Market Entry

Question 1

Equity Modes of ME

Answer 1

Greenfield
Brownfield
Acquisitions
Joint Ventures

Question 2

Non-Equity Modes of ME

Answer 2

Franchising
Licensing
Leasing
Management Service Contracts
Alliances
Export

Question 3

Communication between HQs and subsidiaries refers to:

Answer 3

transfer knowledge
coordinate the activities
monitor the subsidiaries
socialize their employees

Question 4

Decision criteria between GR and BR

Answer 4

Firm specific knowledge
Human capital
Financial resources
Plant and equipment
Excess resources
Cultural distance 
Integration & Adaptation

Question 5

Determinants (Einflussfaktoren) of the Transaction Cost (TC) View

Answer 5

Uncertainty and Opportunism

Question 6

Determinants of Agency Theory

Answer 6

Residual loss
monitoring costs
incentive costs
bonding cost

Question 7

What is the goal conflict in the Agency Theory?

Answer 7

Principal (Exporter) - Agency (Intermediary) > 0 –> residual loss (Restverlust)

Question 8

What is the opportunism risk in the Agency Theory?

Answer 8

Asymmetric information between the principal (exporter) and the agent (intermediary)

Question 9

Determinants of Resource-based View

Answer 9

Specific, non-imitable resources and capabilities of the export intermediaries:

• Knowledge of foreign market / institutional environment and the local transaction partners
• Cost advantages through economies of scale + scope

Question 10

Indirect Exporting - Advantages

Answer 10

• limited commitment and investment
• minimal risk
• no export experience required
• use intermediaries’ experience for market diversification

Question 11

Indirect Exporting - Disadvantages

Answer 11

• less control over market mix elements
• lack of contact with the market
• TC + AC (small profit to intermediary)

Question 12

Direct Exporting - Advantages

Answer 12

• access to local market experience
• contact with potential customers
• shorter distribution chain
• acquisition of market knowledge
• higher control over marketing mix elements

Question 13

Direct Exporting - Disadvantages

Answer 13

• investment in sales organisation required (for contact with distributers, agents from home base)
• cultural differences can lead to communication problems and higher TC
• possible trade restrictions

Question 14

Export intermediary performance

Answer 14

ability to lower clients search costs
ability to lower clients negotiation costs
ability to lower clients monitoring/enforcement costs

Question 15

Strategical Factors / Global Strategic Variables on which ME mode decision is based

Answer 15

Global Concentration
Global Synergies
Global Strategic Motivations

Question 16

MNC strategic behavior variables

Answer 16

Host country competition –> WOS
Host country growth –>JV
Assets seeking motivation (Vorteil, Vermögen) –> WOS
Global strategic motivation –> WOS

Question 17

MNC control variables

Answer 17

Firm size
Country risk
Cultural barrier
Establishment method
State-owned enterprise
Industrial sector

Question 18

Cultural Characteristics/Dimensions (Geert Hofstede)

Answer 18

Individualism - Collectivism
Masculinity - Femininity
Uncertainty avoidance (tolerance for ambiguity)
Power distance (extent to which individuals tolerate inequality in relationships)
(Long- vs. short-term orientation
Indulgence vs. restraint)

Question 19

National culture Paradox (within the cultural distance view)

Answer 19

Positive relation between cultural distance and low-control modes (dominant view) –> high = JV or GR (not A)

Negative relation between cultural distance and low-control modes

Question 20

Explain the separation of ownership of control

Answer 20

Owner: residual claimants and decision control

–> between them: potential goal conflict

Manager: decision management and initiation + implementation of decisions

Question 21

Two components of the property rights theory / Governance structure of JV consists of two components:

Answer 21

Decision rights:

• right to use the good
• right to change the good

Ownership rights:

• right to capture the profit or to bear the loss
• right to sell the good and to receive the payment

Question 22

Name the 3 steps of acquisition of local market knowledge

Answer 22

Internationalization strategy –> foreign market experience* –> resource commitment

*(market uncertainty reduction through experiential learning)

Question 23

Name the establishment chain (Uppsala Model)

Answer 23

1. no regular export activity
2. selling via an agent
3. sales subsidiary in foreign country
4. production subsidiary in foreign country

First choose markets with less physic distance, afterwards, markets with increasing physic distance are successively selected

Question 24

Organizational Learning

Answer 24

1. Core competence-oriented strategy: start with FDI in core business
2. Diversification strategy: experience and learning enable FDI in less related areas and finally in unsealed areas (non-core business)

Question 25

Organizational Capabilities

Answer 25

1. Sequentially enter a foreign market from strong competitive advantage of business lines over local firms to less competitive ones 2. Sequentially enter a foreign market, moving from core business to non-core business 3. accumulate investments in a foreign market and invest further in that market

Question 26

Factors influencing internationalization of SMEs

Answer 26

1. Domestic market is too small 2. Commitment by the management to internationalize 3. Personal networks that support partnerships 4. Unique technology + know-how that creates competitive advantage (mostly Born Globals) 5. Commitment to grow through alliances with suppliers and distribution partners

Question 27

Characteristics of emerging economies

Answer 27

``` weak legal infrastructure unclear rules of law (weak enforcement) capital scarcity bureaucracy rapid population growth rate increased urbanization economic reforms rapid economic growth ```

Question 28

Distances in emerging economies

Answer 28

Institutional distances (legal, regulatory, political, social rules) --> extent of diff. btw. MNC home + host country Cultural distance Sectoral distance

Question 29

Characteristics partial acquisitions

Answer 29

Higher flexibility lower investment costs lower control

Question 30

Determinants of Market Entry Choice

Answer 30

``` Geographic distance Cultural distance Political risk Market volume and growth Resources of the partner Brand name assets International experience Financial situation of the franchisor ```