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Question 1

What is Licensing in foreign market entry (FME)?

Answer 1

Companies license their name or logo to be used on another company’s products or services

Question 2

What is Franchising in foreign market entry (FME)?

Answer 2

The franchisee pays an ongoing fee to the franchisor; and in return, the franchisee receives the rights to use a given brand in order to sell products or services: often a retail arrangement (e.g. fast food)

Question 3

What is Subcontracting in foreign market entry (FME)?

Answer 3

Hiring foreign firm to produce a product to certain specifications (materials, processes, and quality).

Question 4

Difference between public and private firms?

Answer 4

Private firms are owned by the company ‘founder’ and/or their family.
- often smaller

Most large companies, however, are ‘public’
publicly held, which means, the public owns them

Question 5

What makes a public firm public?

Answer 5

A public company has gone through an IPO (Initial Public Offering)
–> This offers stock shares to the public

Question 6

What is Foreign Market Entry?

Answer 6

introducing your company to new markets by selling your product or service in a different country.

Question 7

What is FDI in the context of foreign market entry?

Answer 7

Foreign Direct Investment = the purchase of an interest in a company by an investor located in another country

Question 8

What does investment in foreign market entry involve?

Answer 8

capital and a time commitment, as it typically takes several years for a company to begin turning a profit.

(most risky)

Question 9

What is a Joint Venture (JV) in foreign market entry?

Answer 9

JV is a type of investment in foreign market entry where a new firm is established and jointly owned with a foreign firm. This allows the company to rely on the foreign expertise of the foreign market.

Question 10

Why is establishing a Joint Venture sometimes required by law?

Answer 10

to prevent a large number of foreign firms from entering the market and putting local firms out of business.

Question 11

Most common form of FDI?

Answer 11

M&A: Mergers and Acquisitions

Question 12

What is M&A (Mergers and Acquisitions)?

Answer 12

If a company buys part of the shares of a foreign company, we call this a merger

If it buys all, we call it an acquisition

Question 13

Motivations for International Production

Answer 13

1. Resource Seeking:
2. Market seeking
3. Efficiency Seeking:
4. Strategic Asset Seeking

Question 14

What is entry mode chocie?

Answer 14

a company’s approach to enter a new foreign market that has not been targeted by the company before.

Question 15

Different Modes of Entry

Answer 15

direct export, licensing, joint ventures, strategic and foreign direct investment. etc

Question 16

What is the importance of knowledge capital in entry mode choice?

Answer 16

Knowledge capital, which includes both individual and firm-owned knowledge such as technology and patents, plays a crucial role in determining the entry mode choice. There is a concern about the dissemination risk, where foreign firms may gain access to special processes or knowledge. Knowledge-intensive firms often prefer Foreign Direct Investment (FDI) as a means of entry to protect their knowledge advantages.

Question 17

What is a Global Value Chain?

Answer 17

International production, trade and investments are increasingly organised within so-called GVCs where the different stages of the production process are located across different countries.

Question 18

What is Intra-Firm Trade?

Answer 18

when parts of a company produce and sell goods to other parts of the same company.

Question 19

What is Task Assessment

Answer 19

Task assessment involves dividing the production process into specific tasks.

Question 20

How do corporate strategists determine the allocation of tasks to different countries?

Answer 20

They consider the efficiency gain associated with conducting a task in a particular country.

Question 21

What are the three-fold decision-making processes in international production?

Answer 21

• Tasks – dividing up your production process into this
  *Location – Choosing where to do the task
  *Mode—Choosing whether you will contract, or invest, and how

Question 22

What is the significance of value chains in the production process?

Answer 22

Value chains represent the division of tasks in the production process and guide the organization and coordination of production.

Question 23

What is the importance of efficiency gain in international production?

Answer 23

the benefits a company derives from producing in a certain country, which helps offset the increased costs and risks associated with international production.

Question 24

What is the “Smile” concept in Global Value Chains?

Answer 24

The “Smile” concept highlights that tasks such as R&D, branding, advertising, and after-sales support tend to add more value to the product compared to manufacturing.

Question 25

What are the major benefits of FDI?

Answer 25

job creation, increased productivity, technology transfer, and access to international markets.

Question 26

How is international production governed?

Answer 26

international production is not governed by a specific internationally recognized agreement. However, organizations like the OECD work towards liberalizing terms on Foreign Direct Investment (FDI).