Chapter 15- Entry Strategies and strategic alliances Flashcards
what are the two things you need to consider before going into a new market
- which foreign markets to enter and on what scale 2. the choice of entry mode
four ways to enter foreign markets
exporting, licensing/franchising to host country firms, wholly owned subsidiary, acquiring an established enterprise
what factors come into play when determining what entry mode to use
timing of entry and small scale vs large scale entry
first mover advantages
by going first on a large enough scale you can capture a large portion of the market
first mover disadvantages/second mover advantages
by going in first you are going into unknown territory so you will probably make mistakes that the people who come behind you can capitalize on
what are two types of entry modes with a wholly owned subsidiary
setting up a new business facility either with a greenfield or a turnkey project or acquiring an established enterprise in the host country
five ways other than a wholly owned subsidiary to enter a foreign market
exporting, licensing, cross licensing, franchising, and a joint venture
always look at ______ before deciding what foreign market you want to enter
the trade treaties that a country may be involved in; these treaties make some countries very favorable markets and others not so much
how do US companies normally have to enter into the Chinese marketsf
they have to go in with a local partner due to the governmental rules in place; require a joint venture
someone who knows the area and market well builds the business from the ground up and then hands you a ready to go business when they are done
turnkey project
if you want the first mover advantage you normally have to do what kind of entry
a large scale entry; have to do this to scare off competitors
what is critical in a joint venture or franchising
brand name protection
why do people do cross licensing
it makes the people less likely to go against you; don’t want to create a competitor by giving them some of your key technology without getting something in return
what is common in most strategic alliance agreements
providing a means of market access
when a company enters markets before its competitors
early entry
_______ are associated with businesses that enter a national market before other businesses
pioneering costs
when a company makes a commitment to enter a market on a large scale, this implies
a rapid entry
not having to establish manufacturing operations overseas and being able to work to achieve experience curve and location economies are advantages of
exporting
three things that can cause exporting to be uneconomical
tariff barriers, transport costs, and low cost manufacturing locations abroad
Oil-refining technology was sold to firms in Saudi Arabia and other Gulf states and now those Western firms that sold the technology have to compete with these countries in the oil industry. This shows how a ____ strategy can be a disadvantage
turnkey
what are the disadvantages to licensing for the licensor
a licensor does not have control over manufacturing, marketing, and strategy; can lose control over its technology; limits the ability to coordinate strategic moves across countries
two disadvantages of franchising
lack of quality control and franchisor may not be able to take profits out of one country to support another
what are three advantages of a wholly owned subsidiary
firm has tight control over its operations; can retain competitive advantage based on technology; may realize location and experience curve economies
disadvantage of operating a wholly owned subsidiary
most costly entry mode and subject to the full capital costs and risks
what are some advantages of acquisitions
less risk than greenfield venture; fast to execute; and beat out the competition
_______ blames top management as the reason why acquisitions fail
hubris hypothesis
