Week 2: Export Market Selection / Market Entry

Question 1

Uppsala Stages Model of Internationalisation

Answer 1

• Firms start exporting before utilising higher risk entry modes e.g. FDI
• Rationale – Enter foreign markets with greater ‘psychic distance’

Question 2

‘Internationalisation Process’ Model

Answer 2

• Firms take a gradual/incremental approach to internationalisation
• Rationale – firms gradually build up their ‘experiential’ knowledge to manage risk

Question 3

Business Network Internationalisation Process Model

Answer 3

• Rationale – markets are networks of relationships / insider-ship is necessary for successful internationalisation

Question 4

Reactive Exporting

Answer 4

Choice of export market is already given e.g. firm responds to an unsolicited order from abroad (still needs to examine/evaluate market before responding to order)

• Risky without research
• Overseas company provides info

Question 5

Proactive Exporting

Answer 5

Initiating need to export
A firm decides to export ‘proactively’ – evaluate market opportunities / ensure potential opportunities are relevant to firm and its capabilities / ensure product market fits consistently with long-term growth opportunity / profitability

• More work involved

Question 6

Indirect Exporting

Answer 6

Exporters use independent marketing organisations located in home country
By selling to / through channel partner

Question 7

Indirect Exporting Advantages

Answer 7

• Market entry / sales growth = fast
• Channel partner’s existing knowledge / networks
• Sales, marketing, costs shared

Question 8

Indirect Exporting Disadvantages

Answer 8

• No control over pricing / branding / marketing

- Must provide sales support for continuing growth

Question 9

Direct Exporting

Answer 9

Selling directly to target markets. By own dependent unit (e.g. export department) or by using foreign marketing organisation

Question 10

Direct Exporting Advantages

Answer 10

• In control of pricing/ brand

- Own / maintain customer relationships

Question 11

Direct Exporting Disadvantages

Answer 11

• Market progress slower

- Commit lots of time, energy, staff resources and money

Question 12

Intra-Corporate Transfer

Answer 12

Type of exporting for MNCs – lend itself to tax maximisation

Question 13

Piggyback

Answer 13

Cross between direct/indirect export
- Occurs when one manufacturer (carrier) uses its foreign distribution facilities to sell another company’s (supplier) products

Advantage:
- Easy/low-risk way for smaller manufactures to export through an established firm without investing heavily in foreign marketing

Disadvantage:
- No control over marketing of products

Question 14

Wholly Owned Subsidiary

+/-

Answer 14

• Enables global strategic coordination
• Realises location / experience economies
• $$$$$ / risks
• Requires overseas management skills
• Slower to implement

Question 15

IJV

+/-

Answer 15

• Exchange knowledge Sharing development costs / risks
• More politically acceptable than 100% foreign ownership
• Quicker market access
• Loss of control over technology / managerial know-how / flexibility
• Relationship problems
• Gov. regulations

Question 16

Int. Strategic Alliance

+/-

Answer 16

Similar to IJV

More difficult to manage than IJV

Question 17

Franchising

+/-

Answer 17

• Low financial risk/ development costs

• No control over quality
• Growth slower
• Chance of exploitation
• Loss of know-how

Question 18

Licensing

+/-

Answer 18

• Low risk / commitment of resources
• Quick cash flow / market access
• Limited control
• Chance of competition / exploitation
• Opportunity costs

Question 19

FDI

+/-

Answer 19

• High level of control
• Greater access to inputs / customers
• $$
• Greater resource commitment
• Exposure to risks
• Suited well-est. exporters

Question 20

Service Modes International Entry

Answer 20

1. Cross-border supply e.g. market research company provides consultation for overseas customer
2. Consumer abroad e.g. foreign student in Australia for tertiary education
3. Commercial presence e.g. bank sets up overseas through direct investment
4. Presence of a natural person e.g. engineer goes overseas for a project

Question 21

E-Strategy

Answer 21

• Supports internationalisation of a business
• Selling/promotion
• Customer support/feedback

Question 22

E-Strategy Benefits

Answer 22

• Complements needs of most businesses
• May assist in creating international reputation/awareness
• May ease entry into international markets

Question 23

E-Strategy Limitations

Answer 23

• Most businesses cannot rely on internet sales alone to generate sufficient profits
• Does not easily replace traditional distribution channels
• Although useful, a website alone does not provide sustainable competitive advantage

Question 24

Start-Up Approach

Answer 24

Firms export in an overseas market before selling in domestic market

• Know to be used by some born-global firms
• Considered unorthodox approach – contradicts traditional ‘incremental / stages’ theories of internationalisation

Question 25

Grey Trade

Answer 25

• Refers to ‘parallel import’ of genuine goods, bypassing the authorised local suppliers /distributors
• Generally, not an illegal practice but tends to disrupt existing trading/channel relationships

Question 26

Grey Trade Benefits

Answer 26

• Right to free trade
• Consumers benefit from lower prices
• Discount distributors found a profitable market niche

Question 27

Grey Trade Problems

Answer 27

• Grey marketers take unfair advantage against authorised channel members
• Parallel imports may not meet local product standards/expectations of after-sale service
• May complicate strategies