Which of the Following Market Entry Strategies: Quiz & Flashcards

Questions and Answers

What is one advantage of licensing mentioned in the text?

It provides quick and easy market entry.

What is a disadvantage associated with franchising?

Saturating the franchisor's territory.

Why might a firm choose licensing over franchising?

To establish a competitor for the licensor.

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

Limited returns. Signup and view all the answers

Why might a company choose franchising as an entry strategy?

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

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

Reduction in profit margins. Signup and view all the answers

What is the primary purpose of market entry strategies?

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

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

All of the above Signup and view all the answers

What is franchising as a market entry strategy?

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

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

Complete control over the foreign operations 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?

The strategy chosen by the company Signup and view all the answers

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

Companies can choose different strategies based on their goals and target markets 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