Quiz 2: Chapters - 12, 13 Flashcards
CHPT 12: What must be done before starting business in a foreign market
Weight out the risks and rewards associated with doing business in that country
CHPT 12: how does entering early affect starting a business in a foreign market
First/ Early entry:
- Advantages: establish brand, sales volume, experience curve, market share
- disadvantages: pioneering costs
CHPT 12: how does being a late mover/enterer affect starting business in a foreign market?
ADVANTAGES:
- more experience, avoid pioneering costs
DISADVANTAGES:
- switching costs, cost disadvantage
CHPT 12: DEFINITIONS:
- pioneering costs
- switching costs
- cost disadvantages
- EXPERIENCE CURVE
- pioneering costs = costs associated with establishing the market: promotion, regulation, legal
- SWITCHING COSTS = costs associated swithcing suppliers, brands; could be time, loss of product, loss of revenue from seller
- COST DISADVANTAGES = having a higher cost of operation/production than competitors within the same industry
- EXPERIENCE CURVE: more experience = less cost of production and increase efficiency
CHPT 12: what is scale of entry? how does it affect entering a foreign market?
scale of entry refers to the amount of resources required to start business in that foreign market ex:
Large scale: Factories, large shopping stores (has to be built, lots of capital needed to start)
small scale: a single retail clothing location
CHPT 12: properties of large and small scales of entry
Large:
- requires significant commitment and rapid entry
- long term impact and cannot be easily reversed,
- captures first mover advantages
-large commitment to one country often = less resources to support expansion to other markets
SMALL;
-limits firms exporsure to just one market
-allows firm to learn and diversify by building a presence in that market.
CHPT 12: what are the 5 general indicators of market potential
- Demographic characteristics
- Geographic characteristics
- Economic characteristics
- sociocultural characteristics
- Political and legal characteristics
CHPT 12: What are the Demographic characteristics ?
- education
- population size and growth
- population age composition
CHPT 12: what are the geographic characteristics?
- climate
-country size - population density
- transportation/ accessibility
CHPT 12: what are the economic characteristics?
GDP size and growth
income distribution
industrial infrastructure
natural resources
financial and human resources
CHPT 12: what are the Sociocultural characteristics?
- consumer lifestyles, beliefs, and values
- business norms
-cultural norms - languages
CHPT 12: what are the Political/legal characteristics?
national priorities
political stability and compatibility
government attitudes
government bureaucracy
monetary and trade regulations
CHPT 12: ADVANTAGES AND DISADVANTAGES OF EXPORTING:
advantages:
- avoids costs of establishing manufacturing opeerations in the host country
- helps a firm achieve experience curve and location economies
disadvantages:
- exporting from firms home base may not be appropriate if there are lower cost locations for manufacturing abroad
- high transport costs can make exporting uneconomical, particularly for bulk products
- tarrif barriers can make exporting cost $$$
-foreign agents often carry the products of competing firms and so have divided loyalties
CHPT 13: Don’t change Product + Don’t change communications =
Straight extension
CHPT 13: Don’t change Product + adapt communications =
Communication adaptation
CHPT 13: Adapt product + Don’t change communications =
Product adaptation
CHPT 13: Adapt product + Adapt communications =
Dual adaptation
CHPT 13: Readiness to export/import is made up of what factors
export:
Product readiness
(What international customer needs does your product satisfy?)
Company Readiness
(Do you have top-level commitment, resources, skills, and knowledge?)
IMPORT:
Product readiness
(What needs does the product or part satisfy for your value chain?)
Company Readiness
(Do you have top-level commitment resources, skills , and knowledge?)
CHPT 13: Why would a firm choose to export? What are the Promises of exporting?
- large revenue and profit opportunities are to be found in foreign markets
- international market is normally much larger than the firm’s domestic market therefore increase ^^
-achieve economies of scale, lowering unit costs
- not exporting often means loss of gains
CHPT 13: Why would a firm choose not to export? what are the pitfalls of exporting?
- Fucktons of paperwork, complex formalitites, delays, errors, sooooo mcuh work
- time involved in preparing documentation often amounts to 10% of the final value of goods exported
-poor market analysis, identification of opportunities, expertise, failure to customize the product based on foreign market needs, failure to effectively communicate the product (promo, distribution, etc)
- poor securing financing
CHPT 13: what are the keys to improving export performance? (4) ESII
-Export strategy
-Service Providers
- International Comparisons
- information source
CHPT 13: what comprises of international comparisons:
- Collect information: trade associations, government agencies, banks
- Japan, Germany
-MITI (ministry of international Trade and Industry,
-Sogo shosha
CHPT 13: what comprises of information sources:
Its a source for information, Canadian businesses use these for the scoop:
Federal level:
-Global affairs canada, ISEDC, stats canada, EDC
-international trade Centers, Canada Trade Missions
-Forum for international Trade training (FITT)
Provincial Level:
-Local Chambers of commerce, trade representation offices
- commercial banks
CHPT 13: what comprises of Service providers:
Service providers = freight forwarders, export management companies, export trading or packaging companies, customs brokers, confirming houses, export agents and merchants, economic processing zones
AND
EMCs
CHPT 13: What is an EMC
EMC = Export management company
-export specialists act as export marketing department/ international department for their clients
-hire one of these mfs if you wanna have all your exporting concerns taken care of.
CHPT 13: what is “PREFERENCE” in exporting
What can be used if there is a lack of trust?
When the importer pays for the good before it ships, that exporter preference
vice versa for importers
BAnk issued letter of credit
CHPT 13: What 7 steps make up Export strategy? HIRE BHK
- Hire EMC
- Initially focus on-a few markets
- Recognize time and managerial commitment
- Enter market on small scale
- Build relationships with local distributors/customers
- Hire local personnel
- Keep option of local production in mind
CHPT 13: What are the 6 entry modes? J.W. TELF
- JOINT VENTURE
- WHOLLY OWNED SUBSIDIARY
- TURNKEY PROJECTS
-EXPORTING - LICENSING
- FRANCHISING
CHPT 13: what is countertrade? What are its 5 types?
Counter trade is an alternative means of structuring international sale (non-monetary)
- Barter (Good for Good)
-Counter purchase (ill buy ur company’s goods if u buy my company’s goods)
- offset (I’ll buy your company’s goods if you buy my country’s goods)
- Switch trading (trading goods in credits like optimum)
- compensation of buybacks (when a firm supplies some kind of tech/equipment or service to a country, and the country takes a percentage of the firms output as payment)
CHPT 13: Pros and cons of Countertrade:
Pros :
- gives firm a way to finance export deals
- often the only option when doing business in poor countries
- many countries prefer it
- export opporitunity
- government requirement
Cons:
- may involve exchanges of unusable goods
- most attracting to large multinationals
- small and medium sized exporters may need to avoid countertrade bc of lack of worldwide network
CHPT 13: Implications for business?
- Accurate documentation is necessary, shit can get fucked up quick
- EDC (export development Corporation Canada) is often used as a saftey net for Canadian exporters
CHPT 13: What is Franchising?
CHPT 13: What is Licensing?
granting a foreign entity (the licensee) the right to produce and sell the firms product in return for a royalty fee on every unit sold.
CHPT 13: What is Exporting?
the sale of products produced in one country to residents of another country
CHPT 13: What is a wholly owned subsidiary?
A subsidiary in which the firm owns 100 percent of the stock.
CHPT 13: What is a turnkey project?
A venture in which a firm agrees to set up an operating plant for a foreign client and hand over the “key” when the plant is fully operational.
CHPT 13: what is a joint venture?
A cooperative undertaking between two or more firms.
