Kafli 13

Question 1

PEST

Answer 1

Political
Economic
Sociocultrual
Technological

Question 2

Liability of foreigness

Answer 2

A liability foreign firms face as the geographic, economic, cultrual or administrative diffrences between the foreign markets and the domestic market increase

Question 3

Ethnocentrism bias

Answer 3

A bias indicating that customers prefer local brands over foreign brands and are willing to pay more for local brands even whean the quality is inferior

Question 4

TRUE OR FALSE

Companies that pick foreign markets similar to there home markets are more likley to suceed

Answer 4

TRUE

Question 5

Once a firms desiceds it will enter a foreign market it needs to choose the method it will use to do so, these methods can be devided into two categorys?

Answer 5

Non equity and equity modes

Question 6

NON equity modes

Answer 6

Typically carry less risk but also bring fewer rewards, they include entry modes of
- Exporting
- Turnkey operations
- Licensing
- Franchising

Question 7

Equity modes

Answer 7

Require a larger investment and engage the foreign firm in local operations. This increases the risk of the activity but also allows the firm to get close to customers and thus build better products, this includes these equidy modes
- Joint ventures
- Wholly owned subsidiaries
- Either greenfield projects or acquisitions

Question 8

NON equity modes include

Answer 8

• Exporting
• Turnkey operations
• Licensing
• Franchisisng

Question 9

Equity mdoes include

Answer 9

• Joint ventures
• Whooly owned subsidiaries
• Either greenfield projects or acquasisitons

Question 10

Exporting

Answer 10

Exporting is the process of producing a good or service in one countrie and selling it in another country

Question 11

What are the advantages of exporting

Answer 11

A key advantage of exporting is the associated low cost of entering a foreign market

Question 12

What are the disatvantages of exporting

Answer 12

• Exports of goods and services are often subjects to import tariffs

Question 13

Tarfiss

Answer 13

As tarfiss increases in a country the proftiability of exporting to that country decreses

Question 14

Turnkey operations

Answer 14

In a turnkey protject a company builds a facility in a foreign market for a client, makes it operational and then hans over the “keyes” to the client, which will own and operate the facility

Question 15

The advatages of turnkey

Answer 15

As en entry mode is that they enable foreign firms to enter technologicallly complex markets and politically sensitive enviroments

Question 16

Disadvantages of using tunkey

Answer 16

That once the firm hands over the operations to the costumer it has no further financial intrest in the business

Question 17

Licensing

Answer 17

Is a contractual agreement between two partys, known as the licensor and the licensee. That grants the licencee certain rights such as the right to produce or sell the licensors patend goods, display the licensors brand name or trademark

Question 18

Advantages of licensing

Answer 18

The licensing firm takes on very little risk in entering foreign markets. It allows a company to grow quickly by levraging its brand or tech into new industreis and new locations. It allows compaies to enert geographic or product markets that are outside their own strategic goals. And help solve the problems of pricing a good across markets

Question 19

Disadvantages of licensing

Answer 19

A licensor becomes one step removed from consumers and loses the opprutunity to get feedback directly from them. The agreements only provide limited control over the way in which the licensed brand is used

Question 20

Franchising

Answer 20

Is a unique form of licensing in which a parteer called the franchisee is given the rights to use the franshisors brand and other intelectual property, while the franschisor takes an active role in the ongoing operations of the firm such as advertising, training staff and more

Question 21

Advantages of franchising

Answer 21

Are two fold
1. The franchisor can seek global growth with limited financial risk yet maintain direct involevement with the franchise, thus it can learn directly from local markets and transfer that knowlage to other markets

2. The franchiseor can benifit from flexibility in a licensing arrangement that enebles a franchisee to respond to local customer needs

Question 22

Disadvantages of franchising

Answer 22

Finding suitible franchisees is one of the key challenges in franchising and to build a franchise intrest in foreign markets

Question 23

Joint venture

Answer 23

An international joint venture is a new legal entity creaded and owned by two or more existing companies from diffrent countries. The parent companies can have very diffrent degrees of ownership in the joint venture ranging from 50/50 to 1/99 depending on there goal

Question 24

Advatages for a joint venture

Answer 24

For the entering firm it reduces political risk, the opprutinuty to levrage local knowlage and share cost

Question 25

What are the disatvantages of joint ventures

Answer 25

Sometimes partners have diffrent goals. Joint ventures can also lead to loss of intelectual property if the less technologically advaced partner takes advantege of the relationship

Question 26

Wholly owned subsidiary

Answer 26

A new legal entity set up for opperation in a foreign makret that legally is a seprate company but is fully owned by the parent firm

Question 27

Advantages of a wholly owned subsidiary

Answer 27

One of the biggest advantages of a wholly owned subsidiaries is that by retaining ownership control of the subsidiary, the parent company protects its intellectual propwrty.

Wholly owned subsidiaries also enable parents firms to maintain thight control over their foreign operations, opening the opportunity for a high degree of coordination

Question 28

Disadvantages of a wholly owned subsidiary

Answer 28

It is an expensive undertaking, companies must bear intitial costs such as purchasing retail or manufacturing space, hirirng staff, and establishing distrubution entirely by themselves and that means puting a large investment on the line

Question 29

Companies that can decide to MAKE on the market are those that go by the entry modes?

Answer 29

• Exporting
• A turnkey project
• Franchise
• Wholly owned subsidiary

Question 30

Firms that choose export can establish their own____________

(MAKE)

Answer 30

Supporting functions such as sales, distribution, lobbying, and trade. In this case the firm can directly own the exporting process

Question 31

Firms that choose to go thorugh tunrk key projects are by definirion______________
(MAKE)

Answer 31

Developing infanstructure in foreign markets

Question 32

A firm can Make by developing its own________

Answer 32

International franchise operation

Question 33

Allying

Answer 33

Allying with international partners requires an alliance whic is a contractual relationship between two or more companies. Firms often use allying as an importnat tactic in theri globalization efforts

Question 34

Alliance

Answer 34

A contractual relationship between, two or more companies

Question 35

Consortium

Answer 35

An alliance of companies pooling their resorces, to deliver a turnkey project

Question 36

Allying is the only entry tactic available with ___________

Answer 36

Licensing entry mode

Question 37

A firm that chooses the make tactic__________

Answer 37

Develops its own operations in the country

Question 38

A firm that chooses the Ally tactic_________________

Answer 38

A company partners with exsiting firms in the local amrkets

Question 39

The buy tactic means that __________

Answer 39

The firm will aquire another firm already operating in the local market