Global Expansion Strategies

Question 1

International Strategy

Answer 1

Used when pressures for both cost reduction and national responsiveness are low.

Ex: Rolex

Question 2

Global Strategy

Answer 2

Used when pressures for cost reduction are high, but pressures for national responsiveness are low.

Ex: Coca-Cola

Question 3

Multi-domestic Strategy

Answer 3

Used when pressures for cost reduction are low, but pressures for national responsiveness are high.

Ex: Plastic Surgery

Question 4

Transnational Strategy

Answer 4

Used when pressures for both cost reduction and national responsiveness are high

Ex: McDonalds

Question 5

Exporting

Answer 5

Benefits:
- no infrustructure investment
- low risk
- learn about foreign operations

Costs:
- lack of control over marketing and distribution
- transportation costs
- tariffs

Question 6

Wholly Owned Subsidy (WOS)

Answer 6

Benefits:
- 100% control

Costs:
- assume 100% of cost
- assume 100% of risk

Question 7

Alliances

Answer 7

Benefits:
- utilize the local partner’s knowledge
- share costs and risks

Costs:
- less control over operations
- alliances often break down and fail
- risk of leaking core competencies to partner

Question 8

Contractual Alliance

Answer 8

a short-term contract between two enterprises that wish to collaborate

ex: joint R&D project

Question 9

Equity Alliance

Answer 9

A long-term alliance that creates a new LLC in which each enterprise has an equitable stake

ex: Joint Venture (JV)

Question 10

Two Reasons Alliances Fail

Answer 10

1. intentions and expectations for the alliance are not well established
2. the company chose to form an alliance when they should have acquired their partner

Question 11

When to Ally (5)

Answer 11

• entering a new geographic market
• want to combine human assets
• firms have unique competiencies
• markets are uncertain
• low competition industry

Question 12

When to Accquire

Answer 12

• entering an existing geographic market
• want to combine hard assets
• firms have redundant assets
• market is stable
• high competition industry

Question 13

Greenfield Venture v. Acquisition

Answer 13

Greenfield When:
- control over compay cultureis necessary
- high tolerance for risk
- timeline is flexible
- forseen cultural conflict

Acquire when:
- want to reduce competition
- low tolerance for risk
- accept lower profit margins
- time is of the essense