Entry and Strategy Flashcards
Exam 3 (30 cards)
What is strategic alliance?
A strategic alliance is a formal agreement between firms to work together on specific projects or business objectives—like sharing resources, knowledge, or markets—without merging or creating a new company.
What are questions you should be dealing with in entry and strategy?
Where
What (scale)
When
How (mode)
Where in entry strategy?
Where a firm invests in operations is influenced by a range of factors, including costs, resource availability, infrastructure, labor markets, and regulatory environments.
What is ownership advantage?
Ownership Advantage is a concept primarily used in international business and theory of foreign direct investment (FDI), especially in Dunning’s OLI Framework (Ownership, Location, Internalization). It refers to the competitive edge or unique benefits a company possesses that allow it to succeed internationally.
Whats an example of ownership advantage?
Intellectual Property & Technology
Apple’s iOS software and chip design
Tesla’s battery tech and autonomous driving algorithms
These are proprietary technologies that competitors can’t easily copy.
Brand Recognition & Reputation
Coca-Cola and Nike have globally recognized brands that help them enter new markets with consumer trust already established.
Managerial Expertise & Organizational Know-how
McDonald’s has operational systems and franchise management processes that allow it to scale efficiently worldwide.
Access to Capital
Large multinationals like Amazon or Toyota can invest in foreign markets thanks to their strong financial positions.
Oligopolistic Reaction
Oligopolistic Reaction refers to the tendency of firms in an oligopoly (a market dominated by a small number of large firms) to imitate or respond to each other’s strategic moves, especially in terms of foreign direct investment (FDI), pricing, product launches, or other competitive actions.
Oligopolistic reaction happens when big companies copy each other’s moves to stay competitive. Imagine a few major companies control most of a market—like airlines, car makers, or soft drink brands. If one of them enters a new country, lowers prices, or launches a new product, the others quickly follow so they don’t fall behind.
🧠 Think of it like this:
If Coca-Cola opens a new factory in India, Pepsi might do the same soon after. Why? Because neither wants the other to take over the market while they sit back.
When in entry strategy?
Being first movers comes with advantages and disadvantages.
When you come into the market
What are advantages of first movers
“First to establish a brand”
→ You’re the first name people remember.
Example: When you think of streaming, you think of Netflix—because it was one of the first.
“Build sales volume early, resulting in cost advantage”
→ Selling a lot early means the company can produce more for less (economies of scale).
Example: If a company makes lots of phones early, each phone costs less to make.
“Chance to create switching costs”
→ The company can make it hard or annoying for customers to switch to another brand later.
Example: If you already have a lot of songs saved in Spotify, switching to another app might feel like a hassle.
What are disadvantages in first movers strategy?
Pioneering cost like learning about the market and educating the audience”
→ The first company has to figure everything out—like customer preferences, rules, and how to sell the product.
It also has to teach people what the product is and why they should want it, which takes time and money.
Example: The first company to sell electric cars in a new country might have to explain how charging works.
“Host countries adjust regulations after initial experience”
→ The government might change the rules after seeing how the first company works.
That could make things harder or more expensive for the pioneer company.
Example: A country might raise taxes or create new rules about product safety after seeing the first foreign company operate.
What are advantages of being a late entrant?
first can learn and benefit from first movers. Host country regulations can be more stable.
ex: India and Nissan They came late to the scene and the FDI was more lenient.
what are disadvantages to being a late entrant?
eing a late “entrant” are late to establish a brand. More difficult to build sales volume. May have to overcome switching costs created by competitors.
What? What scale? Entry Strategy:
scale (or scaling) means a company’s ability to grow its operations, sales, or production—without a big increase in costs.
Large scale entry advantages
Advantages- signals commitment to governments, customers and suppliers. Creates perceived barriers for competitors. More likely to result in first movers advantages. Lack of flexibility may actually encourage success.
Large Scale entry disadvantages
difficult to back out, can tie up resources that could be used elsewhere, financial risk is greater.
What is large scale entry?
Large-scale entry refers to a strategy where a company enters a new market or foreign country by making a significant investment up front — in terms of capital, resources, infrastructure, or presence — rather than testing the waters with small steps.
Large scale entry ex
Tesla is building a massive Gigafactory in Germany instead of slowly exporting more cars to Europe.
Walmart entered a country by acquiring or opening dozens of stores at once.
Apple launched an entire retail chain in a new country rather than starting with online-only sales.
Advantages of smaller scale entry
limits exposure while learning about the host market. Options (option to increase commitment later) Experience gained may reduce risks of later investments into the market.
Disadvantages of small scale entry
difficult to build a brand, firms might not try hard to bed success which leads them to leave the market too early.
what is small scale entry
Small-scale entry is a market entry strategy where a company enters a new or foreign market gradually, using limited resources and lower risk methods to test the market before making bigger commitments
How (mode) entry strategy
1.Exporting
2.Licensing
3. Franchising
4. Wholly owned subsidaries
Mode 1 Exporting
Advantages vs Disadvantages
Advantages: firms can manufacture in one spot. Ability to realize location and experience economies. Simplicity. Less perceived risk.
Disadvantages- transportation costs. Trade barriers, and problems with local agents.
Mode 2 Licensing
Licensing is a contractual agreement where the licensor allows the licensee to use certain rights (such as a trademark, brand, or technology) under specific terms and conditions, usually in return for a royalty payment.
Advantages vs disadvantages of licensing
Advantages
Low Risk Market Entry- The licensor doesn’t need to invest heavily in foreign markets.
Revenue Stream- Royalties create ongoing income from existing assets.
Faster Expansion- The licensee handles local operations, speeding up market growth.
Local Expertise- Licensees usually understand the local market, laws, and culture.
Focus on Core Business- Licensors can expand without diverting internal resources.
Disadvantage
Loss of Control- The licensor can’t fully control how the product, brand, or tech is used.
Risk to Brand Reputation- Poor quality or behavior by the licensee can damage the brand.
Limited Income Potential- Royalties are often lower than profits from direct operations.
Intellectual Property Risk- Risk of IP theft or misuse, especially in weak legal systems.
Creating Future Competitors- Licensees can learn your business and later compete with you.
What is franchising?
Franchising is a legal and commercial relationship between the owner of a trademark, brand, or business model (the franchisor) and an individual or company (the franchisee) who operates a separate location of the same business under the franchisor’s system.
