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What is a primary factor influencing firms' decision on entry modes into foreign markets?
What is a primary factor influencing firms' decision on entry modes into foreign markets?
Which method of entry is characterized by creating a new firm in a foreign country?
Which method of entry is characterized by creating a new firm in a foreign country?
What might lead firms to choose acquisition over greenfield investment when entering foreign markets?
What might lead firms to choose acquisition over greenfield investment when entering foreign markets?
Why might late entrants into oligopolistic markets prefer acquisitions?
Why might late entrants into oligopolistic markets prefer acquisitions?
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Which type of market is acquisition suggested as a suitable method for entering?
Which type of market is acquisition suggested as a suitable method for entering?
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In terms of entry strategy, who is likely to prefer greenfield investments?
In terms of entry strategy, who is likely to prefer greenfield investments?
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What aspect contributes to the uniqueness of each firm's resources in foreign market entry?
What aspect contributes to the uniqueness of each firm's resources in foreign market entry?
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Which of the following options is least likely to be a reason for high acquisition rates in faster-growing markets?
Which of the following options is least likely to be a reason for high acquisition rates in faster-growing markets?
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What is the 'classic' organizational form for a multinational company?
What is the 'classic' organizational form for a multinational company?
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Which mode of entry into foreign markets allows for shared ownership and risks?
Which mode of entry into foreign markets allows for shared ownership and risks?
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What external factor can trigger a change in the mode of entry used by a multinational?
What external factor can trigger a change in the mode of entry used by a multinational?
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Which of the following is NOT a common mode of entry for multinationals?
Which of the following is NOT a common mode of entry for multinationals?
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In the incremental process of entering a foreign market, what does local production primarily aim to achieve?
In the incremental process of entering a foreign market, what does local production primarily aim to achieve?
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What is one of the potential benefits of forming alliances and constellations in the global market?
What is one of the potential benefits of forming alliances and constellations in the global market?
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Which entry mode could be characterized by the establishment of a new, fully owned subsidiary from scratch?
Which entry mode could be characterized by the establishment of a new, fully owned subsidiary from scratch?
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Which of the following is a disadvantage of using acquisition as a mode of entry into foreign markets?
Which of the following is a disadvantage of using acquisition as a mode of entry into foreign markets?
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What was one major effect of acquisition strategies after World War II on US manufacturing firms?
What was one major effect of acquisition strategies after World War II on US manufacturing firms?
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What characteristic defines a fragmented market?
What characteristic defines a fragmented market?
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In which country did Unilever acquire Companhia Gessy Industrial?
In which country did Unilever acquire Companhia Gessy Industrial?
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What facilitated the rise of hostile takeovers in the business systems of Britain and the US?
What facilitated the rise of hostile takeovers in the business systems of Britain and the US?
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What challenge did Unilever face when acquiring companies in developing countries?
What challenge did Unilever face when acquiring companies in developing countries?
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What percentage of the European ice cream market did Unilever hold by the 1980s?
What percentage of the European ice cream market did Unilever hold by the 1980s?
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Which market sector did Unilever notably consolidate through acquisitions?
Which market sector did Unilever notably consolidate through acquisitions?
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What was a key strategy used by Unilever to expand its international ice cream business?
What was a key strategy used by Unilever to expand its international ice cream business?
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What is likely to happen if an acquired foreign firm is fully absorbed into the parent company?
What is likely to happen if an acquired foreign firm is fully absorbed into the parent company?
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What systematic process did Unilever develop for post-acquisition management?
What systematic process did Unilever develop for post-acquisition management?
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During which decade was the pace of Unileverization notably accelerated?
During which decade was the pace of Unileverization notably accelerated?
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What major change occurred within two years of Unilever's acquisition of Cheseborough Ponds?
What major change occurred within two years of Unilever's acquisition of Cheseborough Ponds?
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What was a characteristic of joint ventures during the interwar years?
What was a characteristic of joint ventures during the interwar years?
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What was the initial purpose behind the formation of the Kuwait Oil Company in 1934?
What was the initial purpose behind the formation of the Kuwait Oil Company in 1934?
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Which aspect of the Unilever acquisition process was focused on retaining key managerial talents?
Which aspect of the Unilever acquisition process was focused on retaining key managerial talents?
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What was the effect of selling unwanted assets after a corporate acquisition by Unilever?
What was the effect of selling unwanted assets after a corporate acquisition by Unilever?
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What is a significant challenge faced by foreign firms during post-acquisition management in the United States?
What is a significant challenge faced by foreign firms during post-acquisition management in the United States?
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Which of the following is associated with hostile acquisitions in Continental Europe and Japan?
Which of the following is associated with hostile acquisitions in Continental Europe and Japan?
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What tends to happen to the shareholders of acquired firms during acquisitions?
What tends to happen to the shareholders of acquired firms during acquisitions?
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What do cross-border acquisitions face that adds to their overall risk?
What do cross-border acquisitions face that adds to their overall risk?
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Why might foreign acquirers pay too much for acquisitions in the United States?
Why might foreign acquirers pay too much for acquisitions in the United States?
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What can create tension between senior executives and foreign firms?
What can create tension between senior executives and foreign firms?
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In acquisitions, what is typically true about the sellers compared to the buyers?
In acquisitions, what is typically true about the sellers compared to the buyers?
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What element complicates the integration process during cross-border acquisitions?
What element complicates the integration process during cross-border acquisitions?
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What motivated Standard Oil of California and Texaco to form a joint venture in 1936?
What motivated Standard Oil of California and Texaco to form a joint venture in 1936?
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What challenge did the predecessors of IG Farben face after World War I?
What challenge did the predecessors of IG Farben face after World War I?
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How did IG Farben manage to regain a strong market position?
How did IG Farben manage to regain a strong market position?
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What was the primary benefit for Océ van der Grinten in making licensing agreements?
What was the primary benefit for Océ van der Grinten in making licensing agreements?
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What type of companies often collaborated with Océ van der Grinten through licensing?
What type of companies often collaborated with Océ van der Grinten through licensing?
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What continued to be a strategy for Océ until the 1960s?
What continued to be a strategy for Océ until the 1960s?
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What was one of the main advantages for managers from Océ visiting their licensees?
What was one of the main advantages for managers from Océ visiting their licensees?
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What was the approach taken by Océ to expand its market reach initially?
What was the approach taken by Océ to expand its market reach initially?
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Study Notes
Chapter 6: Crossing Borders
- Topic and Structure of the Lesson: Entering and existing markets, evolution of multinationals, Greenfield vs acquisition, divestments, alliances and constellations, subsidiaries and hybrids
- Entering and Existing Markets: The 'classic' organizational form was often a wholly owned affiliate. This coexisted with other forms like joint ventures, licensing, franchising and long term contracts. Firm, industry, location, and time-specific factors influenced the chosen mode. Multinationals follow an incremental process when entering a foreign market (e.g., starting with export, then distribution, and eventually local production).
- Greenfield vs Acquisition: Greenfield investment creates a new firm, while acquisition involves buying an existing firm. Companies with new technologies might prefer greenfield as they lack suitable acquisition targets. Established multinationals might choose acquisition to reduce uncertainty in new markets.
- Acquisition: Used to consolidate fragmented industries. Strategies accelerated after World War II. Acquisition might be used to enter fast-growing markets or when target markets are static/declining. Acquisition involved complicated negotiations and could be influenced by political factors. This was particularly true in developing countries. Hostile takeovers became more common in the mid-1950s onward.
- Risk of Acquisition: Risks associated with the acquisition process include the seller generally having better information than the buyer, and post-acquisition management of pre-existing firms. Value often goes to shareholders of the acquired firm and not to the acquirer. Cultural, legal and accounting differences in cross-border acquisitions can add extra risks. Problems with retaining US senior management were common in foreign acquisitions. Post-acquisition integration challenges arise when corporate cultures and management systems differ significantly.
- Alliances and Constellations (Joint Ventures): Widely used in industries with high political risk or demanding capital. Used for financial pressure and risk sharing (e.g. during the interwar period) as well as for collaboration in production, refining, and marketing in the Middle East. One example is the formation of the Kuwait Oil Company, reflecting the political sensitivity of the time.
- Collaborative Arrangements: Capital shortages prompted firms to use collaborative arrangements. This was seen in IG Farben which acquired equity stakes in US companies to regain market position in the US without large capital investments (following World War I impacts)
- Licensing: Used to access foreign markets. Small firms could use licensing agreements (e.g. the Dutch family firm Océ) to expand in multiple markets with less significant managerial/financial capital.
- Acquisition (cont): Acquisition procedures and management inside large multinationals became routinized towards the end of the 20th century. Examples include Unilever's approach of 'Unileverisation' to absorb acquired firms. The absorption process often meant the implementation of new corporate accounting methods and salaries/pensions. Acquisitions can be expedited to reduce cost
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Description
Test your knowledge on the various entry modes that firms use to enter foreign markets, including advantages of acquisitions and greenfield investments. Explore factors influencing these strategic choices and the unique considerations for multinationals. This quiz covers essential concepts in international business practices.
