International Business Strategy Quiz

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Questions and Answers

What are the primary reasons why businesses go international?

  • Expand market share (correct)
  • Gain economies of scale (correct)
  • Increase profitability (correct)
  • Gain tax advantages (correct)
  • All of the above (correct)

Which of these is NOT a strategic entry mode into foreign markets?

  • Strategic alliances
  • Joint ventures
  • Franchising
  • Product differentiation (correct)
  • Exporting
  • Cross-border acquisitions
  • Licensing

What is the difference between direct exporting and indirect exporting?

  • Indirect exporting is more expensive than direct exporting, while direct exporting is less expensive than direct exporting.
  • Direct exporting is more expensive than indirect exporting, while indirect exporting is less expensive than direct exporting.
  • Indirect exporting involves selling products directly to foreign customers, while direct exporting utilizes intermediaries.
  • Direct exporting involves selling products directly to foreign customers, while indirect exporting utilizes intermediaries. (correct)

What are the main types of Countertrade?

<p>All of the above (C)</p> Signup and view all the answers

What is the difference between a licensing agreement and a franchising agreement?

<p>A licensing agreement grants rights to use intellectual property like trademarks and patents, while a franchising agreement provides a complete business model, including operational procedures and branding. (D)</p> Signup and view all the answers

What are the key features of a Foreign Direct Investment?

<p>Long-term commitment, Active control over the foreign operations, Significant control over the foreign operations (B)</p> Signup and view all the answers

What does "turnkey project" mean?

<p>A full service, fully developed, ready to use project that is sold to a buyer who can operate the project without any additional work (B)</p> Signup and view all the answers

Which of the following is NOT a characteristic of a Joint Venture?

<p>Joint Venture usually involves a complete merger of two companies (C)</p> Signup and view all the answers

A company's decision on how to enter a foreign market is based solely on internal factors.

<p>False (B)</p> Signup and view all the answers

What are the advantages of using indirect exporting?

<p>Indirect exporting can be less expensive and require fewer resources compared to direct exporting. It can be a good option for companies new to international markets or those with limited resources. It also allows companies to tap into existing distribution networks and gain valuable market insights. However, companies have less control over the sales process, pricing, and customer relationships when using indirect exporting.</p> Signup and view all the answers

What are the challenges of international business?

<p>International business poses several challenges: Political and economic instability, Cultural differences, Language barriers, Foreign currency exchange fluctuations, Trade regulations and tariffs, Competition in foreign markets, Logistical complexities, and Differences in legal systems and regulatory compliance.</p> Signup and view all the answers

What is the difference between a licensing agreement and a franchising agreement?

<p>Licensing primarily involves the granting of permission to utilize intellectual property such as trademarks or patents while franchising includes the transfer of an entire business system, encompassing branding, operational procedures, and marketing strategies. Licensing is often employed by manufacturing companies while franchising is typically favored in the service industry, although this is not always the case.</p> Signup and view all the answers

Flashcards

International Business Strategies

Methods used by companies to enter and operate in foreign markets.

Market Share Expansion

Increasing the proportion of sales a company holds in a market.

Economies of Scale

Cost advantages associated with large-scale production.

Profit Advantage

Higher profits achieved compared to other companies.

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Tax Advantage

Favorable tax policies in specific locations.

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Exporting

Selling goods or services from a home country to a foreign buyer.

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Indirect Exporting

Working with a 3rd party intermediary to distribute goods.

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Direct Exporting

Selling products directly to foreign buyers.

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Countertrade

Exchange of goods or services for other goods or services.

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Contract Manufacturing

Outsourcing production to a foreign company.

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Licensing

Granting a foreign company the right to use a product or service.

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Franchising

Letting a foreign partner use your business model.

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Foreign Direct Investment

Setting up a business or buying assets abroad

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Turnkey Project

Completing a project for a foreign client and handing it over.

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Pure Barter

Direct exchange of goods for goods without money.

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Study Notes

International Business Strategy

  • This is a study of international business.
  • The goal is to understand strategies for entering international markets.
  • Understanding different strategies for market entry.
  • Analyzing market conditions to choose the best entry method.
  • Developing guidelines for market entry specific to industries.
  • Analyzing potential problems from specific entry methods.
  • Market share expansion is a key benefit of international business.
  • Economies of scale (cost per unit) is a significant advantage.
  • Increased profits are another advantage.
  • Tax advantages are a benefit to some businesses.

Strategic Entry Modes

  • Exporting
    • Indirect exporting
    • Direct exporting
  • Contract Manufacturing
  • Licensing
  • Franchising
  • Foreign Direct Investment (FDI)
  • Turnkey Project

Countertrade

  • Pure barter (direct exchange of goods)
  • Clearing arrangements (pre-agreed upon payments)
  • Switch trading (exchange of goods through a third party)
  • Counterpurchase (sale of goods in exchange for other goods)
  • Buy-back (sale of goods in exchange for payment from future sales of products)

Contract Manufacturing

  • A firm contracts with a foreign manufacturer to produce goods.
  • The firm retains control of marketing and sales.

Licensing

  • Allows a foreign firm to use a company's trademark or technology for a fee.

Franchising

  • A business grants the rights to use its name and operating system to a foreign business.
  • A fee is paid to the franchiser.

Foreign Direct Investment (FDI)

  • Involves significant investment in foreign operations.
  • This includes building factories or establishing new branches in a foreign country.

Turnkey Project

  • A project includes design, construction, testing, and training for personnel.
  • The project is then handed over to the host country.

Joint Venture

  • A company combines resources with a foreign partner.
  • Sharing costs and profits..

Mission Statement - Sony Ericsson

  • Sony Ericsson was a joint venture.
  • Their goal was to become the leading mobile phone brand.

Comparative Analysis

  • Provides a comparison of strategic entry methods.
  • Factors of control, risk, and resource investment are included.

Frameworks for Entry Mode Choice

  • Firm capability is a factor.
  • Industry-specific factors.
  • Country-specific factors.
  • Venture-specific factors.
  • Strategic factors.

External/internal factors

  • Businesses must consider external factors when selecting a method of entering a new market.
  • Internal factors are also critical; such as financial standing etc.

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