Test on Fundamentals of International Business

Question 1: The second step in the four-step export strategy is to initiate meetings with potential buyers.

A. Ano

B. Ne

Explanation: The second step in the four-step export strategy is to match needs to abilities, while initiating meetings is the third step.

Question 2: According to the study materials, which of the following is a reason why firms engage in Foreign Direct Investment (FDI)?

A. Lower initial costs compared to licensing

B. To achieve greater control over operations

C. To avoid trade barriers

D. To lessen long-term commitment abroad

Explanation: The study materials state that firms use FDI for 'Greater Control', 'Closer to Customers', 'Avoid Trade Barriers', 'Access Resources', and 'Long-Term Commitment'. Therefore, 'To achieve greater control over operations' and 'To avoid trade barriers' are correct motivations. 'Lower initial costs compared to licensing' is incorrect as FDI typically involves higher initial investment than licensing. 'To lessen long-term commitment abroad' is incorrect, as FDI is explicitly described as a 'Long-Term Commitment'.

Question 3: A joint venture is an entry mode that offers advantages such as shared risk and shared investment, but can also lead to disadvantages like conflict and shared control.

A. Ano

B. Ne

Explanation: The study materials state that advantages of a joint venture include 'Shared risk' and 'Shared investment', while disadvantages include 'Conflict' and 'Shared control'.

Question 4: Which of the following statements accurately reflects a characteristic of Greenfield Investment, according to the provided study materials?

A. It offers immediate operations and existing customer bases upon entry.

B. It provides full control and the benefit of modern technology.

C. It is generally less expensive and quicker than acquiring an existing company.

D. Its main advantage is reducing integration problems and cultural conflicts.

Explanation: Greenfield Investment involves building new facilities from scratch. The study materials list its advantages as "Full control," "New facilities," and "Modern technology." Its disadvantages are listed as "Expensive" and "Slow." Therefore, the statement about full control and modern technology is accurate. Immediate operations and existing customers are advantages of Acquisition. Being less expensive and quicker contradicts the listed disadvantages of being expensive and slow. Reducing integration problems and cultural conflicts are benefits of *not* doing an acquisition or merger, but are not listed as direct advantages unique to Greenfield Investment itself in this context, nor does Greenfield inherently solve integration problems as it creates new operations, not integrates existing ones.

Question 5: Can suppliers, through global sourcing, learn a company's technology or processes and potentially become a rival, which is considered a risk?

A. Ano

B. Ne

Explanation: The study materials explicitly state that a risk of global sourcing is 'Creating Competitors', where a supplier may learn technology, processes, or know-how and later become a rival.