Chapter 15- Entry Strategies and strategic alliances

Question 1

what are the two things you need to consider before going into a new market

Answer 1

1. which foreign markets to enter and on what scale 2. the choice of entry mode

Question 2

four ways to enter foreign markets

Answer 2

exporting, licensing/franchising to host country firms, wholly owned subsidiary, acquiring an established enterprise

Question 3

what factors come into play when determining what entry mode to use

Answer 3

timing of entry and small scale vs large scale entry

Question 4

first mover advantages

Answer 4

by going first on a large enough scale you can capture a large portion of the market

Question 5

first mover disadvantages/second mover advantages

Answer 5

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

Question 6

what are two types of entry modes with a wholly owned subsidiary

Answer 6

setting up a new business facility either with a greenfield or a turnkey project or acquiring an established enterprise in the host country

Question 7

five ways other than a wholly owned subsidiary to enter a foreign market

Answer 7

exporting, licensing, cross licensing, franchising, and a joint venture

Question 8

always look at ______ before deciding what foreign market you want to enter

Answer 8

the trade treaties that a country may be involved in; these treaties make some countries very favorable markets and others not so much

Question 9

how do US companies normally have to enter into the Chinese marketsf

Answer 9

they have to go in with a local partner due to the governmental rules in place; require a joint venture

Question 10

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

Answer 10

turnkey project

Question 11

if you want the first mover advantage you normally have to do what kind of entry

Answer 11

a large scale entry; have to do this to scare off competitors

Question 12

what is critical in a joint venture or franchising

Answer 12

brand name protection

Question 13

why do people do cross licensing

Answer 13

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

Question 14

what is common in most strategic alliance agreements

Answer 14

providing a means of market access

Question 15

when a company enters markets before its competitors

Answer 15

early entry

Question 16

_______ are associated with businesses that enter a national market before other businesses

Answer 16

pioneering costs

Question 17

when a company makes a commitment to enter a market on a large scale, this implies

Answer 17

a rapid entry

Question 18

not having to establish manufacturing operations overseas and being able to work to achieve experience curve and location economies are advantages of

Answer 18

exporting

Question 19

three things that can cause exporting to be uneconomical

Answer 19

tariff barriers, transport costs, and low cost manufacturing locations abroad

Question 20

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

Answer 20

turnkey

Question 21

what are the disadvantages to licensing for the licensor

Answer 21

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

Question 22

two disadvantages of franchising

Answer 22

lack of quality control and franchisor may not be able to take profits out of one country to support another

Question 23

what are three advantages of a wholly owned subsidiary

Answer 23

firm has tight control over its operations; can retain competitive advantage based on technology; may realize location and experience curve economies

Question 24

disadvantage of operating a wholly owned subsidiary

Answer 24

most costly entry mode and subject to the full capital costs and risks

Question 25

what are some advantages of acquisitions

Answer 25

less risk than greenfield venture; fast to execute; and beat out the competition

Question 26

_______ blames top management as the reason why acquisitions fail

Answer 26

hubris hypothesis