Tech 22

Question 1

What is a foreign subsidiary?

Answer 1

A foreign subsidiary is a business that manufactures and sells in a foreign market.

A foreign subsidiary operates under the laws and regulations of the host country.

Question 2

What are the risks and costs associated with establishing a foreign subsidiary?

Answer 2

The risks and costs include:
* Cost of facility and establishment of operations
* Sometimes needing permission from the foreign government

These costs can vary significantly based on the location and industry.

Question 3

Why do companies use foreign subsidiaries?

Answer 3

Companies use foreign subsidiaries to:
* Overcome trade barriers
* Control intellectual property and marketing

Establishing a subsidiary can provide a competitive advantage in local markets.

Question 4

What capabilities and resources are needed to establish a foreign subsidiary?

Answer 4

The necessary capabilities and resources include:
* Sales volume justifying investment
* Understanding of the foreign market and access
* Distribution capabilities

A thorough market analysis is crucial for success.

Question 5

What is a sales office?

Answer 5

Establish your own sales office but manufacture in your domestic market and ship abroad.

This allows businesses to manage sales operations in foreign markets while producing goods domestically.

Question 6

What are the reasons to use a sales office?

Answer 6

• Retain marketing control
• Insufficient volume to justify facility
• Have excess capacity in domestic facility
• Don’t have resources to build foreign facility
• Don’t want to take risk (yet)

These reasons highlight the strategic advantages of maintaining a sales office without the overhead of establishing a production facility abroad.

Question 7

What are the risks and costs associated with a sales office?

Answer 7

• Trade barriers
• Market knowledge
• Investment to establish foreign sales capabilities

These factors can complicate the operations of a sales office and require careful consideration.

Question 8

What capabilities and resources are needed for a sales office?

Answer 8

• Understanding of foreign market
• Ability to pay for and supervise foreign office
• Investment in foreign office
• Ability to modify product

These resources are crucial for effective operation and success in foreign markets.

Question 9

What is a joint venture?

Answer 9

Partner with a local firm for mutual benefit; partnership can take many forms - mutual distribution, sharing of knowledge, investment

Joint ventures are often used to combine strengths and resources for better market penetration.

Question 10

What are some reasons to use a joint venture?

Answer 10

• Political or trade barriers
• Overcome market barriers with lower investment or risk
• Overcome production constraints

These reasons highlight the strategic advantages of forming joint ventures in challenging environments.

Question 11

What are the risks or costs associated with a joint venture?

Answer 11

• Time
• Personnel
• Money
• Partnership doesn’t work
• Difficulties with partner incompatibilities

It is crucial to assess these risks before entering into a joint venture.

Question 12

What capabilities and resources are needed for a successful joint venture?

Answer 12

• Something of value for the partner
• Capability to negotiate
• Ability to supervise and work in partnership
• Resources as determined by partnership

Having the right capabilities and resources is essential for managing and sustaining a joint venture.

Question 13

True or False: A joint venture can help overcome market barriers with higher investment or risk.

Answer 13

False

Joint ventures are typically used to lower investment or risk while overcoming market barriers.

Question 14

Fill in the blank: A joint venture involves a partnership with a local firm for _______.

Answer 14

[mutual benefit]

This mutual benefit can manifest in various forms, such as shared knowledge or investment.

Question 15

What can make a partnership in a joint venture difficult?

Answer 15

• Partner doesn’t deliver
• Doesn’t deliver as expected or promised
• Difficult to work with (incompatibilities)

These challenges can significantly impact the success of a joint venture.

Question 16

What is licensing?

Answer 16

Giving local organization the right to use your intellectual property in exchange for royalties

Intellectual property can include brand, patent, or copyright.

Question 17

What is franchising?

Answer 17

Another company produces goods or services using your intellectual property in exchange for royalties

Franchising often involves a broader business model compared to licensing.

Question 18

List two reasons to use licensing and franchising.

Answer 18

• Faster and larger expansion with fewer financial resources
• No need to understand market, export, produce, distribute etc.

Question 19

True or False: Licensing and franchising require overcoming trade barriers.

Answer 19

False

There is no need to overcome trade barriers when using licensing and franchising.

Question 20

What is a key risk associated with licensing and franchising?

Answer 20

Damage to intellectual property

Protecting intellectual property is crucial to maintain its value.

Question 21

What capabilities and resources are needed for licensing and franchising?

Answer 21

Intellectual property of value that other company can’t easily acquire

The value of intellectual property is essential for attracting potential licensees or franchisees.