Assessing Internationalisation: Market Entry

Question 1

What are the four ways to enter an international market in order or least risk go most?

Answer 1

Export.
Licensing.
Alliances.
Direct investment.

Question 2

Define exporting.

Answer 2

Selling products in overseas markets.

Question 3

Two types of exporting.

Answer 3

Direct.

Indirect.

Question 4

Indirect exporting definition.

Answer 4

Exporting and selling through local agents.

Question 5

Direct exporting definition.

Answer 5

Exporting and selling on own behalf.

Question 6

What are most uk exports? Examples?

Answer 6

Services e.g. banking and insurance.

Question 7

Benefit of exporting.

Answer 7

Increase market share.

Question 8

Disasvantages, example.

Answer 8

Expensive and time consuming to access market e.g. tariff negotiation and customisation.

Question 9

Disadvantage of inderect exporting.

Answer 9

Element of control lost to the agent.

Question 10

Licensing definition.

Answer 10

Selling rights to a foreign firm to produce or sell products.

Question 11

Product type licensing is common for

Answer 11

Distinct, differentiated and protected product.

Question 12

Licensing is useful for

Answer 12

Companies involving products with high cost to transport and establish in a foreign country.

Question 13

Risk of licensing.

Answer 13

Foreign company who is responsible to generate sales within their own market.

Question 14

Disadvantage of licensing.

Answer 14

Loss of marketing control and danfer of host company “breaking away” in the future.

Question 15

When does the licensing disadvantage often happen?

Answer 15

Technology business where intellectual property is able to be limited.

Question 16

Licensing is most suitable for

Answer 16

Companies with strong, consistent innovation enabling a competitive advantage.

Question 17

Alliances definition.

Answer 17

Joining forces with a similar company overseas, combining local market knowledge with a successful domestic product.

Question 18

Alliances most suitable for…why?

Answer 18

Small medium business.

Provides immediate access to international markets, technology, distribution and expertise etc.

Question 19

Benefits of alliances based on research.

Answer 19

Faster growth, higher productivity and refenue = benefits of synergy.

Question 20

Synergy remembering equation.

Answer 20

2 + 2 = 5

Question 21

Synergy definition.

Answer 21

Value and performance of two companies combined will be greater than the sum of seperate, individual parts.

Question 22

Alliances can be formalised as

Answer 22

Joint venture - joint ownership of the businesses.

Question 23

Benefit of joint venture alliance.

Answer 23

Avoid trade barriers - minimise costs - product is more competitive.

Question 24

Alliances disadvantages.

Answer 24

Shared profits.
Joint investment of the building in the new market.
Minor control loss over brand.

Question 25

Alliance businesses must be aware of

Answer 25

Conflicting interests and objectives.

Question 26

Disadvantage of alliances.

Answer 26

Costs shared.

Question 27

Direct investment definition:

Answer 27

Uk based firms taking over or merging with overseas business.

Question 28

Effects of direct investment.

Answer 28

Immediate access to market.

Acquire instant share of market.

Question 29

More suitable for…why?

Answer 29

Established businesses due to the capital implications.

Question 30

Advantages of direct investment.

Answer 30

reduces risk - uk firm can continue to use established firms brand and reputation - gain direct access to raw materials.

Cheaper labour and avoid import duties.

Full control maintained of the venture.

Question 31

Disadvantages of takeovers and mergers (direct investment).

Answer 31

expensive.
require shareholder permission to proceed.
challenges and risks in operating abroad.

Question 32

(Direct investment(DI) two ways overseas bases can be formed. ``

Answer 32

Organic growth.

takeover.

Question 33

Organic growth defintion.

Answer 33

Business establishes overseas factory or outlet.

Question 34

Takeover definition.

Answer 34

Foreign business takes over a host business in order to enter and expand in a domestic market within another country.

Question 35

Three types of strategically direct investment.

Answer 35

Horizontal.
Vertical.
Conglomerate.

Question 36

Horizontal direct investment definition.

Answer 36

Invests in a company that is involved in the same activities as it does at home.

Question 37

Vertical direct investment definition.

Answer 37

Different stages of activities are added abroad.

Can be forward or backward vertical investment.

Question 38

backwards vertical direct investment definition.

Answer 38

Firm brings goods or components back to home country.

Question 39

Forward vertical direct investment definition.

Answer 39

`Firm sells goods into local or regional markets (acting as distributor).

Question 40

Conglomerate direct investment definition.

Answer 40

Corporation made up of several businesses.

Made in an unrelated business abroad.

Question 41

Conglomerate is…why?

Answer 41

Most uncommon form.

Requires investing business to overcome both new market and industry (2 barriers).

Question 42

Multinational company definition.

Answer 42

Companies with headquarters based in one country but operations in several.

Question 43

Multinational companies are enabled…effects?

Answer 43

to produce goods in the most cost effective method possible.

Increased profit and economic power.

Question 44

Multinational companies and internet relation.

Answer 44

Growth of the internet has made the establishment of mnc’s easier.

Question 45

Why is the establishment of mcn’s easier?

Answer 45

Communication and spread of information through the growth of the internet is now more accurate.