7

Question 1

Why do companies opens up in other markets and become international? (5 things)

Answer 1

For the commercial traction, decrease operating cost, boost competitiveness, diversifying risks (having many operations and target markets) and prestige.

Question 2

Factors which determines the final choice of entry form into a forigen market

Answer 2

Control, risks, and Resources and capabilities.

Question 3

Control enables organization to

Answer 3

manage, adjust, coordinate its market activities and operations. More control an organization has more authority over decision and performance they have.

Question 4

Risk in the market is dependent on

Answer 4

the market uncertainty. The higher the uncertainty the higher the risk.

Question 5

Resources and capabilities determine the organizations entry strategy, in what way?

Answer 5

Less resources they have, lower the degree of resource commitment they get.

Question 6

Market entry strategies from low involvement and low cost too high involvement and high cost. (5 types)

Answer 6

Exporting, licencing, contract manufacturing, joint venture, & equity stake or acquisition

Question 7

Choice of startegy depends on

Answer 7

• Vision
• Attitude toward risk
• Available investment capital
• How much control is desired

Question 8

Advantages of exporting

Answer 8

The ease of implementing the strategy.
Risks are minimal
Most common overseas entry approach for small firms.
It’s a good start and can be used in the future.

Question 9

Modes of exporting

Answer 9

Indirect, direct and piggyback export

Question 10

Direct vs indirect export?

Answer 10

Direct exporting does not include intermediatireies (someone not connected to the company) while indirect does.

Question 11

Piggybacking

Answer 11

A forms of cooperative exports. The rider takes advantage of the carrier’s foreign market experience and distribution channel.

Question 12

Indirect Export Intermediaries include

Answer 12

Export merchant, Export agent and Export management companies

Question 13

Licensing is a

Answer 13

A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation: Patent, Trade secret, Brand name, or Product formulations.

Question 14

Advantages to Licensing

Answer 14

• Provides additional profitability with little initial investment
• Provides method of circumventing tariffs, quotas, and other export barriers
• Attractive ROI (return on investments)
• Low costs to implement
• Licensees have autonomy to adapt products to local tastes

Question 15

Disadvantages to Licensing

Answer 15

• Limited market control
• Returns may be lost
• The agreement may be short-lived
• Licensee may become competitor
• Licensee may exploit company resources

Question 16

SPECIAL LICENSING ARRANGEMENTS (2 types)

Answer 16

Contract manufacturing & Franchising

Question 17

Franchising

Answer 17

Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies.

Question 18

Investment is

Answer 18

Partial or full ownership of operations outside of home country. Forms of investment are joint ventures Minority or majority equity stakes & Acquisition.

Question 19

Joint Ventures

Answer 19

Entry strategy for a single target country in which the partners share ownership of a newly-created business entity. So Firm A and Firm B, together creates Joint venture C

Question 20

Joint Ventures advantages

Answer 20

• Allows for risk sharing-financial and political
• Provides opportunity to learn new environment
• Provides opportunity to achieve synergy by combining strengths of partners
• May be the only way to enter market given barriers to entry

Question 21

Joint Ventures disadvantages

Answer 21

*Requires more investment than a licensing agreement
* Must share rewards as well as risks
* Requires strong coordination
* Potential for conflict among partners
* Partner may become a competitor

Question 22

Equity Stake or Full Ownership

Answer 22

An equity stake is an investment. Full ownership means that the investor has 100 percent control.
Minority ˂ 50%, Majority˃ 50%

Question 23

Strategic alliances may be a

Answer 23

contractual arrangement whereby two or
more partners agree to cooperate with each
other and use each partner’s resources and
expertise to penetrate a particular market.

Question 24

Market Expansion Strategies depends on the choice of to

Answer 24

Seek new markets in existing countries and seek new country markets for already identified and served market segments.