Expanding abroad

Question 1

What is a multinational enterprise

Answer 1

• Enterprise that is international

Question 2

List three characteristics of MNE

Answer 2

1. Substantial direct investment in foreign countries
2. Active coordinated management of these offshore assets
3. Strategic and organizational integration of operations in different countries

Question 3

What are the motivations to internationalize

Answer 3

Traditional motivations and Emerging motivations

Question 4

List all traditional motivations

Answer 4

Market seeking - fill capacity, exploit competitive advantages and economies of scope and scale

Resource Seeking - secure key supplies, exploit factor cost differences ( low cost production)

Question 5

List all Emerging motivations

Answer 5

1. Industry internalization forces: scale economies, ballooning R&D investments, shortening product life cycles
2. Global scanning and learning capability: Access emerging trends, new technologies, and best skills
3. Competitive positioning use global operations to pre empt other, cross-subsidize

Question 6

What approaches to foreign market entry are available to firms? list pros and cons

Answer 6

1. Export
   - Pro: Expand market without dependence
   - Con: Time and control
2. Licensing
   - Pro : less capital investment needed
   - Con: trademark/reputation ruined by partner
3. Franchising
   - Pro: low investment, scaling
   - Con: Culture, legal
4. Joint Ventures
   - Pro: New market penetration with existing brans
   - Synergy
   - Con: Culture, different objectives
5. Subsidiaries
   - Pro: high control, streamline process

• Con: Large investment and time, political risk

Question 7

When should a firm choose a given entry mode?

Answer 7

1. Export - low control over foreign activity, low amount of resources committed to foreign market
2. Licensing
3. Franchising
4. Joint venture
5. Subsidiaries - high control over foreign activity, high amount of resources committed to foreign market

Question 8

What does Cage stand for

Answer 8

1. Cultural - languages, religion, social norms
2. Administrative and political - trade and political unions, currency, tariffs, trade quota, political instability
3. Geographic - distance to country, access to water, transportation and communication infrastructures
4. Economic - wealth and income of customers, resource and factor costs

Question 9

What are the mentalities and strategic approaches to internationalization

Answer 9

International Mentality
exploit tech forces by creating new products domestically and diffuse to foreign
( med global integration, low nations responsiveness)

Multinational Mentality
strong national subsidiaries sensitive to local development/adaptation.
(low global integration, high national responsiveness)

Global Mentality
Centralized, scale sensitive manufacturing, R&D, worldwide exports of standard products
(High global integration, low national responsiveness)

Transnational Mentality
global integration, national responsiveness and worldwide learning
( high global and national responsiveness)