Lecture 9

Question 1

International diversification

Answer 1

Allows firms to serve new markets

Question 2

Why do firms seek international diversification

Answer 2

1. natural Ressource seeking
2. market seeking
3. efficiency seeking
4. innovation seeking

Question 3

What is the key objective of natural Ressource seekers when diversifying internationally?

Answer 3

Acquiring natural natural resources for own production processes or re-selling to customers

Question 4

What is the key objective of market seekers when diversifying internationally?

Answer 4

Increase sales by leveraging strong customer demand and willingness to pay

Question 5

What is the key objective of natural efficiency seekers when diversifying internationally?

Answer 5

Improve cost efficiency trough higher economies of scale, lower wages and lower material costs

Question 6

What is the key objective of natural innovation seekers when diversifying internationally?

Answer 6

Enhance innovation capacity trough better human capital, R&D cooperations, and innovative ecosystem

Question 7

How to measure international diversification?

Answer 7

Transnationality Index. It is the average of the following three ratios:

• foreign to total assets
• foreign to total sales
• foreign to total number of employees

Question 8

What questions do you need to answer to prepare an entry strategy

Answer 8

Where to enter?
How to enter?
When to enter?

Question 9

First mover advantages

Answer 9

*Preemption of scarce resources
*Establishment of entry barriers for late entrants
*Avoidance of clash with dominant firms at home (Sony, Honda and Epson went to the U.S. market before their rivals)
*Relationships and connections with key stakeholders, such as customers and governments
*Proprietary/technology advancements

Question 10

Late mover advantages

Answer 10

*Opportunity to free ride on first movers investments (Ericsson won big contracts in Saudi Arabia, free riding on Cisco‘s efforts)
*Resolution of technological and market uncertainty
* First movers difficulty to adapt to market (e.g. KarstadtQuelle was a large German player in catalogue-based delivery, but was outplayed such as online deliveries as Amazon)

Question 11

Ich control low investment ways of entering a foreign market

Answer 11

Franchising and licensing

Question 12

High level of control over foreign activities and high amount of resources committed to foreign markets

Answer 12

Wholly-owned subsidiary (Acquisition or greenfield)

Question 13

Mid level of control over foreign activities and mid amount of resources committed to foreign markets

Answer 13

Joint venture (e.g. with local partner)

Question 14

Low-control, low-investment method of entering a foreign market

Answer 14

Indirect export (distributors,agents etc)

Question 15

Direct exporting

Answer 15

Direct contact with companies located in the foreign market

Question 16

Indirect exporting

Answer 16

Intermediary firms provide knowledge and contacts necessary to sell overseas

Question 17

MNEs

Answer 17

Multinational enterprises

Question 18

VUCA

Answer 18

Volatility, uncertainty, complexity, ambiguity

Question 19

Axiom

Answer 19

A statement or principle that is accepted without the need of proof

Question 20

Businesses share customer relationships

Answer 20

Target the same customer group
(Could be important for corporate strategy)

Question 21

Who said culture eats strategy for breakfast

Answer 21

Peter Drucker

Question 22

The purpose of a business is to create a customer.

Answer 22

Peter Drucker