Selecting and Entering Global Markets Flashcards
What is the difference between indirect exporting and direct exporting?
Indirect exporting is a little cheating. Selling goods to the 2nd Austrian company (for you it’s a domestic transaction), the 2nd company exports the goods for you (you know that the gods will eventually be exported). Indirect: selling to another domestic company that then does the exporting for you -> trading company, export management company, piggy-back exporting
Direct exporting = you sell directly into the foreign market (foreign distributor, agent, overseas marketing subsidiary, overseas branch)
What is the difference between a distributor and an agent?
Distributor takes title (buys the product, then sells the product again). Agent is acting on commission (has samples, arranges sales in the foreign market, gets a commission).
What is piggyback exporting?
A Carrier and a Rider. E.g. photocopying, Equador. Come to agreement with IBM, sell our photocopies to guys you see there in Equador.
Need training, teach sales
You are responsible for faulty products, service, warranty, since YOU sold the product
Rider:
Gets into the market straightaway, very quickly, w/o much investment
Lacks control of how much the carrier pushes the product. Carrier doesn’t have that much knowledge, might do not very efficiently.
* Approaching another company that is active in a market to sell your product often a completely different product
* Involves a carrier and a rider carrier sells the strange product, rider provides the product
o Carrier: additional sales
What is the difference between licensing and franchising?
Franchising is a more complex form of licensing, franchising an entire system.
Licensing involves a producer renting out intellectual property to a third party. Normally the licensor—the party granting the license—is compensated by the licensee—the party obtaining the license—through a lump sum and royalties, which are both specified in the license agreement.
ability to enter a market with little capital outlay, to circumvent trade barriers and government restrictions and tap into local knowledge and expertise.
limited contact with customers, little control over the product and the image developed in the market, danger of having one’s intellectual property infringed upon by the licensee.
Franchising = agreements between two parties where the franchisor grants the franchisee the right to run a business bearing the former’s name.
What is Licensing?
Licensing involves a producer renting out intellectual property to a third party. Normally the licensor—the party granting the license—is compensated by the licensee—the party obtaining the license—through a lump sum and royalties, which are both specified in the license agreement.
ability to enter a market with little capital outlay, to circumvent trade barriers and government restrictions and tap into local knowledge and expertise.
limited contact with customers, little control over the product and the image developed in the market, danger of having one’s intellectual property infringed upon by the licensee.
What is Franchising?
Franchising is a more complex form of licensing, franchising an entire system.
Franchising = agreements between two parties where the franchisor grants the franchisee the right to run a business bearing the former’s name.
What is an equity joint venture?
Equity joint ventures= formed by establishing a new jointly owned company or by purchasing equity in an existing company. Depending on the agreed proportion of capital investment, joint ventures as referred to as minority joint ventures, 50/50 joint ventures, or majority joint ventures. In addition to drawing up a joint venture agreement, the companies involved typically also enter into accompanying contractual agreements, such as distribution agreements or licensing agreements.
2) o the foreign company invites an outside partner to share stock ownership in the new unit; two partners contribute with a fixed amount of resources & the venture develops on its own; reasons: share the risk of a new venture, take advantage of jv partner skills/contacts, involve a customer, enter government-controlled economies
What are common reasons for strategic alliances?
Two+ firms pool their resources in a collaboration which goes beyond the limits of a joint venture. Reasons: technology-based, production-based, distribution-based.
What is meant by make or buy decisions in the context of Foreign Direct Investments (FDIs)?
Decisions whether to produce smth in house (make) or outsource it to suppliers (buy). Especially important in terms of technology.
What is the difference between FDIs and Portfolio Investments? (book)
Foreign direct investment presumes that the investor has control or significant influence over the investment, usually defined as an equity capital stake of 10 % or more. If the threshold of 10 % ownership is not reached, investments are viewed as portfolio investments.
Is only depending on the number \proportion of shares or is it also dependent on the managerial influence which you may or may not have?
Can be 8% + Managerial influence, control. How much control rights? In the right of the beholder. If you want to treat it as your FDI, you do it. In contrast, fully owned subsidiary is wholly owned.
How do you choose a Market Entry Alternative ?
Choosing a Market Entry Alternative - based on a variety of criteria. The number and weights attached to specific selection criteria depend on the industry and on firm specific requirements.
