Entering Developed & Emerging Markets (Chapter 13)

Question 1

Pioneering Costs

Answer 1

cost of promoting and establishing a product offering

Question 2

Strategic Commitment

Answer 2

has a long-term impact and is difficult to reverse

Question 3

6 Modes of Entry into a Foreign Market

Answer 3

exporting, turnkey project, licensing, franchising, joint venture with host-country firm, creating wholly owned subsidiary in host-country

Question 4

Which 2 modes of entry become optimal as pressures to cut costs increase?

Answer 4

wholly-owned subsidiaries & exporting

Question 5

Pros of Acquisitions

Answer 5

quick to execute, can preempt their competitors, less risky than Greenfield ventures

Question 6

Why acquisitions fail

Answer 6

firms often overpay; there is often a clash of culture between the acquired and acquiring firms; attempts to integrate operations take longer than forecasted

Question 7

Timing of entry

Answer 7

when a firm enters a market relative to its competitors (early or late)

Question 8

Turnkey Project

Answer 8

client agrees to handle all every detail of the project for a foreign client; most common in chemical, pharmaceutical, and metal industries

Question 9

Franchising

Answer 9

a type of licensing where the franchisee also must abide by strict rules as to how it does business

Question 10

Advantages of Exporting

Answer 10

ability to realize location and experience curve economies; increased speed and flexibility of engaging target markets

Question 11

Disadvantages of Exporting

Answer 11

high transportation costs, trade barriers, problems with local marketing agents

Question 12

Advantages of Turnkey Contracts

Answer 12

ability to earn returns from process technology skills in countries where FDI is restricted

Question 13

Disadvantages of Turnkey Contracts

Answer 13

creation of efficient competitors, lack of long-term market presence

Question 14

Advantages of Licensing

Answer 14

low development costs and risks, moderate involvement and commitment

Question 15

Disadvantages of Licensing

Answer 15

lack of control over technology; inability to realize location and experience curve economies; inability to engage in global strategic coordination

Question 16

Advantages of Franchising

Answer 16

low development costs and risks; possible circumvention of import Barries; strong sales potential

Question 17

Disadvantages of Franchising

Answer 17

lack of control over quality; inability to engage in global strategic coordination

Question 18

Advantages of Joint Ventures

Answer 18

access to local partner’s knowledge; shared development costs and risks; politically acceptable; typically no ownership restrictions

Question 19

Disadvantages of Joint Ventures

Answer 19

lack of control over technology; inability to engage in global strategic coordination; inability to realize location and experience economies

Question 20

Advantages of Wholly Owned Subsidiaries

Answer 20

protection of technology; ability to engage in global strategic coordination; ability to realize location and experience economies

Question 21

Disadvantages of Wholly Owned Subsidiaries

Answer 21

high costs and risks; need for more human/non-human resources and interaction/integration with local employees