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Question 1

How can companies adapt and rethink the way they do business?

Answer 1

Emergence of circular economies, indispensability of access to digital technologies, rethink purely cost-driven supply chain approaches, focus on and alignment of all stakeholders.

Question 2

What is international diversification?

Answer 2

International diversification is a strategy through which a firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets.

Question 3

The transnationality index is the average of what ratios?

Answer 3

foreign to total assets, foreign to total sales, foreign to total number of employees.

Question 4

What are the four strategic motives that are not mutually exclusive?

Answer 4

Natural resource seeking, market seeking, efficiency seeking, innovation seeking.

Question 5

What is natural resource seeking?

Answer 5

Acquiring natural resources for own production processes or re-selling to customers.

Question 6

What is market seeking?

Answer 6

Increase sales by leveraging strong customer demand and willingness to pay.

Question 7

What is efficiency seeking?

Answer 7

Improve cost efficiency through higher economies of scale, lower wages, and lower material costs.

Question 8

What is innovation seeking?

Answer 8

Enhance innovative capacity through better human capital, R&D cooperation’s, and innovative ecosystem.

Question 9

Regarding where to enter, what is the general decision criteria?

Answer 9

Consider strategic goals: given that different locations offer different benefits, it is imperative that firms match strategic goals with locations.

Question 10

What are the location specific advantages?

Answer 10

Geographical advantages, agglomeration.

Question 11

What is cultural distance?

Answer 11

The difference between two cultures along some identifiable dimensions.

Question 12

What is institutional distance?

Answer 12

Comparing the regulatory, normative, and cognitive institutions.

Question 13

What are the first mover advantages?

Answer 13

Proprietary, technological leadership; preemption of scarce resources; establishment of entry barriers for late entrants; avoidance of clash with dominant firms at home; relationships and connections with key stakeholders, such as customers and governments.

Question 14

What are the later mover advantages?

Answer 14

Opportunity to free ride on first mover investments; resolution of technological and market uncertainty; first mover’s difficulty to adapt to market.

Question 15

What are the advantages of being a pioneer? And the disadvantages?

Answer 15

Advantages: temporary monopoly; build market entry barriers; can set technological standards and has first access to resources, supply and distribution; move down experience curve before rivals.
Disadvantages: risky; highest costs; competitors benefit from the effort of the pioneer and can adapt more quickly to the market.

Question 16

What are the advantages of the early follower? And the disadvantages?

Answer 16

Advantages: better access to reliable information concerning the market; can learn from pioneer’s previous mistakes; free-rider effects.
Disadvantages: entry barriers; first mover’s success.

Question 17

What are the late follower advantages? And disadvantages?

Answer 17

Advantages: same as the early follower; even more limited risk.
Disadvantages: entry barriers; difficult to attract customers; only small market potential left.

Question 18

What are the large scale entries?

Answer 18

Demonstration of strategic commitment and drawbacks of large-scale entries.

Question 19

What is demonstration of strategic commitment?

Answer 19

Helps to assure local customers and suppliers, and deters potential entrants.

Question 20

What are drawbacks of large-scale entries?

Answer 20

Limited strategic flexibility elsewhere, and potential huge losses.

Question 21

What are the characteristics of small scale entries?

Answer 21

Less costly, focus on accumulating experience, learning by doing while limiting the downside risk, drawbacks of small-scale entries.

Question 22

What are the drawbacks of small-scale entries?

Answer 22

A lack of strong commitment, and difficulties in building market share and(or in capturing first mover advantages.

Question 23

What are the two types of entry modes?

Answer 23

Non-equity modes and equity modes.

Question 24

What are the non-equity modes?

Answer 24

Exports and contractual agreements.

Question 25

What are the equity modes?

Answer 25

joint ventures and wholly owned subsidiaries.

Question 26

What is direct exporting?

Answer 26

Direct contact with companies located in the foreign market.

Question 27

What is indirect exporting?

Answer 27

Intermediary firms provide knowledge and contacts necessary to sell overseas.

Question 28

What is licensing?

Answer 28

Arrangement whereby one firm (licensor) permits another (licensee) to use its intellectual property for a specified period of time. In return, the licensor receives a royalty fee from the licensee.

Question 29

What is Franchising?

Answer 29

Franchising is basically a specialised form of licensing. Franchisor sells intangible property to another independent entity. Franchisee agrees to abide strict rules. Franchisor receives royalty payment.

Question 30

What is a joint venture?

Answer 30

Entity owned by two or more parent companies. Each part contributes assets, has some equity and shares risk.

Question 31

What are the three types of joint venture?

Answer 31

Minority JV, 50/50 JV, majority JV.

Question 32

What is the wholly owned subsidiary?

Answer 32

Entry mode with highest degree of internationalization: Long-term relocation of value activities/resources to a foreign target country.

Question 33

What are the advantages of joint ventures? And disadvantages?

Answer 33

advantages: sharing costs, risks, and profits; access to partners’ knowledge and assets; politically acceptable.
Disadvantages: Divergent goals and interests of partners; limited equity and operational control; difficult to coordinate globally.

Question 34

What are the advantages of Greenfield operations? And disadvantages?

Answer 34

Advantages: complete equity and operational control; protection of know-how; ability to coordinate globally.
Disadvantages: Potential political problems and risks; high development costs; add new capacity to industry; slow entry speed (relative to acquisitions).

Question 35

What are the advantages of acquisitions? And disadvantages?

Answer 35

Advantages: same as Greenfield; do not add new capacity; fast entry speed.
Disadvantages: Same as Greenfield, except adding new capacity and slow speed; payment of a considerable acquisition premium to target shareholders; post-acquisition integration problems.

Question 36

What is cost reduction?

Answer 36

It calls for global integration and standardisation. In both domestic and international competition almost universal.

Question 37

What is local responsiveness?

Answer 37

Unique in international competition. Means reacting to different consumer preferences which can tremendously vary around the globe.

Question 38

What are the four strategic choices for MNEs?

Answer 38

Global standardisation strategy, transnational strategy, home replication strategy, and localisation strategy.

Question 39

What is global standardisation strategy?

Answer 39

The firm develops a standardised product that it sells to all customers throughout the world.

Question 40

What is transnational strategy?

Answer 40

The firm attempts to combine the benefits of global integration to achieve low cost with the benefits of being locally responsive.

Question 41

What is home replication strategy?

Answer 41

The firm uses the competitive approach it developed in its home market to enter international markets.

Question 42

What is localisation strategy?

Answer 42

The firm develops separate operating subsidiaries, each of which develops products to meet the specific needs of the international market it serves.

Question 43

What are the advantages of home replication? And disadvantages?

Answer 43

Advantages: leverages home country-based advantages; relatively easy to implement.
Disadvantages: lack of local responsiveness; may result in foreign customer alienation.

Question 44

What are the advantages of localisation? And disadvantages?

Answer 44

Advantages: maximizes local responsiveness.
Disadvantages: high costs due to duplication of efforts in multiple countries; too much local autonomy.

Question 45

What are the advantages of global standardisation? And disadvantages?

Answer 45

Advantages: leverages low-cost advantages.
Disadvantages: lack of local responsiveness; too much centralised control.

Question 46

What are the advantages of transnational? And disadvantages?

Answer 46

Advantages: cost efficient while being locally responsive; engages in global learning and diffusion of innovations.
Disadvantages: Organisationally complex; difficult to implement.

Question 47

What are the advantages of an international division?

Answer 47

Firms’ initial expansion abroad, later often phased out; assures international focus receives top management attention; unified approach to international operations.

Question 48

What is the silo effect?

Answer 48

International division activities are not coordinated with the rest of the firm, which focuses on domestic activities.

Question 49

What are the advantages of a geographic area structure?

Answer 49

Organises the MNE according to different geographic areas; its ability to facilitate local responsiveness is both a strength and a weakness.

Question 50

What are the two types of wholly owned subsidiaries?

Answer 50

Greenfield operations and acquisitions.

Question 51

What are the factors of production?

Answer 51

Skilled labor, infrastructure, research institutions.