Podcast
Questions and Answers
What is one reason companies might avoid market transactions according to the OLI model?
What is one reason companies might avoid market transactions according to the OLI model?
When did Starbucks first enter the Chinese market?
When did Starbucks first enter the Chinese market?
What model assesses the international production stages as referenced in the content?
What model assesses the international production stages as referenced in the content?
What was a method Starbucks used to expand its presence in China?
What was a method Starbucks used to expand its presence in China?
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What significant change occurred in global FDI flows in Q1 2023?
What significant change occurred in global FDI flows in Q1 2023?
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What is a primary advantage of acquisitions when entering a new market?
What is a primary advantage of acquisitions when entering a new market?
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Which strategy does Starbucks utilize when it possesses extensive market knowledge?
Which strategy does Starbucks utilize when it possesses extensive market knowledge?
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What is a challenge associated with establishing wholly-owned subsidiaries in a market?
What is a challenge associated with establishing wholly-owned subsidiaries in a market?
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In what situation would Starbucks most likely use a licensing strategy?
In what situation would Starbucks most likely use a licensing strategy?
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What is one of the incentives local governments provide for multinational corporations (MNCs) establishing new subsidiaries?
What is one of the incentives local governments provide for multinational corporations (MNCs) establishing new subsidiaries?
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What defines a joint venture as a market entry strategy for Starbucks?
What defines a joint venture as a market entry strategy for Starbucks?
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Which market entry strategy allows for sharing specific advantages that are hard to transfer?
Which market entry strategy allows for sharing specific advantages that are hard to transfer?
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What characteristic defines franchising models in comparison to other market entry strategies?
What characteristic defines franchising models in comparison to other market entry strategies?
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What is a primary characteristic of management contracts?
What is a primary characteristic of management contracts?
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Which of the following best defines a manufacturing contract?
Which of the following best defines a manufacturing contract?
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What type of agreement involves providing franchisees with services such as training and advertising?
What type of agreement involves providing franchisees with services such as training and advertising?
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In a franchising model, which option allows for a foreign company to operate as a franchisor in a different market?
In a franchising model, which option allows for a foreign company to operate as a franchisor in a different market?
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Which of the following best describes the relationship between the licensor and licensee in a patent licensing agreement?
Which of the following best describes the relationship between the licensor and licensee in a patent licensing agreement?
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What financial investment is typically required to open a McDonald's franchise in Spain?
What financial investment is typically required to open a McDonald's franchise in Spain?
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What is often a goal of using a manufacturing contract in new markets?
What is often a goal of using a manufacturing contract in new markets?
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Which statement about licensing agreements is correct?
Which statement about licensing agreements is correct?
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Study Notes
Section 2: Unit 4: Choice of Foreign Market Entry Modes
- This unit discusses different strategies for entering foreign markets.
- Three basic groups of entry mechanisms are: Control, Commitment, and Risk.
- Export modes include indirect and direct exporting, using agents, etc.
- Contractual modes include licensing, franchising, and contract manufacturing.
- Investment equity entry (e.g.) joint ventures, wholly-owned subsidiaries.
- The choice depends on internationalization strategic plans and goals, in order to enter a foreign market best.
Teaching Blocks
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The presentation outlines a course structure, including different units.
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Section I covers the global business environment.
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Section II outlines the beginning of internationalization, including deciding to enter a new market and the influence of cultural distance.
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Section III focuses on multinational companies, covering their strategies, subsidiary strategies, and human resources/talent teams.
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Section IV covers specific approaches for new multinational companies.
Contents
- The slides present the topics of entry strategies, influential factors when selecting them, and models for assessing and selecting appropriate entry modes and strategies.
Entry Strategies and Influential Factors
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There are three main groups of entry mechanisms: Control, Commitment, and Risk.
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Export methods: Direct and Indirect.
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Indirect exporting involves using intermediaries, leading to less control but lower risk.
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Direct exporting involves direct contact, increasing control but potentially higher risk.
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Contractual methods: Licensing, Franchises, Distribution agreements, Management contracts, and Patents.
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Licensing involves granting rights to use assets like trademarks or patents to a partner.
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Manufacturing involves authorizing the licensee to manufacture and market products.
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Franchises typically involve agreements for retail distribution and support by the franchiser.
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Investment Equity Methods: Joint Ventures and Wholly-Owned Subsidiaries.
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Joint ventures involve merging capital to form a new organization.
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Wholly-owned subsidiaries involves full foreign ownership.
Models to Assess and Select Entry Mode and Strategy
- Johanson and Vahlne’s Sequential, or Progressive Internationalization Process:
- This model demonstrates the progression from exporting to foreign direct investment, based on a company's level of experience and resources.
- Dunning's OLI (Ownership, Location, Internalization) Paradigm
- This model assesses the advantages a company has in ownership, location, and internalization advantages to determine the best internationalization strategy.
Starbucks Market Entry Strategy
- Starbucks uses three main strategies for entering markets: wholly-owned subsidiaries, joint ventures, and licensing.
- Wholly-owned subsidiaries are best used when thorough market knowledge exists.
- Joint ventures are utilized for entering new markets.
- Licensing is used for quicker market expansion.
FDI in the First Quarter of 2023
There has been a sharp increase in global FDI flows in the first quarter of 2023 compared to previous quarters and years, reaching USD 440 billion. This was a significant increase from very low levels observed in the previous fourth quarter. However, on a year-over-year basis global FDI flows remained 25% below the level observed in Q1 2022.
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Description
This quiz explores different foreign market entry modes, focusing on strategies such as export, contractual, and investment equity. Participants will assess the control, commitment, and risk associated with each method. Dive into the strategic plans that influence how companies choose their market entry approaches.
