Question

Firms that provide specialized services, such as management, technical knowledge, engineering, information technology, education, and so on, our large part of the international business domain. Their strategic circumstances are a bit different than a traditional manufacturing operation or classic service enterprise. Rather, these providers of specialized services often rely see contractual relationships and negotiated arrangements with local partners as the basis of international strategy.

Derrido is an American firm that has produced several successful animated TV series in the United States. It is considering contracting with one or more international companies as a way to market its products overseas.

Derrido's marketing director thinks that the company should craft a contractual agreement as an initial entry strategy, because the company might want to choose a more advanced entry strategy later. Which of the following, if true, would strengthen this position?

A	Contractual agreements allow a company to provide for open, flexible terms of operation.

B	Contractual agreements should be entered into only if the foreign partner is extremely reliable.

C	Contractual agreements require approval by legal specialists from all countries involved.

D	Foreign partners usually want to enter into contractual agreements with American companies for a long-term period.

E	A contractual agreement should spell out as many expectations of the foreign partner as possible.

Answer 1

Answer: Option B

Explanation: Contractual agreements are a good way to enter a new market but should be used with those potential business partners where the partners are extremely reliable. If the assumption is true, the company should craft a contractual agreement as an initial entry strategy, because the company might want to choose a more advanced entry strategy later.