Market Entry Strategies for International Markets
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Questions and Answers

What is one advantage of licensing mentioned in the text?

  • It leads to saturation of the licensor's territory.
  • It imposes heavy reporting requirements.
  • It requires high capital investment.
  • It provides quick and easy market entry. (correct)

    • What is a disadvantage associated with franchising?

  • Saturating the franchisor's territory. (correct)
  • Freedom from restrictions imposed by the franchisor.
  • Exaggeration of advantages by the franchisee.
  • Lower cost of supplies.

    • Why might a firm choose licensing over franchising?

  • To avoid onerous reporting requirements.
  • To establish a competitor for the licensor. (correct)
  • To gain access to lower cost and centralized buying.
  • To have flexibility due to restrictions from the licensor.

    • What is a disadvantage specific to licensing mentioned in the text?

    <p>Limited returns.</p> Signup and view all the answers

    Why might a company choose franchising as an entry strategy?

    <p>To benefit from a well-known trademark or trade name.</p> Signup and view all the answers

    Which of the following is a common disadvantage for both franchising and licensing?

    <p>Reduction in profit margins.</p> Signup and view all the answers

    What is the primary purpose of market entry strategies?

    <p>To provide companies with a way to distribute and sell goods globally</p> Signup and view all the answers

    Which of the following factors do companies consider when choosing a market entry strategy?

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

    What is franchising as a market entry strategy?

    <p>A continuing relationship where the franchisor provides a licensed privilege to the franchisee to do business and offers assistance</p> Signup and view all the answers

    Which of the following is not an advantage of franchising as a market entry strategy?

    <p>Complete control over the foreign operations</p> Signup and view all the answers

    What is the primary factor that determines the level of control a company has over distribution when using a market entry strategy?

    <p>The strategy chosen by the company</p> Signup and view all the answers

    Which of the following statements is true about market entry strategies?

    <p>Companies can choose different strategies based on their goals and target markets</p> Signup and view all the answers

    Study Notes

    Market Entry Strategies

    • Companies use market entry strategies to offer their products in international markets, choosing an approach based on their goals and target market.

    Franchising

    • A continuing relationship where the franchisor provides a licensed privilege to the franchisee to do business, offering assistance in organizing, training, merchandising, marketing, and managing in return for monetary consideration.
    • Advantages: • Possibly easier to finance • Access to quality training and ongoing support • Established concept with reduced risk of failure • Access to extensive advertising • Access to lower cost and possibly centralized buying • Few start-up problems • Use of well-known trademark or trade name
    • Disadvantages: • Onerous reporting requirements • Supplies of materials may be more expensive • Possible exaggeration of advantages by the franchisor • Franchisee may saturate the franchisor's territory • Cost of franchise and other fees may reduce the franchisee's profit margins • Inflexibility due to restrictions imposed by franchisor • Termination policies of franchisor afford little security

    Licensing

    • A partial franchising aspect, where a licensee gets a patent, trademark, or manufacturing know-how from the mother company, paying royalties to the parent company.
    • Advantages: • Requires little capital • Quickest and easiest way to enter a foreign market • Enables the firm to gain knowledge of access to the local market • Provides a means of entry when import restrictions forbid other ways or when the country is sensitive to foreign ownership • Offers savings on tariff, transport, and local production costs
    • Disadvantages: • The licensor may establish his/her own competitor • Limited returns • Problem of control on license may arise

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    Description

    Learn about the various market entry strategies companies use to sell their products globally and how to choose the most suitable approach based on goals and target market. Understanding these strategies can help in planning, distributing, and delivering goods to international markets effectively.

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