Please read the article and answer the questions.

For CH 6 Exporting, Licensing, FDI

A firm has three basic choices if it wants to sell its products in a foreign market exporting, licensing, and foreign direct investment (FDI)/wholly owned subsidiaries. The choice of the best option depends on characteristics of the product, the processes used to make these products, the control a firm needs to exercise over operations, and how the know-how of the firm might be protected. The best option is a strategic choice the international business manager must make, considering the interplay among these factors.

Internalization theories explore the limitations of exporting and licensing from both explanatory and business perspectives. These theories identify with some precision how the relative profitability of foreign direct investment, exporting, and licensing vary with circumstances. Other theories help explain the direction of FDI. The internalization theories help explain why firms prefer FDI to licensing or exporting.

Read the case below and answer the questions that follow.

Your firm manufactures a range of household goods and appliances. Over the years, your firm has developed proprietary processes, using environmentally-friendly chemicals that have given your firm a leadership position for "green" customers. Your products are competitively priced. The appliances and products you manufacture tend to be bulky and a bit heavy for their size.

You are interested in exploring international business options. You need to decide whether exporting, licensing, or foreign direct investment strategies would be the most appropriate for your firm. You want to maintain your competitive advantages, so you consider different strategic options by answering the questions below.

1.The effect of bulky or heavy products on transportation costs can make _______ an inappropriate strategy.

a.exporting

b.foreign direct investment

c.licensing

2.If your proprietary know-how of green processes is difficult to transfer to other firms, the most effective approach would be

a.foreign direct investment or licensing.

b.licensing or exporting.

c.exporting or foreign direct investment.

3.If your household goods can be efficiently produced through economies of scale, it would be a good idea to use a(n) _______ strategy.

a.foreign direct investment

b.exporting

c.licensing

4.If consumers in different countries desire different product attributes, it would be best to engage in

a.exporting.

b.licensing.

c.foreign direct investment.

5.If a firm's know-how, skills, and capabilities can be protected by contract, and if tight control over foreign operations is not vital to remain competitive, and there are reasons to believe that additional costs through transportation or tariffs would be high, the most effective approach would be

a.exporting.

b.foreign direct investment.

c.licensing.