Entering Foreign Markets Flashcards
Which two differetn approaches there are to entering foreign markets?
“Rational optimization” approach” -
• Going after the market with most appealing characteristics
“Learning-by-doing” approach
• Uppsala Model
What is the Upsala Model?
Foreign target markets selected primarly acording to their proximity in terms of “psychich distance”
Start investing in a few neighbouring countries——Investment is carried out cautiously, gradually, according to managers learning process—- moving from low to high commitmen—–enter new market with successiveky larger psychic distance as knowledge and experience increase
What is psychic distance
differences in language, culture, political systems, level of education, industrial
development
The larger is the psychic distance, the harder is to udnertsand the foreign environment
What are the dterminants of entry mode?
- Goals of the firm (market share, profitability, competititve positioning)
- degree of control desired
- firm’s resources and capabilities (strenghts and weaknesses)
- risk associated with each foreign venture
- conditions in target country
- competition frome xisting rivalry and companies that might enter the market
- availabilities and capabilities of partners
- value adding activities that the firm is willing to do on its own, and the activities that will delehate tot he partner
- Long term strategic importance of the market
- Charcateristics of product/service
What are home based international operations?
Exporting, Licensing and franchising
What’sthe advanatges and disadvantages of exporting?
Low risk, Low cost, flexible, No need to establish foreign operations, no need to transfer competencies to other firms, easy to control
Transportation Costs and potential tariffs
lack of distribution channels and market knowledge
What’s the advanatges and disadvantages from licensing/franchising’
Low risk, low cost global expansion strategy´
Fast expansion when target market is not vert large
Little control over licensee’s/franchisee’s operation
potential risk to reputation, transfer of competencies,
with franchising there’s the option that co peititor learn from us and open their own store becoming competitors
What are FDI international operations
&A and greenfield
What’s advanategs of greenfield investments?
High level of control, internal transfer of competencies, high profit potential
High risk, high capital investment, market access and access to distributional channels might be difficult , Lack of local knowledge and local regulation
What’s the advanatge of acquisition and mergers?
rapid expansion opportunity, established market share,
overcoming entry barriers
High capital investment
complex regulation
Cultural differences
inability to achieve synnergy
What are the startegic alliances and joint ventures international operation?
Non-equity strategic alliances and equity strategic alliances
What is the difference etween non-equity strategic alliances and equity starteic alliances?
A non equity strategic alliance is a cooperation between firms that is directly managed through contracts, without equity holdigs or nre firms being created, with detailed contracts neessary
Whereas Equity strategic alliances is about cooperative contractssupplemented by equity investments
What is the advanatge and disadvanatges for a equity staretgic alliance?
advanatges: shares risks and resources requirements
opportunity to learn from partners
complementary assets and skills
favoured by host governments
disadvantage:transfer of competencies, difficult coordination, conflicting goals
Whta’s the 4 C’s of strategic alliances?
Complementarity of resoruces
Congruend goals
Compatibility in terms of culture
Change
Why do many alliances fail?
Incompatibility of culture
incongruent goals
incompatibility of resources and difficult in achieving synergies
opportunistic behvaiour
