30 Questions
What is the primary focus of the lecture on Internationalisation?
Understanding the decision making process
What distinguishes born global firms from other international organizations?
They seek to derive competitive advantage from international resources and sales from inception
What does international expansion entail for organisations?
More than replicating an existing national strategy
What needs to be considered and managed in the international business location?
Political and legal environment
What is the primary factor that distinguishes international business from domestic business?
Cultural differences
What characterizes the opportunities for ambitious companies in the globalization of business?
Opening immense opportunities to expand internationally
Which mode of entry involves the transfer of ownership or use of specified assets?
Licensing
What are the disadvantages of franchising?
Limited control and creativity, decreased profits
Which type of countertrade is related to high-value exports and capital goods supplied by multinational corporations?
Offset
What are the advantages of exporting?
Low investment, gradual exposure to international markets, maximizing economies of scale
What does a confirming house do for foreign buyers?
Acts on a commission basis, bringing sellers and buyers into direct contact
What is the main characteristic of countertrade?
Involves all or partial payments made in kind rather than in cash
What are proactive motives for international expansion?
Profit advantage, unique product, technological advantage, tax benefit, and economies of scale
What factors are relevant to selecting locations for foreign direct investment (FDI)?
Cost/tax factors, production potential, and market factors
What are the disadvantages of being a first mover in international expansion?
Risk, uncertainty, and high expenses
What serves as triggers for international expansion?
Push and pull factors
What are motives for international expansion?
Increasing sales, profits, innovation, economies of scale, government incentives, foreign investment opportunities, new market opportunities, diversification opportunities, and access to talent
What factors are relevant to the timing of entry into a market?
Affecting a firm's market power, strategic options, and return on investment
What are the entry modes for Foreign Direct Investment (FDI)?
Joint ventures/strategic alliances and wholly owned subsidiaries
What distinguishes joint ventures from strategic alliances?
Joint ventures involve creating new companies, while strategic alliances involve sharing access to technology or assets without creating a new company
What are the motives behind strategic alliances?
Access to new markets, sharing of resources and risks, and gaining technological or managerial know-how
What are the advantages of joint ventures mentioned in the text?
Allow firms to enter costly or risky activities, acquire partner knowledge, enhance economies of scale, prevent competition, and boost local acceptance
What are the disadvantages of joint ventures mentioned in the text?
Difficulty in finding good partners, relationship management issues, loss of competitive advantage, and integration challenges
What is an example of a strategic alliance mentioned in the text?
Spotify and Uber's partnership aimed at pursuing prospects from each other's existing customer base and gaining a competitive advantage
What are some advantages of the second mover in a market entry strategy?
Learning from the first mover's mistakes, lower risk, more time to evaluate options, and lower marketing and R&D costs
What are some disadvantages of the second mover in a market entry strategy?
Potential to be late to market, playing catch up, higher entry barriers, and difficulties in gaining market share through imitation
What factors should firms consider when entering a foreign market?
Goals, degree of control, resources, risk, product characteristics, target country conditions, competition, and partners
What are the different modes of entry for international business?
Trade-related (exporting), transfer-related (licensing or franchising), and FDI-related (joint ventures/strategic alliances, wholly owned subsidiaries)
What is the most common way of conducting international business?
Exporting, leveraging home country capabilities and products, and can be direct or indirect
What does the 'second mover advantage' refer to?
The benefits a company gains from entering a market after others or mimicking an existing product
Study Notes
Second Mover Advantage and International Market Entry
- Successful firms like Facebook, Google, Amazon, and Microsoft were not first movers in their market, gaining advantages as second movers.
- The "second mover advantage" refers to the benefits a company gains from entering a market after others or mimicking an existing product.
- Apple has capitalized on the second mover advantage by not being the first in various product categories, such as object-oriented computing and mobile phones, instead improving upon existing ideas.
- Apple's entry into the smartphone market led to the overthrow of BlackBerry as the dominant player, as evidenced by the stock price comparison between the two companies.
- Advantages of the second mover include learning from the first mover's mistakes, lower risk, more time to evaluate options, and lower marketing and R&D costs.
- Disadvantages of the second mover include the potential to be late to market, playing catch up, higher entry barriers, and difficulties in gaining market share through imitation.
- First movers generally have higher market shares than early followers, who, in turn, have higher market shares than later entrants.
- Internationalization involves considerations of location, timing, and entry mode, with the choice depending on costs, risk, expected returns, control, and commitment.
- When entering a foreign market, firms should consider goals, degree of control, resources, risk, product characteristics, target country conditions, competition, and partners.
- The levels of resource commitment, organizational control, risks, and expected returns increase as firms move from trade-related to FDI-related entry modes.
- Modes of entry include trade-related (exporting), transfer-related (licensing or franchising), and FDI-related (joint ventures/strategic alliances, wholly owned subsidiaries).
- Exporting is the most common way of conducting international business, leveraging home country capabilities and products, and can be direct or indirect, with each approach having its benefits and drawbacks.
Test your knowledge of second mover advantage and international market entry with this quiz. Explore the benefits and drawbacks of entering a market after others, and learn about different modes of international entry, such as exporting, licensing, and foreign direct investment. Understand how successful companies have leveraged the second mover advantage to achieve market dominance and consider the factors involved in internationalization decisions.
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