Intermediate Entry Modes Quiz and Flashcards

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Questions and Answers

What is the key strategic issue for companies in today’s fast internationalizing marketplace?

Sharing ownership and risk in intermediate modes

Developing a foreign sales subsidiary

Selecting the most profitable entry mode

Deciding on the mode of entry (correct)

Which type of entry mode offers low control, low risk, and high flexibility?

Export modes (correct)

Intermediate modes

Hierarchical modes

Strategic modes

What does the text suggest about the relationship between company size and resources in the context of entry mode selection?

Smaller companies have more resources available for entry mode selection.

Larger companies have more resources available for entry mode selection. (correct)

Larger companies face difficulties in accessing resources for entry mode selection.

Company size is not related to the availability of resources for entry mode selection.

What does the text suggest about the influence of international experience on entry mode selection?

More international experience leads to easier access to resources. Signup and view all the answers

What factor influences the control a company wants in the context of product/service characteristics or complexity?

Product diversity and competitive advantage Signup and view all the answers

What does sociocultural distance contribute to in the decision-making process for entry mode selection?

It creates internal uncertainty for the firm. Signup and view all the answers

What is the appropriate entry mode when a company wants to achieve better control of sales and show commitment to customers?

Domestic based sales Signup and view all the answers

When is a joint venture an appropriate entry mode?

When companies want to have complementary technology or management skills Signup and view all the answers

In which entry mode is the sales function transferred to the foreign market and tax advantages can be gained through sales subsidiaries in low-tax countries?

Foreign based sales Signup and view all the answers

When is the hierarchical entry mode appropriate?

When a company completely owns and controls the foreign entry mode Signup and view all the answers

What is the appropriate entry mode when a company wants to establish regional headquarters to stimulate sales in a certain region?

Region centers Signup and view all the answers

When is the joint venture entry mode not appropriate?

When companies want to transfer greater autonomy and responsibility to foreign units Signup and view all the answers

In which entry mode is the product made in the domestic market and then shipped, and the type selected based on which functions are the responsibility of an external agent and which will be handled by the company themselves?

Export mode Signup and view all the answers

Which entry mode involves a formal branch office that is an extension and legal part of the company?

Foreign based sales branch Signup and view all the answers

What is the appropriate entry mode when a company wants to gain new business by demonstrating strong commitment, costs can be saved by locating production facilities overseas, and the product has long-term market potential?

Foreign sales subsidiary Signup and view all the answers

When is the transnational organization entry mode appropriate?

When management views world as series of interrelated markets Signup and view all the answers

What type of export mode involves another partner in the exporting process?

Indirect export Signup and view all the answers

Which export mode is suitable for firms lacking resources or willingness to invest in manufacturing?

Contract manufacturing Signup and view all the answers

For which firms is licensing appropriate?

Firms concentrating on core competencies Signup and view all the answers

In which type of market would a firm like Zara use hierarchical modes?

Large markets with high growth potential and low cultural distance Signup and view all the answers

What kind of trade barriers can make it cost-effective for firms to produce locally?

Higher import tariffs and stricter regulations Signup and view all the answers

Why do stronger firms tend to prefer hierarchical modes?

For greater control and protection of brand equity Signup and view all the answers

What is the characteristic of contract manufacturing as an export mode?

Involves outsourcing manufacturing to foreign partners Signup and view all the answers

What does franchising as an export mode involve?

Involves granting the right to use the business concept Signup and view all the answers

What type of export mode grants the right to manufacture a product?

Licensing Signup and view all the answers

What does indirect export mode involve?

Involves another partner in the exporting process Signup and view all the answers

Study Notes

Export modes make markets less profitable for firms, leading them to choose modes with low resource commitment and test the waters first.
The stronger the firm, the more towards export modes that involve greater control and less risk.
Market size and growth increase the likelihood of management committing resources to market development.
Trade barriers can make it cost-effective for firms to produce locally and reduce the need for export intermediaries.
Tacit nature of know-how and opportunistic behavior can create friction between firms and local partners.
Stronger firms tend to prefer more hierarchical modes for greater control and protection of brand equity.
Zara is an example of a firm using hierarchical modes in large markets with high growth potential and low cultural distance.
Indirect export modes involve another partner in the exporting process, and are appropriate for firms with limited objectives and resources.
Contract manufacturing is an intermediate mode where the parent firm outsources manufacturing to foreign partners, which is suitable for firms lacking resources or willingness to invest in manufacturing.
Licensing is another intermediate mode where the parent firm grants the right to manufacture a product, which is appropriate for firms concentrating on core competencies and wanting to broaden brand exposure.
Franchising is a type of intermediate mode where the parent firm grants the right to use the business concept, which is suitable for firms requiring a large number of geographically dispersed outlets.

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Description

Test your knowledge of market entry strategies in global marketing with a focus on entry modes. This quiz covers key strategic issues and the types of entry modes used by companies to enter foreign markets.

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