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International business management > Week two - international strategy > Flashcards

Week two - international strategy Flashcards

1
Q

when does the internationalisation strategy become a key response

A

when the globalisation or globalisation of the economy is the future trend for all sectors

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2
Q

list some development strategies

A
  • market penetration
  • product development
  • market development/expansion
  • growth via diversification
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3
Q

how does international strategy compete against other growth options

A

it requires having a broader scope and managing increased complexity

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4
Q

what is the international strategy?

A

the management process through which the companies assess the changing conditions of the international environment and how they develop accurate organisational responses

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5
Q

why do firms go international

A
  • drivers: push, pull, facilitating
  • conditions: factor, demand, related industries, home rivalry, role of government (porters diamond - comparative advantage)
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6
Q

threats in the home market (push factors)

A
  • saturated mature home market
  • legal hinders
  • growing costs
  • economic conditions
  • demographic evolution
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7
Q

opportunities in foreign markets (pull factors)

A
  • growth opportunities
  • niche opportunities
  • competitors follow up
  • customers follow up
  • technology
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8
Q

facilitating factors

A
  • firms experience
  • lower barriers to trade and investment
  • communication technologies
  • management vision and values
  • learning from other firms
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9
Q

two classifications of pull factors and what are they

A

1) market seeking - firms quest to go after countries that offer strong demand for their products and services/need to be located close to the customer, e.g. market growth, market size and per capita incomes etc.
2) natural resource seeking (self-explanatory), e.g. national resources, skill labour, technology

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10
Q

two classifications of push factors

A

1) strategic motives - firms target countries and regions renowned for generating world-class innovations, e.g. competitors/customers follow up, geographical diversification
2) efficiency seeking - firms quest to single out the most efficient locations (combo of scale economies and low-cost factors), e.g. low transport and communication costs

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11
Q

systematic selection process

A

1) initial screening
2) industry sales potential
3) firms potential sales
4) identification of market opportunities

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12
Q

how do companies expand internationally

A

entry modes: exports, licenses, direct investments

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13
Q

what is foreign entry mode decision

A

the way that a firm wants to carry out its business activities and the degree of engagement in a foreign market, either by exporting, licensing or establishing their own subsidiaries

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14
Q

examples of licenses

A
  • distribution agreements
  • franchises
  • management contracts
  • manufacturing contracts
  • patents
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15
Q

what are some internal barriers for exporting on a micro level

A
  • difficulty in selecting reliable distributors
  • lack of negotiating power
  • little understanding of target market
    poor organisation of exports department
  • inability to access information
  • short international experience
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16
Q

what are some external barriers for exporting on a macro level

A
  • lack of proper trade institutions
  • lack of incentives and protection from the government
  • political instability
  • legal and political problems
  • demand insufficiency
  • adaptation problem of market entry
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17
Q

what is a direct export

A

this occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign market

18
Q

what is an indirect export

A

this involves the use of independent middlemen (brokers, bank) to market the firms products overseas

19
Q

pros and cons of using a broker etc.

A
  • pros: simplest an cheapest mode, no experience required
  • cons: lack of control over market strategies and selection of markets
20
Q

pros and cons of using independent agents, trading companies etc. (indirect export)

A
  • pros: learn from specialist, shared costs, fee dependent on sales and lower risk and higher flexibility
  • cons: not all markets are covered, post sales service cannot always be granted and higher dependency
21
Q

pros and cons of using a ‘piggy back’ (indirect export)

A
  • pros: simple and low risk, benefits from the ‘carriers’ knowledge, increases the product portfolio, makes it easier to achieve scale and scope economies
  • cons: the ‘riders’ brand is not perceived by the final customer and there are problems related to post sales services
22
Q

what is piggy-back exporting

A

a foreign distribution operation where your products are sold along with those of another manufacturer, often used by companies that have related or complementary (non-competitive) products

23
Q

pros and cons of direct exports

A

pros:
- higher number of marketing activities
- high control of exports
- higher feedback
- freedom for selecting the target markets
- concentrated manufacturing
- lower complexity and cost
cons:
- higher cost and risk
- lower flexibility
- exploitation of location advantages of foreign countries
- transportation costs, tariff and non-tariff barriers

24
Q

pros and cons of licenses

A

pros:
- facilitates quick expansion
- low cost
- access to distant markets
- use of ghost market knowledge
- no extra resources needed
- low capital investment required (high return on initial investment)
- wide range of contractual agreements
cons:
- difficulties in finding the right partners
- risk of losing control
- the licensee may become a new competitor when the license runs out
- may be hard to keep the standards (especially with franchises)

25
Q

what is licensing

A

a business agreement involving two companies, one gives special permissions such as using patents or copyrights, in exchange for payment

26
Q

what is a management contract

A

a legal agreement where the asset holder employs an operator to professionally manage the hotel

27
Q

how long do management agreements usually last

A

around 20-50 years

28
Q

pros and cons of joint-ventures

A

pros:
- shared cost and risk - acceleration in the international process
- exchange of resources, knowledge and experience
- a way for achieving higher size for competing
- may be the first step to test a market
- may help overcome governmental restrictions to FDI
- take advantage of contacts of partner network
cons:
- hard to find right partner
- shared revenues
- difficult organisational and cultural fit
- problems with control
- opportunistic behaviour of the partners
- hard to integrate the alliances portfolio
- lack of independence

29
Q

pros and cons of acquisitions

A

pros:
- lower start-up costs
- fast entry mode
- generates cash flow from the beginning
- good opportunity for acquiring local knowledge and contacts
- fast way to diversify
cons:
- institutional and cultural barriers
- integration problems
- less synergies than expected
- exit barriers
rigidness and inertia from previous manager
- complexity in the assessment of the value of firms
- public funds are harder to get in acquisitions compared to new investments

30
Q

pros and cons of Greenfields

A

pros:
- the subsidiary is created from scratch with no restrictions
- new image
- total control over management/operations etc.
- easier to achieve economies of scale
- most profitable option in the long term
cons:
- high cost and risk
- difficulties in distant markets
- time elapsed to obtain profit

31
Q

factors influencing entry mode choice

A
  • market potential
  • country risk
  • cultural distance
  • company size and experience
  • intangible resources
32
Q

factors influencing entry mode choice

A
  • market potential
  • country risk
  • cultural distance
  • company size and experience
  • intangible resources
33
Q

what is the sequential internationalisation process also known as

A

scandinavian/uppsala model

34
Q

what is meant by sequential

A

forming or following in a logical order or sequence

35
Q

critics of the scandinavian model

A
  • many companies do not follow it
  • increased market homogeneity
  • many firms need to follow their customers or competitors
  • need managers with international experience
36
Q

what are the four types of firms using the degree of internationalisation of firms and markets

A
  • pioneering firm
  • delayed firm
  • lonely firm
  • firm in a global network
37
Q

how do companies expand internationally

A

entry modes (exports, licenses, direct investments)

38
Q

what factors influence the decision for companies to begin in international activities

A

reactive and proactive, systematic process and emerging strategy

39
Q

according to literature what percentage of internationalisation follow the uppsala model

A

80%

40
Q

what are the stages of the sequential process

A

1) sporadic export
2) export through agents
3) sales subsidiaries
4) manufacturing subsidiaries

41
Q

what is the network approach

A

the network approach suggests that firms develop relationships with clients, distributors and suppliers creating an industrial market that allows an understanding of the International growth of the firm

42
Q

how is the network approach different to the Uppsala model

A

1) abandons the idea that internationalisation results from a rational decision process - instead is influenced by the network
2) introduces the idea of market relationships
3) considers the characteristics of firms and markets

International business management (6 decks)

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