune Carlson, which was launched following the establishment of the Institute of Business Studies at the University of Uppsala in the late 1950s.

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Modes of entry into international business Question 9

1. Sporadic dumping
2. Predatory dumping
3. Reverse dumping
4. Persistent dumping

Modes of entry into international business Question 9 Detailed Solution

Dumpingis a term used in the context of international trade. It's when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market.

Reverse dumpingis an instance of non-conventional dumping.

Explanation:

1. Reverse dumping isfollowed in the overseas marketswhere the demand is less elastic.
2. Such markets tolerate a higher price.
3. Thus, dumping is done in the manufacturer’s home market byselling locally at a lower price.

Therefore, it is termed asnon-conventional dumping.

1. Sporadic dumping:

• Manufactures practice sporadic dumpingto get rid of excess merchandise.
• A manufacturer with unsold inventories avoids starting a price war in the home market to preserve his competitive position.
• Excess supplies are destroyed.
• For example, Asian farmers dumped small chickens into the sea.
• Another method is to have theexcess supply dumped in a foreign marketwhere the product is normally not sold.
• Thus, sporadic dumping isaimed at liquidating excess stocksthat may arise occasionally.

2.Predatory dumping (Intermittent dumping):

• While sporadic dumping is occasional,predatory dumping is permanent.
• Predatory dumping is also known asintermittent dumping.
• It involves the sale of goods in overseas markets at a price lower than the home market price.
• This is selling at a loss to gain access to a market and eliminate competition.
• After the competition is eliminated, the company becomes a monopolist.
• A monopoly position is then used to increase the price.
• Anyway, there is a disadvantage that former competitors may rejoin the market because of high-profit margins.

3.Persistent dumping (Long-period dumping):

• Persistent dumping as the name itself implies is themost permanent type of dumping.
• It involves consistent selling at lower prices in one market than in the rest of the market.
• This practice is based on the fact that markets vary in terms of overhead costs and demand characteristics.
• In persistent dumping, thefirm may use marginal cost pricing abroadwhile usingfull-cost pricing (covering fixed costs at home) in the domestic market.

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Modes of entry into international business Question 10

1. Management Contract
2. International Licensing
3. International Leasing
4. Portfolio Investments

Modes of entry into international business Question 10 Detailed Solution

The correct answer isManagement Contract

Key Points

Management Contracting

• Management Contracting is a low-risk method of getting into a foreign market and it starts yielding income right from the beginning.
• The arrangement is especially attractive if the contracting firm is given theoption to purchase some shares in the managed company within a stated period.
• It may obtain the business of exporting or selling otherwise of the product of the managed company or supply the inputs required by the managed company.
• A management contract can involve a wide range of functions, such as the technical operation of a production facility, management of personnel, accounting, marketing services, and training.

Additional InformationInternational Licensing

• An international business licensing agreement involves two firms from different countries, with the licensee receiving the rights or resources to manufacture in the foreign country.
• Rights or resources may include patents, copyrights, technology, managerial skills, or other factors necessary to manufacture the good.

International Leasing

• International leasing meansa transaction where the lease itself crosses a border i.e, where the lessor and lessee are in different countries.
• International leasing provides the lessee with additional flexibility in his use of resources, the ability to better plan his budgets, financial convenience, taxation-proof advantages, risk matching, and flexibility in dealing with replacement decisions in the face of rapid technological change.

Portfolio Investment

• Portfolio investment is defined as cross-border transactions and positions involving equity or debt securities, other than those included in direct investment or reserve assets.

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Modes of entry into international business Question 11

1. Management - Employee Buyout
2. Spontaneous Privatisation
3. Cross Holdings
4. Strategic sale

Modes of entry into international business Question 11 Detailed Solution

Privatization:

As the definition of privatization is so very diverse let us take a look at the three main features of privatization.

1. Ownership Measures: The ownership of all public enterprises ultimately shifts to private owners. The denationalization can be complete or partial.
2. Organizational Measures: This is where we limit the control of the state in public companies. Some methods include holdingcompanystructuring, leasing. restructuring of the enterprises etc.
3. Operational Measures: Public organizations and companies were running into huge losses. So the efficiency of these companies was to be increased.

The most popular route of privatisation adopted by the Government of India isStrategic sale.

Explanation:

1. When the government decides to transfer the ownership and control of a public sector entity to some other entity, either private or public, the process is called strategic disinvestment.
2. The Department of Investment and Public Asset Management (DIPAM) which comes under the Finance Ministry defines Strategic disinvestment as follows:
   • “Strategic disinvestment would imply the sale of a substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of up to 50%, orsuch higher percentage as the competent authority may determine, along with transfer of management control.”

1. Amanagementandemployee buyout(MEBO) is a restructuring initiative that involves bothmanagerialand non-managerial employeesbuying out a firm in order to concentrate ownership into a small group from a widely dispersed group of shareholders.
2. Spontaneous privatizationoccurs when managers acquire residual rights of control over their firm on their own initiative.
3. Cross holdingis a situation in which a publicly-traded corporation owns stock in another publicly-traded company. So, technically, listed corporations own securities issued by other listed corporations.

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Modes of entry into international business Question 12

1. Indirect exporting

2. Direct exporting

3. Direct investment

4. Joint ventures

Option 3 :

Direct investment

Modes of entry into international business Question 12 Detailed Solution

Direct investment-Foreign Direct Investment (FDI's) risk and profit potential are the highest in the foreign markets.

Explanation:

International-Expansion Entry Modes

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Modes of entry into international business Question 13

1. Acquisition.
2. Exporting
3. Strategic Alliance
4. Joint Venture

Modes of entry into international business Question 13 Detailed Solution

The correct answer is Exporting.

Key PointsExporting

• Exporting is the promotion and direct sale of products made domestically in another nation.
• A tried-and-true strategy for reaching overseas markets is exporting.
• Since it does not require that the items be produced in the target country, no investment in foreign production facilities is required.
• The majority of exporting's expenses are in the form of marketing charges.

Important Points

• The method of entering a foreign market is one of the crucial choices in international marketing.
• At the other end of the spectrum, a business may choose to manufacture the item domestically and export it to a foreign market.
• The business is not required to make any foreign investments in this situation.
• On the other extreme, the business can create production facilities through joint ventures, alliances, or acquisitions in another nation in order to market its goods there.
• The corporation must make direct investments abroad to implement this approach.
• Exporting is therefore the most affordable option among the others and is preferred by a company with limited knowledge of global markets.
• According to this strategy, the business exports its goods from its home office without conducting any marketing, production, or organization efforts abroad.
• A very popular entry method that many businesses use for at least some of their markets is exporting to a foreign market.

Hence, it can be concluded that the correct answer is exporting.

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Modes of entry into international business Question 14

1. Indirect exporting
2. Joint venture
3. Direct investment
4. Direct exporting

Modes of entry into international business Question 14 Detailed Solution

The correct answer is Direct Investments.

Key PointsForeign Direct Investment

• Foreign direct investments (FDIs) are sizeable, long-term investments made into a foreign enterprise by a company or a government.
• Investors in foreign direct investment (FDI) frequently hold controlling positions in domestic businesses or joint ventures and actively participate in their management.
• The investment could entail purchasing a material supply, growing a business's reach, or establishing a global presence.

Important PointsModes of Entry in Foreign Markets:

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Modes of entry into international business Question 15

1. (D), (B), (E), (C), (A)
2. (B), (D), (E), (A), (C)
3. (B), (D), (A), (E), (C)
4. (D), (B), (A), (E), (C)

Modes of entry into international business Question 15 Detailed Solution

The correct answer is(B), (D), (A), (E), (C).

Key Points

B) Company starts exports working through domestic export agents and exports management companies:
In this strategy, the company leverages the expertise of domestic export agents and exports management companies to enter international markets. These intermediaries help facilitate the export process, handle documentation, logistics, and distribution, and assist with market research and finding potential customers abroad. This approach allows the company to tap into the knowledge and networks of established export professionals, minimizing the complexities and risks associated with international expansion.

D) Company starts export using domestic export department and overseas sales branch:
This strategy involves the company establishing its own export department to handle international sales and marketing activities. The company sets up a dedicated team within its organization to manage export operations, including identifying target markets, building relationships with customers abroad, handling logistics and shipping, and overseeing export-related documentation and compliance. Additionally, the company may establish an overseas sales branch or office to have a local presence in target markets, enabling better customer support and market penetration.

E) Company offers a complete brand concept and operating system to an investor in return for a certain fee:
In this strategy, the company licenses or franchises its brand concept and operating system to an investor or partner in another country. The company provides a comprehensive package that includes its brand identity, marketing strategies, operational guidelines, and intellectual property rights. In return, the investor pays a fee or royalties to the company for using its brand and system. This approach allows the company to expand its brand presence globally without directly managing operations in every location, leveraging the expertise and resources of local partners.

A) Company hires a local manufacturer to produce the product:
This strategy involves the company outsourcing the manufacturing process to a local manufacturer in the target market. By partnering with a local manufacturer, the company can benefit from lower production costs, access to local supply chains, and better understanding of local regulations and market preferences. This approach allows the company to adapt its products to the specific needs and preferences of the target market while reducing production and transportation costs.

C) Company joins hands with a local investor and forms a company in which both share ownership and control:
In this strategy, the company forms a partnership with a local investor or business entity to establish a joint venture or a subsidiary in the target market. Both the company and the local investor contribute capital, resources, and expertise to the new entity, sharing ownership and control. This approach allows the company to leverage the local investor's knowledge of the market, distribution networks, and regulatory landscape while maintaining a level of control and influence in the operations.

Important PointsThe sequence of modes of entry in foreign markets startingwith the mode of entry having the least commitment, risk, control and profit potential:

(B) Company starts exports working through domestic export agents and export management companies.

(D) Company starts exporting using the domestic export department and overseas sales branch.

(E) Company offers a complete brand concept and operating system to an investor in return of a certain fee.

(A) Company hires a local manufacturer to produce the product.

(C) Company joins hands with a local investor and forms a company in which both share ownership and control.

Hence, the correct answer is (B), (D), (A), (E), (C).

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