CH 12 -Entering A Foreign Market

Question 1

First / early movers

Answer 1

Advantages: establish brand, sales volume, experience curve

Disadvantages: pioneering costs (promotion & regulation)

Question 2

Late movers

Answer 2

Advantages: experience, avoid pioneering costs

Disadvantages: switching costs, cost disadvantage

Question 3

Exporting

Answer 3

Adv: avoid costs, achieve experience

Dis: transport costs, tariffs, competition

Question 4

Turnkey projects

Answer 4

A contractor handles all details of a foreign project

Adv: gain econ. benefits
Dis: no long term investment

Question 5

Licensing

Answer 5

Licensor grants intangible property rights to a licensee

Adv: the firm avoids developmental costs & risks

Dis: loss of control over manufacturing, marketing & strategy

Question 6

Franchising

Answer 6

Licensing where the franchisee agrees to follow strict rules

Adv: Franchisee assumes costs

Dis: firm doesn’t have experience curve

Question 7

Joint Venture

Answer 7

Establish a firm that is owned by 2 or more firms

Adv: benefits from partners knowledge & sharing costs & risks

Dis: give control of its technology to its partner

Question 8

Wholly owned subsidiaries

Answer 8

A firm owns 100% of its stock

Adv: reduce risks of losing control over technological competence

Dis: most costly method