22 Questions
What is a major advantage of International Licensing?
Low financial risk
Which of the following is a disadvantage of International Franchising?
Increased complexity
What is the main benefit of Foreign Direct Investment (FDI)?
Profit potential
Which of the following is a type of Foreign Direct Investment?
Joint Ventures
What is a disadvantage of the Greenfield Strategy?
Implementation takes time and patience
Which of the following is an advantage of International Licensing?
Low financial risk
What is a challenge of Foreign Direct Investment (FDI)?
Economic risks
Which of the following is not a type of Foreign Direct Investment?
International Franchising
What is a primary advantage of exporting over foreign direct investment?
Relatively low financial exposure
What motivates a firm to enter foreign markets due to opportunities available there?
Proactive motivations
What type of exporting involves selling products directly to customers in foreign markets?
Direct exporting
What involves the transfer of products within a company's own subsidiaries or affiliates?
Intracorporate transfers
What allows a firm to utilize the resources and expertise of a foreign partner?
International licensing
What involves the production of goods by a foreign company according to the specifications of the licensing firm?
Contract manufacturing
What type of international business involves the right to produce and sell a company's products in a foreign market?
International franchising
What is a primary disadvantage of exporting?
Vulnerability to tariffs and nontariff barriers
What is one of the primary advantages of Foreign Direct Investment (FDI)?
Control over the firm's resources
What is the primary role of an export intermediary?
To facilitate exporting goods
What is one of the advantages of international franchising?
Requires less capital investment
What is contract manufacturing?
A manufacturing arrangement in which a firm hires a local manufacturer to produce its products
What are the three basic forms of Foreign Direct Investment (FDI)?
Acquisition, Greenfield, and Joint Venture
What is one of the disadvantages of international licensing?
Loss of control over the licensed technology
Study Notes
International Business: Entry Modes and Strategies
International Licensing
- Low financial risk
- Market assessment opportunities
- Sales opportunities
- Disadvantages: limited market opportunities, potential litigation, competitive issues
International Franchising
- Product and system reputation
- Low-cost expansion opportunities
- Learning opportunities
- Disadvantages: shared revenues, increased complexity, quality control issues
Foreign Direct Investment (FDI)
- Benefits: increased control, profit potential, local factories
- Challenges: economic risks, political risks, operating complexity, government policies
Greenfield Strategy
- Disadvantages: implementation takes time, location may be costly, government regulations, recruiting and training local workforce, stigma as a foreign firm
Exporting to Foreign Markets
- Primary advantages: relatively low financial exposure, gradual market entry, acquiring knowledge about local market
- Primary disadvantages: vulnerability to tariffs and non-tariff barriers, logistical complexities, potential conflicts with distributors
Motivations for Exporting
- Proactive motivations: opportunities available in foreign markets
- Reactive motivations: decreasing opportunities in domestic market
Forms of Exporting
- Indirect exporting
- Direct exporting
- Intracorporate transfers
Acquisition Strategy
- Advantages: control over resources, generates immediate revenues, adds no new capacity to the industry
- Disadvantages: assumes the firm's liabilities, inherits unresolved problems, requires substantial upfront spending
Joint Ventures
- Jointly-owned separate firm
- Promotes mutual interest
Learn about the advantages and disadvantages of international licensing, including low financial risk, market assessment, and sales opportunities. Understand the potential drawbacks, such as limited market opportunities and competitive issues.
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