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International Business > Week 7 > Flashcards

Week 7 Flashcards

1
Q

What are the three basic decisions firms must make for foreign expansion?

A

Which markets to enter, when to enter those markets, and on what scale.

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2
Q

List the different modes firms use to enter foreign markets.

A
  • Exporting
  • Turnkey projects
  • Licensing
  • Franchising
  • Joint ventures
  • Wholly owned subsidiaries
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3
Q

What factors influence a firm’s choice of entry mode?

A

Core competencies, cost pressures, market conditions, and strategic goals.

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4
Q

True or False: Acquisitions generally provide long-term interest in the foreign country.

A

False

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5
Q

What are first-mover advantages?

A

Establishing a strong brand name, capturing demand, and creating customer loyalty.

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6
Q

What are some disadvantages of being a first mover?

A
  • High costs of establishing a market presence
  • Risks of business failure
  • Need for customer education
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7
Q

Define exporting.

A

Sale of products produced in one country to residents of another country.

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8
Q

What are the advantages of exporting?

A
  • Avoids costs of establishing manufacturing in host country
  • Helps achieve experience curve and location economies
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9
Q

What are the disadvantages of exporting?

A
  • High transport costs
  • Tariff barriers
  • Divided loyalties of local agents
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10
Q

What do turnkey projects involve?

A

Contractor handles every detail of the project for a foreign client, including training.

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11
Q

What are the advantages of turnkey projects?

A
  • Can earn great economic returns
  • Less risky than conventional FDI
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12
Q

What are the disadvantages of turnkey projects?

A
  • No long-term interest in the foreign country
  • Selling competitive advantage to rivals
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13
Q

What is licensing?

A

Licensor grants rights to intangible property such as patents, trademarks, and processes.

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14
Q

What are the advantages of licensing?

A
  • No development costs
  • Allows participation in foreign markets with barriers
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15
Q

What are the disadvantages of licensing?

A
  • Lack of control over technology
  • Limits strategic coordination across countries
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16
Q

Define franchising.

A

Franchiser sells intangible property to the franchisee under strict operational rules.

17
Q

What are the advantages of franchising?

A
  • Lower costs and risks
  • Helps build global presence quickly
18
Q

What are the disadvantages of franchising?

A
  • Inhibits profit repatriation
  • Quality control issues
19
Q

What characterizes joint ventures?

A

Cooperative undertakings between two or more firms, often 50-50 ownership.

20
Q

What are the advantages of joint ventures?

A
  • Local partner’s knowledge
  • Shared costs and risks
21
Q

What are the disadvantages of joint ventures?

A
  • Loss of technology control
  • Potential conflicts between partners
22
Q

What defines wholly owned subsidiaries?

A

Firm owns 100% of the subsidiary, either through greenfield ventures or acquisitions.

23
Q

What are the advantages of wholly owned subsidiaries?

A
  • Full control over operations
  • Protection of technology
24
Q

What are the disadvantages of wholly owned subsidiaries?

A
  • High costs and risks
  • Cultural challenges
25
Q

What is a core competency in relation to entry mode?

A

Technological know-how that firms often share through wholly owned subsidiaries.

26
Q

Fill in the blank: The greater the pressures for cost reductions, the more likely a firm will pursue some combination of exporting and _______.

A

[wholly owned subsidiaries]

27
Q

What are the pros of acquisitions?

A
  • Quick execution
  • May preempt competitors
28
Q

What are the cons of acquisitions?

A
  • Often disappointing results
  • Culture clash
29
Q

What are the pros of greenfield ventures?

A
  • Greater ability to shape the subsidiary
  • Less risky than acquisitions
30
Q

When should a firm choose an acquisition over a greenfield venture?

A

When entering a market with well-established competitors.

31
Q

What are some advantages of strategic alliances?

A
  • Facilitate market entry
  • Share development costs and risks
32
Q

What are the disadvantages of strategic alliances?

A
  • May give competitors access to technology
  • Risk of hollowing out competitive advantage
33
Q

What should firms consider when selecting a partner for an alliance?

A
  • Strategic goals alignment
  • Complementary capabilities
34
Q

What impact does the macro environment have on entry choices?

A

Changes in political, economic, and legal systems can influence market entry strategies.

35
Q

True or False: Declining trade barriers make exporting less attractive as an entry mode.

A

False

International Business (7 decks)

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