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Simon & Schuster purchased the exclusive franchising rights to the Harry Potter series, and author J.K. Rowling has become a wealthy woman as a result.

FALSE

Cross-border contractual relationships are used strictly in the manufacturing industry, especially in the computer and automobile industry.

FALSE

Patents provide inventors the right to prevent another person or company from selling or importing an invention for up to twenty years.

TRUE

In a licensing agreement, the licensee is both the owner and user of intellectual property, such as a cartoon character.

FALSE

In many licensing agreements, the licensee compensates the licensor with a down payment plus ongoing royalties based on sales.

TRUE

After any technical information or assistance has been provided, the licensor usually continues to advise the licensee on management and marketing issues for the first few years.

FALSE

Licensing agreements enable energy and defense firms to enter nations that restrict the foreign ownership of businesses related to national security.

TRUE

One of the advantages of licensing is that the profits generated from such agreements are typically higher than for exporting or FDI.

FALSE

The relationships established in franchising arrangements are typically stable and long-lasting in comparison to licensing arrangements.

TRUE

Master franchising accounts for a small percentage of international franchising arrangements because franchisors dislike the lack of control over their products and services.

FALSE

Foreign governments often encourage franchises because most of the money generated by the franchise remains in the local economy.

TRUE

Foreign laws regarding franchising may affect royalty payments and a franchisor's control over the products and services sold by its franchisees.

TRUE

U.S.-based franchises, such as McDonald's and KFC, ensure consistency in their food by shipping all the necessary ingredients from the United States and avoiding unreliable suppliers in foreign markets.

FALSE

Management contracts are especially useful in markets which lack skilled local workers to oversee large scale facilities, such as airports and hospitals.

TRUE

When a firm allows others to use a business system in exchange for compensation, the relationship is known as which of the following?
A) licensing
B) franchising
C) joint venture
D) equity venture

B

In a cross-border contractual relationship, how much control is maintained by the focal firm over the foreign partner?
A) low control
B) moderate control
C) high control
D) no control

B

Each of the following is a type of intellectual property except ________.
A) an industrial design
B) the patent for a new invention
C) an author's unpublished book
D) a trade secret

C

All of the following are typical characteristics of cross-border contractual relationships except ________.
A) involves the exchange of intellectual property and services
B) generates a consistent level of earnings from foreign operations
C) allows firms to make changes and be flexible
D) provides the focal firm with a high level of control

D

How can a cross-border contractual relationship help focal firms with public relations issues?
A) Domestic complaints against the MNE can be minimized.
B) The fair hiring practices of the MNE can be emphasized.
C) The local partner can protect the MNE from criticism.
D) The local media can contact the local managers.

C

What is the purpose of a firm integrating an industrial design into a product?
A) eliminate the possibility of the design being copied
B) improve a product's performance and marketability
C) protect firms from intellectual property theft
D) identify the product with a young demographic

B

Collective mark can best be defined as which of the following?
A) the confidential know-how of a firm
B) a distinctive symbol used by a firm
C) the unique features of a product
D) the logo of a group or an association

D

The purpose of intellectual property rights is to ________.
A) prevent excessive litigation between competing firms over product ownership
B) enable SMEs the opportunity to fairly compete in markets dominated by MNEs
C) allow inventors the chance to gain dominance in a market for a period of time
D) provide born globals with the chance to recoup start-up costs and investments

C

Why are licensing agreements in foreign markets beneficial to Disney?
A) Licensees are able to meet customer needs by using Disney logos on products appropriate for the local market.
B) Disney is able to better distribute its U.S.-made products through local intermediaries in foreign markets.
C) Disney licensees have been trained in the United States and are able to balance corporate needs with local tastes.
D) Licensees in foreign markets are responsible for advertising upcoming Disney movies in the local media.

A

Which of the following is most likely provided by the licensor in a licensing agreement?
A) a monetary down-payment plus royalties for all products sold locally
B) a combination of intellectual property and technical information and assistance
C) a storefront or facility and the necessary materials to make the product
D) a combination of a lump-sum payment and the intellectual know-how

B

Exclusive licensing agreements are characterized by which of the following?
A) The licensor is not allowed to interfere with the production or marketing of the licensed asset.
B) The licensor may not sell the licensed asset to other companies in a certain territory of the same country.
C) The licensee cannot cancel the contract with the licensor even if sales of the licensed asset are poor.
D) The licensee is prohibited from sharing the licensed asset with another company within a specified region.

D

In a licensing agreement, which of the following is responsible for local sales?
A) the licensee
B) patent owner
C) the licensor
D) copyright partner

A

Which of the following items is most likely not an example of a trademark licensing agreement?
A) a collection of short stories by Stephen King
B) a children's toothbrush with Spiderman on the handle
C) a sweatshirt with the Dallas Cowboys' name and logo
D) a bath towel with Martha Stewart's name on the tag

A

Which of the following is most likely not protected under copyright laws?
A) the Nike swoosh
B) the art of Jackson Pollack
C) the poems of Ezra Pound
D) Microsoft Power Point

A

A know-how agreement is characterized by which of the following?
A) exclusive rights to reproduce original design work
B) permission to use manufacturing facilities for a fee
C) exchanging technological or management information for royalties
D) trading the use of a name brand for management advice

C

Cross-licensing often occurs in the semiconductor and chemical industries for which of the following reasons?
A) divide the costs of production and marketing between partnering firms
B) avoid research duplication and build on each firm's innovations
C) protect the inventions and designs of small firms from large MNEs
D) decrease the likelihood of industrial spying and theft among firms

B

Which of the following companies earns the largest amount of annual licensing revenues?
A) Marvel Entertainment
B) The Cherokee Group
C) Warner Bros.
D) Disney Consumer Products

D

Where are the majority of the world's top licensing firms based?
A) Europe
B) United States
C) China
D) Japan

B

Which of the following industries has the greatest amount of licensing?
A) computers
B) music
C) toys
D) mining

C

Which of the following has most likely led to increased revenues from licensing agreements?
A) growth of small retailers
B) licensees in Asia
C) magazine advertising
D) Internet search engines

D

Why is licensing most likely a preferred method of foreign market entry for SMEs?
A) SME managers gain cultural information from local distributors.
B) Licensors gain access to valuable knowledge and technology.
C) Licensing requires very little capital or presence of the licensor.
D) Licensors maintain inventory in exchange for steady royalties.

C

An advantage of licensing is that firms are able to ________.
A) enter markets with extensive trade barriers
B) share knowledge with small, inexperienced firms
C) avoid markets that restrict foreign ownership
D) find success during economic downturns

A

By establishing a brand name and market power through a licensing agreement, licensors are able to ________.
A) deter competition
B) maximize profits
C) learn the culture of the target market
D) increase monopoly power

A

The reputation of a licensor will most likely be jeopardized by a licensing agreement if the licensee ________.
A) markets competing products for significantly lower prices
B) uses the licensing asset to create products of poor quality
C) refuses to pay the agreed upon royalties to the licensor
D) generates few sales because of a lack of marketing skills

B

Which of the following best explains why the licensing agreement related to Disneyland Tokyo was a poor strategy for Disney management?
A) The licensees of Disneyland Tokyo sold the merchandise of competitors in other retail stores they owned.
B) Disney management assumed the park would be a success, but the firm lost money because of low turnout.
C) The licensees of Disneyland Tokyo poorly marketed Disney products, and the Disney reputation was harmed.
D) The theme park was more successful than anticipated, and Disney could have earned more money.

D

Which of the following is a reason that technological firms should avoid licensing?
A) Foreign governments fear that high-tech firms threaten national security.
B) Foreign markets often lack the technological infrastructure to support production.
C) Firms have difficulties finding highly skilled labor to make their products.
D) Intellectual property might end up in the hands of potential competitors.

D

Franchisors most likely give all of the following to franchisees in a business format franchising agreement except ________.
A) production methods
B) sales systems
C) raw materials
D) ongoing support

C

Master franchise arrangements are characterized by which of the following?
A) licensees that manage franchise networks in one market
B) licensors that assert extensive control within a market
C) franchises managed by licensor representatives
D) franchise networks that pay fewer royalties to franchisors

A

Which of the following countries is home to the largest number of franchisors?
A) United States
B) Britain
C) China
D) Canada

A

Which of the following is an example of one of the world's top franchisors?
A) Walmart
B) CVS Pharmacy
C) GAP
D) Subway

D

Information technology has most likely increased the success and growth of international franchising operations by ________.
A) eliminating the need for corporate meetings to discuss quality control
B) improving communication between MNE managers and their franchisees
C) reducing Internet sales and the need for freight forwarding services
D) enabling franchisees to oversee all international tariff regulations

B

Which of the following is most likely a problem for international franchisors?
A) Franchisees are unwilling to modify products for local needs.
B) Currency exchange rates reduce the profits of franchisees.
C) Franchisors cannot afford to send company executives to each franchise.
D) Franchisees use franchise knowledge to start a competing business.

D

Which of the following is most likely an advantage of franchising to franchisees?
A) improve chances of business success
B) reduce costs and responsibilities
C) decrease opportunities for competitors
D) increase brand and customer loyalty

A

The Three Georges Dam in China is an example of which of the following?
A) turnkey contracting project
B) build-operate-transfer project
C) management contract project
D) leasing contract project

A

Which of the following most likely makes it difficult to completely duplicate a food franchise in every global market?
A) different local ingredients
B) inconsistent training
C) unique trademarks
D) cultural issues

A

The success of a franchise in a foreign market is most dependent on which of the following?
A) franchisor trademarks
B) strong local intellectual property rights
C) franchisee capabilities
D) franchisor involvement

C

Which of the following terms is used to refer to a business arrangement in which a focal firm plans and implements a major facility abroad and upon completion gives control of it to trained local personnel?
A) build-operate-transfer
B) management contract
C) turnkey contracting
D) leasing contract

C

Leasing is especially beneficial to which of the following?
A) advanced economies
B) mixed political systems
C) socialist market economies
D) developing economies

D

Professional service firms, such as PriceWaterhouseCooper, often enter large international markets through FDI but usually use ________ to enter small markets.
A) franchisees
B) affiliates
C) managers
D) consortiums

B

Which of the following is essential to a focal firm that wants to protect its intellectual property in a foreign country?
A) reputable attorneys
B) reliable intermediaries
C) high-tech security measures
D) close connections to foreign government officials

C

Wonder Cat is a popular new cartoon series created by the All Cartoon Channel (ACC). Currently, the only Wonder Cat items available for sale are shirts sold exclusively through the ACC website. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions.

Which of the following questions would be more important to evaluate before ACC enters a licensing agreement with the Chinese firm?
A) What other cartoon characters have been licensed to foreign firms as a way to enter international markets?
B) Will a licensing agreement for the Wonder Cat character lead to additional agreements for other ACC characters?
C) Will the Wonder Cat products made by the Chinese firm be available for sale on the ACC website?
D) What is the likelihood that the Chinese firm will steal the Wonder Cat idea and become a competitor?

D

Wonder Cat is a popular new cartoon series created by the All Cartoon Channel (ACC). Currently, the only Wonder Cat items available for sale are shirts sold exclusively through the ACC website. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions.

Which of the following most likely supports an ACC decision to enter into a licensing agreement with the Chinese firm?
A) Royalties from toys and apparel would be initially minimal.
B) The Wonder Cat concept could be easily counterfeited.
C) ACC would not have to invest much time or capital.
D) ACC would avoid paying U.S. taxes on Chinese exports.

C

Wonder Cat is a popular new cartoon series created by the All Cartoon Channel (ACC). Currently, the only Wonder Cat items available for sale are shirts sold exclusively through the ACC website. The cartoon series is a big hit in China, and as a result ACC has been approached by a Chinese firm about a licensing agreement. ACC executives are considering the pros and cons of such an agreement before making any final decisions.

Which of the following most likely supports an ACC decision not to enter a licensing agreement with the Chinese firm?
A) ACC is considering entering the Chinese market through FDI in the future.
B) ACC desires a low-risk, low-cost strategy to internationalize the Wonder Cat character.
C) The popularity of the Wonder Cat character in China would generate high royalties.
D) ACC wants to maintain firm control of how the Wonder Cat character is used.

D

The nation of Azoo needs the assistance of a contractor to construct a new bridge and a new subway system. The nation lacks the skilled labor and know-how to handle such large scale projects. Representatives of the Azoo government are reviewing the project bids provided by two different international contractors. Contractor A proposes a turnkey contract for Azoo. Contractor B proposes a build-operate-transfer arrangement.

Contractor A would most likely oversee each of the following except ________.
A) designing the bridge
B) managing the subway system
C) engineering the bridge
D) constructing the subway system

B

The nation of Azoo needs the assistance of a contractor to construct a new bridge and a new subway system. The nation lacks the skilled labor and know-how to handle such large scale projects. Representatives of the Azoo government are reviewing the project bids provided by two different international contractors. Contractor A proposes a turnkey contract for Azoo. Contractor B proposes a build-operate-transfer arrangement.

The government of Azoo might select Contractor B in order to ________.
A) receive management assistance
B) charge high tolls and usage fees
C) build the needed projects cost effectively
D) increase the number of visitors to Azoo

C

The nation of Azoo needs the assistance of a contractor to construct a new bridge and a new subway system. The nation lacks the skilled labor and know-how to handle such large scale projects. Representatives of the Azoo government are reviewing the project bids provided by two different international contractors. Contractor A proposes a turnkey contract for Azoo. Contractor B proposes a build-operate-transfer arrangement.

Which of the following most likely supports the Azoo government's decision to award the project bid to Contractor A?
A) Azoo leaders want immediate ownership of the public projects.
B) Azoo leaders want long-term help with operation of the subway.
C) Azoo lacks qualified workers to maintain public works projects.
D) Azoo lacks the financial resources to purchase large machinery.

A

Big Boy Burgers (BBB) is an American chain of fast food restaurants that has franchises around the world. Recently, BBB managers have been concerned about protecting the firm's intellectual property, which for BBB includes the recipes for its unique burger sauces and specialty burger buns. Although BBB has never experienced a theft of intellectual property, the firm's managers feel BBB should be more cautious. Managers are meeting with security and legal experts to discuss the options available to the firm which would protect BBB from future international problems.

Which of the following questions would be more important for the experts to evaluate when determining how to ensure intellectual property protection for Big Boy Burgers?
A) What intellectual property protections are offered by the World Trade Organization for restaurant chains?
B) Is BBB partnering with ethical franchisees that have no intention of becoming BBB competitors in the future?
C) Have BBB competitors been affected by intellectual property theft since the inception of stronger protections by international organizations such as WIPO?
D) How are BBB franchisees modifying recipes and menus to meet the needs and desires of customers in local markets?

B

Big Boy Burgers (BBB) is an American chain of fast food restaurants that has franchises around the world. Recently, BBB managers have been concerned about protecting the firm's intellectual property, which for BBB includes the recipes for its unique burger sauces and specialty burger buns. Although BBB has never experienced a theft of intellectual property, the firm's managers feel BBB should be more cautious. Managers are meeting with security and legal experts to discuss the options available to the firm which would protect BBB from future international problems.

Which of the following most likely supports BBB legal experts fully investigating the intellectual property laws of each nation in which BBB has franchises?
A) Intellectual property laws and their enforcement vary from country to country.
B) Patents and trademarks granted in one country will transfer to another country.
C) TRIPS protects the intellectual property of firms doing business in any nation.
D) Nations with numerous IPR violators are beginning to comply with the WTO.

A

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