12.3: Selecting and Entry Mode Flashcards
Tabke: Advantages and Disadvantages of Entry modes
What are the inevitable considerations when selecting an entry mode for international business?
Trade-offs are inevitable when selecting an entry mode due to the advantages and disadvantages each mode offers.
Why might a firm choose a joint venture when entering a country with a history of discriminating against foreign-owned enterprises?
A firm might choose a joint venture to leverage a local partner’s help in establishing operations and winning government contracts in a country that discriminates against foreign-owned enterprises.
What is the risk associated with a firm’s core competence in proprietary technology when entering into a joint venture?
The risk is losing control of that proprietary technology to the joint-venture partner.
Under what circumstance might a high-tech firm prefer a wholly owned subsidiary when entering a foreign market?
A high-tech firm would prefer a wholly owned subsidiary when it wants to profit from a core competency in technological know-how without risking losing control over that technology.
When might a licensing or joint-venture arrangement be structured to reduce the risk of losing technological know-how?
When the firm’s technological advantage is transitory, or it wants to license its technology to deter competitors from developing their own and establish its technology as the industry standard.
What should a firm do if it considers its core technology easy to imitate?
The firm might license its technology as quickly as possible to other firms to gain global acceptance before competitors can imitate it.
Why might service firms favor franchising and master subsidiaries over other entry modes?
Service firms may favor these options because management know-how is less at risk of being expropriated and brand names are generally well protected by international laws.
Why might a joint venture be a preferred entry mode for service firms?
A joint venture is often politically more acceptable, brings a degree of local knowledge, and can work well for controlling subsidiaries.
What influences a firm to pursue wholly owned subsidiaries as part of its entry mode strategy?
Pressures for cost reductions can influence a firm to pursue wholly owned subsidiaries, especially in locations where factor conditions are optimal.
How do wholly owned subsidiaries contribute to a firm’s global strategy?
Wholly owned subsidiaries allow a firm to realize location and experience curve economies, and maintain control over its value chain, aiding in global standardization or transnational strategies.
