Chapter 9- Foreign market strategies

Question 1

Agency

Answer 1

Relationship between the principal person who is a supplier of goods, and the agent person who carries out selling on the principals behalf

Question 2

Characteristics of Agency

Answer 2

-Located in foreign jurisdiction
- facilitates sales for principal
- commission compensation
-ownership and economic risk remains with principal

Question 3

Distributorship

Answer 3

Foreign distributor purchases goods on its own account from the supplier for resale in its own market

Question 4

Characteristics of Distributors

Answer 4

• purchases the goods from the supplier for resale
  -selects own pricing
  takes on economic risk
• knows how to service product

Question 5

Protective legislation for distributors

Answer 5

1. Minimum notice requirements
2. compensation for termination

Question 6

Licensing

Answer 6

Obtaining the right to use IP rights that belongs to someone else

Question 7

why grant a license?

Answer 7

1. used to establish manufacturing or a market in a foreign country without investment
2. avoid the risk and expenses of foreign investment

Question 8

Risk of Granting a license

Answer 8

1. losing control of IP and technology
2. foreign country may not have some IP protections
3. if it does, the licensor has to register for IP protection
4. Risks disclosure of confidential info as part of negotiation

Question 9

Franchsing

Answer 9

• Form of licensing
  -Franchisee obtains the right to use trademark or logo
  -strict quality standards are maintained and the business is run in a style set out by the franchisor

Question 10

Characteristics of Franchsing

Answer 10

-most aspects controlled by the franchisor
-strict uniformity among other franchises
-rarely involves tech transfer
-franchisee owns the business and risks the capital
-negotiated renewal rights

Question 11

Outsourcing

Answer 11

Delegation of specific operations from the internal operation of a business to an external entity

Question 12

Foreign Direct Investment

Answer 12

Long term investment by a foreign investor in an enterprise resident in a foreign country

Question 13

Risks of Direct Investment

Answer 13

-seizure of assets
-lack of transparency in the host country
-host country requirements for local sourcing and hiring