Location Decision

Question 1

What are Geographic Strategies for international market strategies?

Answer 1

SINGLE MARKET (one foreign market activity)
MULTI-SINGLE MARKET (several foreign market activities)
REGIONAL MARKET (market activities in all countries of one region)
MULTI-REGIONAL MARKET (market activities in all countries of several regions)
WORLD MARKET (market activities in all countries of the world)

Question 2

What are geographic strategies in relation to the home country?

Answer 2

CONCENTRIC or DETACHED (activities don’t have to surround home market)

Question 3

What does the MARKET STRATEGIES MATRIX cross-examine between market attractiveness and market barriers?

Answer 3

SLIDE 43

• High, Low: Focus Markets
• High, High: Promise Markets
• Low, Low: Occasion Markets
• Low, High: Abstinence Markets

Question 4

What are balance strategies?

Answer 4

PRICK
Profit (already profitable country markets/newly captured markets)
Risk (economically, politically stable/instable countries)
Investment (cash flow generating/consuming)
Competition (highly/moderately competitive)
Know-how (knowledge exploring/exploiting)

Question 5

What are criteria that increase the chances of host countries being selected?

Answer 5

market size
market growth potential
market/price structure
cost situation
infrastructure

Question 6

What are criteria that increase the risk of host countries being selected?

Answer 6

currency/inflation risks
transportation and storage risks
safety risks
substitution risks
legal and political risks

Question 7

What are criteria that increase the host countries’ barriers to entry?

Answer 7

institutional barriers (tariffs, regulations, finance)
market barriers (access to distribution channels)

Question 8

What types of Information Gathering are used in the selection of country markets?

Answer 8

SLIDE 51

• Qualitative Reports (chambers of foreign trade)
• Quantitative Statistics (world investment report)
• Uni-dimensional Ratings (credibility/liquidity, Moody’s, governmental interventions)
• Multi-dimensional Indexes (country risk, country culture)

Question 9

What is checklist technique?

Answer 9

qualitative comparison: factors that are relevant to a specific market entry decision in a check list

Question 10

What is sequential technique?

Answer 10

ranking of criteria; countries that do not meet standards are eliminated one by one

Question 11

What is Scoring Technique?

Answer 11

relevant factors to market entry decision are weighted by their importance

Question 12

What is Combination technique

Answer 12

self explanatory, combination technique

Question 13

What are Examples of Scoring Model: Business Environment Risk Index (BERI)?

Answer 13

Slide 53.
Operations Risk Index (ORI)
Political Risk Index (PRI)
Remittance and Repatriation Factor (R-Factor)

All Leads to Profit Opportunity Recommendation Index (POR)

Question 14

What obstacles to entering the foreign market does the Theory of Monopolistic Advantages show?

Answer 14

Obstacles to entering a foreign market

• less knowledge than domestic firms
• discrimination by government, customers, and suppliers
• exchange rate risks

Question 15

What are the SECONDARY MOTIVES OF FDI in the Theory of Monopolistic Advantages?

Answer 15

-Enterprises seek for diversification
-Enterprises utilize advantages through FDI if there are:
Host country market imperfections
Economies of scale
Governmental trade barriers that prevent imports

Question 16

What is the EMPIRICAL EVIDENCE OF MONOPOLISTIC ADVANTAGE?

Answer 16

monopolistic advantage is supported by studies that show the higher the advantage the higher the company invests in R&D and technological capabilities

Question 17

Monopolistic Advantage

Answer 17

Firms choose countries in which the firms monopolistic advantages allow for overcoming the barriers to entry

Question 18

What are the PRIMARY MOTIVES OF FDI in the Theory of Monopolistic Advantages?

Answer 18

Primary motives of FDI

• enterprises have competitive (‘monopolistic’) advantages over competitors which may be utilized at home AND abroad
• eliminating international competition through FDI