S5: Entry modes Flashcards
What are the advantages and drawbacks of the joint venture entry strategy?
Advantages include shared risk, shared investment, and local expertise. Drawbacks may include cultural differences, potential conflicts, and shared control challenges.
Explain what joint ventures usually involve.
oint ventures usually involve two companies taking an equity partnership and creating a new company for a specific task.
What is a management contract, and when is it used?
A company is paid a fee to transfer management personnel and administrative know-how abroad to assist another company. It is used when the foreign company can manage better than the owners.
Define contract manufacturing and mention its benefits.
Manufacturing outsourced to an external partner, specialized in production and production technology. Benefits include proximity to foreign customers, lower production costs, lower transportation costs, and avoiding tariffs and quotas issues.
List some benefits to franchisors in a franchising arrangement.
Effective way to grow business, continuing revenue streams, brand development, economies of scale, international presence, and harnessing the entrepreneurial spirit.
What are the benefits to franchisees in a franchising arrangement?
Support of a big business network, a proven successful business format, existing brand and reputation, easier to secure loans, and compensation for lack of personal experience.
Define franchising in international business.
Franchising involves the franchisor giving the franchisee the right to use a total business concept/system, including trademarks, in exchange for agreed royalties/fees.
What are some reasons for using licensing as an entry mode?
Additional income with minimal involvement, lack of expertise for overseas investment, end of the product life cycle, government regulations restricting foreign direct investment, and high political risks.
Provide an example of a top licensor mentioned in the lesson.
Disney is the world’s top licensor.
What is licensing in international business?
Licensing involves granting intangible property rights to another company for use in a specified geographic area and time in exchange for royalties.
When is exporting not the best idea?
When production abroad is cheaper than at home, transportation costs are too expensive, significant product alterations are needed, governments inhibit imports, and buyers prefer products from a specific country.
What are some risks and pitfalls associated with exporting?
Financial risks, currency fluctuations, customer management challenges, lack of international business experience, marketing barriers, trade regulations, and international relations issues.
Explain the concept of piggybacking in exporting.
Piggybacking involves one company marketing its products through the distribution channels of another company.
Differentiate between direct and indirect exporters.
Direct exporters deal with customers outside their home country directly, while indirect exporters sell products to intermediaries in the domestic market who then export them.
What are the types of exporters mentioned in the lesson?
Non-exporter, Occasional exporter, Regular exporter.
