- How are spot exchange rates determined?
a. Using historical average prices of different currencies
b. Taking the average of a basket of currencies
c. The interaction between demand and supply of a currency relative to other currencies
d. Government decree
e. Predicting future currency movements in nonmember countries
Question text
- Comp-U-Learn Inc. prides itself on a competitive advantage based on their proprietary educational software technology. What two entry modes should the company avoid in order to minimize the risk of losing this technology?
a. acquisitions and greenfield ventures
b. licensing and exporting
c. licensing and joint venture
d. joint venture and wholly owned subsidiary
e. exporting and franchising
- Stacey Yung wants to open a Pizza Hut restaurant in Beijing and has an agreement with the restaurant chain in which she can use the trademark and must also follow a strict set of guidelines detailing how the business should operate. The Pizza Hut Corporation will receive a percentage of Stacey’s revenues from her restaurant. What type of entry mode does this represent?
a. franchising
b. licensing
c. turnkey operation
d. wholly owned subsidiary
e. acquisition
The Correct Answer and Explanation is :
- How are spot exchange rates determined?
Correct Answer: c. The interaction between demand and supply of a currency relative to other currencies
Explanation:
Spot exchange rates are determined by the demand and supply of one currency relative to another in the foreign exchange (forex) market. This market operates based on the economic conditions, interest rates, inflation, and political stability of countries. The rate fluctuates because buyers and sellers are trading currencies for various reasons, such as trade, investment, or speculation. When the demand for a currency increases, its value rises relative to other currencies. Similarly, when demand drops, its value falls. Unlike the historical average prices or government decrees, exchange rates are not determined by a fixed standard but are dynamically set by these interactions between currency buyers and sellers.
- Comp-U-Learn Inc. prides itself on a competitive advantage based on their proprietary educational software technology. What two entry modes should the company avoid in order to minimize the risk of losing this technology?
Correct Answer: c. licensing and joint venture
Explanation:
Comp-U-Learn Inc. should avoid licensing and joint ventures because both modes involve sharing intellectual property or technology with external parties, which increases the risk of losing proprietary knowledge. Licensing allows another company to use its technology, potentially exposing it to misuse or theft, especially if the licensing agreement is not stringent. A joint venture involves collaboration between two firms, where they share resources, knowledge, and risks. This could also lead to the company’s proprietary technology being leaked or accessed by its partners. To maintain its competitive edge and safeguard its technology, the company would benefit more from wholly owned subsidiaries or greenfield ventures, where it retains complete control over its technology.
- Stacey Yung wants to open a Pizza Hut restaurant in Beijing and has an agreement with the restaurant chain in which she can use the trademark and must also follow a strict set of guidelines detailing how the business should operate. The Pizza Hut Corporation will receive a percentage of Stacey’s revenues from her restaurant. What type of entry mode does this represent?
Correct Answer: a. franchising
Explanation:
This represents franchising. In franchising, a company (the franchisor) allows an individual or other company (the franchisee) to use its brand, trademarks, and business model to operate a business in a specific location. The franchisee agrees to adhere to the guidelines and operational methods set by the franchisor. In this case, Stacey Yung is using Pizza Hut’s trademark and business operations model, and the corporation is taking a percentage of the revenue. This is a classic franchising arrangement, where the franchisee benefits from an established brand and business format while the franchisor receives a royalty for the use of its brand.
Let me generate an image related to these topics now.
Here is the visual representation illustrating the interaction between supply and demand in the foreign exchange market, showing how currency exchange rates fluctuate. Let me know if you need further explanations or additional details!
