Entry Strategies and Strategic Alliances Flashcards
What are the basic decision firms make when expanding globally?
- Which markets to enter
- When to enter the market
- What scale of entry
- Which entry mode to use
When deciding which markets to enter, what factors does a firm look at regarding long term profit potential?
- A country’s business environment
- Political/regulatory environment
- Geographic location - regional vs country-by-country positioning
- Current stage of a country’s economic development and political stability vs future economic growth rate
What is a firms decision about which markets to enter a function of?
- Function of market size (demographics)
- Present and future consumer’s wealth (PPP)
What are the concepts related to the firms decision when to enter a market?
- Early vs late entry
- First mover advantages and disadvantages
What are the advantages and disadvantages of entering a market early?
- Advantages
- Preemption of rivals, ability to build sales volume (move down experience curve), develop buyer switching costs
- Disadvantages
- Pioneering costs, shifts in tech or customer needs, incumbent inertia
What are the firms options in choosing what scale of entry when expanding globally?
Choice of scale: strategic commitment and strategic flexibility
What are the benefits of strategic commitment entry scale?
Large-scale entry (implies rapid) and first-mover advantages and will demonstrate commitment to competitors and customers
What are the risks associated with strategic commitment entry scale?
- Long term impact
- Some resources are location specific
What is the most important aspect of strategic flexibility entry scale?
Small scale entry: learning process
What factors affect a firms choice of entry mode into a global market?
- Transport costs
- Trade barriers
- Poltical risks
- Economis risks
- Costs
- Firm strategy
What is true of entry mode into a global market?
Entry may proceed in a gradual manner
What modes of entry are there into global markets?
- Foreign trade
- Contractual entry modes
- Investment entry modes
What can manufacturing at a centralised location through exporting provide?
- Economies of scale
- Location economies
What are the pros and cons of exporting?
- Pros
- Avoids the costs of establishing local manufacturing operations
- Helps the firm to achieve experience curve and location economies
- Cons
- There may be lower cost manufacturing locations
- High transport costs and tariffs can make it uneconomical
- Agents in a foreign county may not act in exporter’s best interest
What contractual entry modes are there?
- Turnkey projects
- Licensing
- Franchising
- Management contracts
- Contractual manufacturing