Chapter 09

Question 1

Factors in the selection of an entry method in a foreign market

Answer 1

• business environment in targeted country
• the firms resources
• competitive context in targeted foreign market
• risk - reward equation associated with entering a new market.

Question 2

Common stages in the process of corporate internationzalization

Answer 2

1. Exporting
2. Sales subsidiaries
3. International Division
4. Multinational
5. Global or transnational
6. Alliances, partners, and consortia

Question 3

Export management companies

Answer 3

Specialized firms hired to handle some, most, or all of other firms’ export-related tasks and activities.
(gives exporting assistance)

Question 4

Types of exporting

Answer 4

Direct exporting, Indirect, Intracorporate

Question 5

Direct Exporting

Answer 5

When sales of a firm’s products or services directly involve foreign customers.

Question 6

Indirect exporting

Answer 6

When a domestic firm sells its product to another domestic firm, which alters the product and then exports it.

Question 7

Intracorporate exporting

Answer 7

When a firm located in one country sells a product to an affiliated firm (or the firm’s subsidiary) in another country.

Question 8

firm adaptability

Answer 8

is generally low in developed countries, and high in emerging.

Question 9

Capabilities in unstable business environments

Answer 9

Multinationals from developed countries: generally weak.
From emerging markets, generally strong

Question 10

Competitive advantages

Answer 10

MNE from developed countries generally strong and weak for emerging markets

Question 11

Path of expansion

Answer 11

Generally simple for MNE’s in developed countries and complex for those in emerging markets

Question 12

Typical foreign market entry mode

Answer 12

Developed country MNE: Internal, with wholly owned foreign subsidiaries.

Emerging markets: External, relying on acquisitions and alliances

Question 13

Speed of internationalization

Answer 13

Gradual (for developed countries mne) Accelerated (for emerging markets)

Question 14

Foreign market entry options: Exporting

Answer 14

The Costs and Challenges of Exporting
Selecting products that will sell well overseas.
Understanding import/export rules and being prepared to deal with voluminous paperwork.
Finding overseas customers and adapting marketing and advertising to reach them.
Dealing with currency fluctuations, language issues, tariffs, and transport delays.

Question 15

Foreign market entry options: Licensing

Answer 15

Licensing
Is selling the rights to a firm’s brand names, patents, technology, or intellectual property to a foreign firm.
Provides a quick access to and testing of foreign markets with an immediate payoff.
Overcomes the lack of resources needed for ownership entry options.
Can preempt or block rivals in foreign markets.
May “educate” a potential competitor.

Question 16

Foreign market entry options: Franchising

Answer 16

Is the contractual right to operate a business using the methods, procedures, products, trademarks, and marketing strategies created by another firm.
Allows franchisor control over franchisee through the terms of the franchise agreement.
Benefits from local market knowledge of franchisees.

Question 17

Master Franchisee

Answer 17

A firm or group of investors willing to coordinate all franchising operations in a specific foreign market for a franchisor.

Question 18

Other foreign market entry options

Answer 18

Management Contract
Providing a foreign organization with specific services, technical help, or managerial expertise for either a flat fee or a percentage of sales/profits.

Turnkey Contract
Typically includes all steps needed to design, build, and operate large, complex facilities in foreign locations.

Contract Manufacturing
Occurs when firms outsource their manufacturing operations to other firms, either in whole or in part.

Question 19

Entry options involving ownership

Answer 19

Greenfield Approach
Is entry into a foreign market by establishing a wholly owned subsidiary from scratch.
Provides for maximum control and protection of intellectual property.
Can maximize location economies in site selection.

Wholly Owned Foreign Subsidiary
Is ownership of an overseas facility by a foreign firm.

Question 20

Why Firms Pursue Ownership Options in Foreign-Market Entry: Three Key Motivations

Answer 20

Market, efficiency, and resource - based

Question 21

Entry Options Involving Ownership (cont’d)

Answer 21

Acquisition Approach
Is the establishment of a wholly owned subsidiary through complicated negotiations about existing plants or facilities.
Can provide benefits and challenges in integrating both firms’ cultures, products, and operations.
Can be accomplished more quickly than using the greenfield approach.
Has the risk of overpayment for the acquired firm.

Privatization
Is the government selling of state-owned enterprises or assets to private parties

Question 22

Entry Options Involving Ownership (cont’d)

Answer 22

Joint Ventures
Represent shared ownership of foreign facilities by two or more separate firms.
Allow for sharing of costs, technology, knowledge, and business risk by the venture’s owner partners.
Require trust between the parties, a clear set of shared objectives, and a visionary management style to be successful.

Delegated Arrangement
Allows joint-venture partners to reduce conflicts by agreeing to step back from active management of operations by hiring new executives/managers