Questions and Answers
Which of the following entry modes involves little out-of-pocket cost?
What type of arrangement provides for more support from the franchisor to the franchisee than a licensor-licensee relationship?
Which of the following is a special form of licensing?
What type of foreign direct investment involves two or more firms agreeing to work together and create a jointly owned separate firm?
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When selecting an entry mode, what is an important factor to consider?
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What type of entry mode is suitable for a company with a transitory technological advantage?
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What type of venture is set up when a firm acquires an established firm in a host nation?
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What type of know-how is less risky for franchises or joint ventures?
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What type of entry mode is suitable for a company with a unique technological advantage?
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Which of the following entry modes provides the most control over operations?
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Study Notes
International Strategies
- There are three levels of international strategies: corporate strategy, business-level strategy, and functional strategy.
Corporate Strategy
- Three forms of corporate strategy: single-business strategy, related diversification, and unrelated diversification.
Business-Level Strategy
- Three forms of business-level strategy: differentiation, cost-leadership, and focus strategy.
Functional Strategy
- Five areas of functional strategy: finance, marketing, operations, human resource management, and R&D.
Entering Foreign Markets
- Three key considerations: which foreign markets to enter, when to enter, and on what scale.
- The choice of entry mode and the role of strategic alliances.
Strategic Alliances
- Four types: cross-shareholding deals, licensing arrangements, formal joint ventures, and informal cooperative arrangements.
Basic Entry Decision
- Identify or analyze foreign markets based on: long-run profit potential, market size, consumer wealth, and costs and risks.
- Suitability of products to the market and indigenous competition.
Timing of Entry
- Rapid large-scale market entry can influence competition and requires balancing risks and flexibility.
- Small-scale entry allows learning about the market while limiting exposure.
Scale of Entry and Strategic Commitments
- Strategic commitments have a long-term impact and are difficult to reverse.
- Must balance risks and rewards.
Choosing an Entry Mode
- Decision factors: ownership advantage, location advantage, internalization advantages, and other factors.
- Six modes of entry: exporting, turnkey project, international licensing, franchising, joint ventures, and wholly owned subsidiaries.
Exporting
- Selling products produced in one country to residents of another country.
- Advantages and disadvantages.
Turnkey Project
- A contract to fully design, construct, and equip a facility.
- Advantages and disadvantages.
International Licensing
- Leasing intellectual property to another firm in return for a fee.
- Advantages and disadvantages.
Franchising
- A special form of licensing with more control and support.
- Advantages and disadvantages.
Joint Ventures
- A separate firm created by two or more firms to promote mutual interests.
- Advantages and disadvantages.
Wholly Owned Subsidiaries
- Firm owns 100% of the subsidiary, including greenfield venture and acquisition.
- Advantages and disadvantages.
Selecting an Entry Mode
- Consider core competencies, including technological and management know-how.
- Avoid licensing and joint-venture arrangements unless the technological advantage is transitory.
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Description
This quiz covers the different levels of international business strategies, including corporate, business, and functional strategies. It also explores the approaches to enter foreign markets.
