Entry into foreign markets Flashcards
what are the four motives for internationalisation?
- push factors (from home market) = escape (explore better positions elsewhere to avoid home’s conditions)
- pull factors (from host markets) = buy better (exploit host’s capabilities to avoid home’s high costs)
- chance factors (in host markets) = upgrade (explore host’s capabilities to upgrade home’s operations)
- entrepreneurial factors (from the company itself) = sell more (exploit current resources to obtain more revenue)
what is the difference between the pull and chance factors?
pull factor relocates the business, while chance factor only brings the strategic resources back to the home country
which has been more popular in the past with emerging economies - pull or chance factor?
chance (get strategic resources, but stay in the home country)
which has been more popular in the past with companies from developed economies - pull or chance factor?
pull (relocate the business)
what are the 4 decisions a company has to make before entering a new market?
- which market to enter
- when to enter it
- the scale of entry (geographical)
- how ot enter it
what do companies do to decicde which market to enter? (to make a market choice) (3)
- preliminary screening = macro-oriented screening of the foreign environment
- fine-grained screening = market characteristics (combined with the firm’s capabilities)
- marketing research = competiton and customer analysis
with which tool is preliminary screening done? what does it do?
business environment risk index (BERI) = measures the quality of a country’s business environment (economic, political, financial factors)
what matrix helps us to determine the market characteristics (and is a result of fine-grained screening)?
market/country attractiveness & competitive strength matrix
(adaptation of MABA matrix)
-> tells us which countries to invest in, which to do selective investments for, and which to divest from
define the country attractiveness & competitive strength matrix
x axis: competitive strength, 5 on L and 1 on R
y axis: market/country attractiveness, 1 on (0,0) and 5 on top
state 3 (example) components of market attractivess
competitive conditions, average industry margin, market size and potential
state 3 (example) components of competitive strength
market share (potential), marketing capabilites, access to distribution channels
what are the options for companies on HOW to enter a foreign market (3 modes of entry, 3/4/3 options for each)?
- export modes
- indirect export
- direct export
- cooperative export - intermediate modes
- franchising
- licensing
- strategic alliances
- joint ventures - hierarchial/investmend modes
- assembly operations
- acquisition
- wholly-owned subsidiary
which of the 3 modes of entry is resource commited the highest?
hierarchial/investment mode(s - the three options of this one)
which of the 3 modes of entry is the most flexible?
export mode
what are the decision factors when a company is deciding how to enter a foreign market?
- internal factors (firm size, experience, type of product)
- external factors (country risk, trade barriers, competition intesity)
- transaction factors (costs, type of know-how)
- desired mode characteristics (risk avoidance, flexibility, control)
which of the 3 modes of entry has the most control?
hierarchial/investment mode
how do companies decide WHEN to enter a foreign market?
it depends on the barriers in the process of internationalisation (country risks, financial risks, and business risks)
should all companies even internationalise? how do they decide if they should?
not all should. they need to consider two factors: how globalised their industry is, and to what extent their company is prepared for the internationalisation
describe the decision of internationalisation matrix
in the ppt!
do first-movers always have advantages?
not really. it depends on the characteristics of the BE: pace of market evolution and pace of technological evoulution
how likely is the first-mover advantage in these scenarios:
- slow tech evolution, slow market evolution
- fast tech evolution, slow market evolution
- slow tech evolution, fast market evolution
- fast tech and market evolution
- very likely
- unlikely
- likely if the firm has the resources to address all market segments
- very unlikely
what are advantages of exporting? (4)
- minimizes risk
- minimises investment
- high speed of entry
- maximises economies of scale
what are the 5 disadvantages of exporting?
- trade barriers
- transport costs
- lack of control (depending on distributers)
- limited access to local info
- outsider status
def indirect export
supplier gives product to intermediary which exports it
