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International Business > Foreign Entry Strategies > Flashcards

Foreign Entry Strategies Flashcards

1
Q

What is strategy?

A

Planned set of actions that managers take to make best use of the firms resources and core competencies to gain a competitive advantage

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2
Q

Why enter? Objectives of establishing foreign subsidiaries

A

Nature resource seeking

Market seeking

Efficiency seeking

Innovation seeking

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3
Q

Nature resource seeking advantages

A

Quality and costs of nature resources

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4
Q

Market seeking advantages

A

Strong market demand and customers willing to pay

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5
Q

Efficiency seeking advantages

A

Economies of scale

Abundance of low-cost labour force and suppliers

Transport and communication infrastructure

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6
Q

Innovation seeking advantages

A

Innovative individuals, firms and unis

Industry agglomeration (collection of things)

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7
Q

First mover advantages

A

Experience curve benefits

Scale benefits

Reputation

Pre-emotion of scale resources

Buyer switching costs

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8
Q

Late mover advantages

A

Free riding

Learning

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9
Q

Foreign market entry strategies

A

Exporting

Contractual agreements, strategic alliances, licensing and franchising

Joint ventures and mergers and acquisition

Wholly owned subsidiary- FDI

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10
Q

How to enter non-equity modes

A

Exporting

Licensing

Strategic alliances

  • technological
  • marketing
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11
Q

How to enter- equity modes

A

Mergers and acquisitions

Joint venture

  • scale
  • link

Wholly owned subsidiaries

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12
Q

Purpose of mergers and acquisition

A

Acquiring another business can fulfil several of a company’s needs

65/70% fail to deliver anticipated results

Finding an appropriate acquisition candidate

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13
Q

The integration responsiveness framework

A

Global integration

Local responsiveness

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14
Q

Global integration STANDARDISATION refers to

A

Coordination of firms activities across countries to achieve worldwide efficiency and synergy in order to take maximum advantage of similarities across countries

Emphasises efficiency/economies of scale

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15
Q

Local responsiveness/adaptation refers to

A

Meeting specific needs of buyers in individual countries

Learning/differentiation

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16
Q

How to organise your operation?

A

Standardisation/global strategy

Adaptation/multidomestic strategy

Glo-Cal/transnational strategy

Home replication strategy

17
Q

Standardisation (global) strategy

A

Take a product and transfer it

Start from a single case e.g flagship store and scale up

Standardise best practices and maximise efficiency

Why not make same product same way everywhere

Management emphasises central control and coordination to achieve max synergy, efficiency and integration

View world as one large market

18
Q

Advantages of standardisation strategy

A

Allows companies to liberate low cost advantage and achieve economies of scale

E.g McDonald’s

19
Q

Disadvantage of standardisation strategy

A

Low level of local responsiveness

Only works for very simple or complicated products

20
Q

Adaptation (Multidomestic) strategy

A

Need to understand customers need

Make them understand why product is important for them

Approach to internationalisation where high culture ensure autonomy towards each area allowing them to operate independently to pursue local responsiveness

E.g Nestle, often considered a local firm in each of its markets, varies the taste of coffee in different areas

21
Q

Advantage of adaptation/multi-domestic strategy

A

Maximum local responsiveness

22
Q

Disadvantage of adaptation/multi-domestic strategy

A

Cost of duplicating companies efforts to pursue local responsiveness

23
Q

Glocal (transnational) strategy

A

Think globally act locally

Identify best practices and transfer them

Centralise core functions and decentralise others

Strives to be responsive to local needs while retaining sufficient control to ensure efficiency

E.g Starbucks chai latte
Lenovo locate HQ China US, manufacturing low cost countries for economies of scale, basic computers are the same but software and keyboard adapted to accommodate differences in language

24
Q

Advantages of Glocal strategy

A

Has the benefits of global and multi-domestic strategy

Both global integration and local responsiveness

25
Q

Disadvantages of Glocal strategy

A

Difficulty to balance integration and local responsiveness

Only works when the company does local exploration and creates local knowledge transfer mechanisms to capture learning

Local unions have to be listened to

Most find it difficult to implement

26
Q

Home replication strategy

A

Views international business as separate/secondary to its domestic business

Emphasises international replication of home country based core competencies

Opportunity to generate additional sales for domestic product lines

Design with domestic market in mind but pursue international business to extend product life cycle and replicate home market success

E.g Walmart American footballs in Brazil

27
Q

Advantages of home replication strategy

A

Relatively easy to use and implement

Allows companies to leverage home country based advantage

28
Q

Disadvantages of home replication strategy

A

Little local responsiveness

Failing to be mindful of local customers need and wants

Foreign customers alienation

29
Q

Global indusry

A

Industry in which competition is on a regional or worldwide scale

30
Q

Multi-domestic industry

A

An industry in which competition takes place on a country by country basis

31
Q

Global industry have same competitors

A

Multi-domestic cater to specific needs of local buyers, usually adapt product according to local characteristics of each market

Each country has a unique set of competitors.

32
Q

Institutional constraints on foreign entry strategies

A

Prohibit certain types of operations or transactions

Create a need for local knowledge

Change the relative costs of alternative strategies

Motivate tariff jumping

33
Q

Firm response to prohibiting certain types of operations or transactions

A

Establish joint ventures where wholly owned subsidiaries are not permitted

Locate where planning permissions are easier to obtain

34
Q

Firm response to need for local knowledge

A

Establish joint ventures to access local knowledge

Locate in places that have agglomerations of foreign investors that help attain local knowledge

35
Q

Firms response to high transaction costs due to costly contact enforcement or lack of financial intermediaries

A

Avoid complex arms length contracts with unfamiliar partners

Avoid joint ventures

Avoid full or partial acquisitions of local firms

Locate in areas where local uncertainty is lower

36
Q

Firms response to higher tariffs or other trade barriers

A

Locate production in the target market

International Business (6 decks)

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