Entry Strategy and Strategic Alliances

Practice flashcards covering market entry strategies, entry modes, core competencies, and strategic alliances based on the Topic 8 lecture notes.

Favorable Markets

Markets characterized by political stability, free market systems, low inflation rates, and low private sector debt.

Less Desirable Markets

Markets characterized by political instability, mixed or command economies, excessive levels of borrowing, and high competitiveness.

First-mover advantages

The ability to preempt rivals by establishing a strong brand name, building sales volume leading to a cost advantage via the experience curve, and creating switching costs for customers.

First-mover disadvantages

Include pioneering costs, the cost of business failure due to ignorance of the foreign environment, and the costs of promoting products and educating customers.

Pioneering costs

Costs that arise when the foreign business system is so different from the home market that the firm must spend considerable time, effort, and expense learning the rules.

Significant Scale Entry

Entering a market on a large scale to make a strategic commitment, which has a long-term impact and is difficult to reverse.

Small Scale Entry

Entering a market to learn about it while simultaneously limiting the firm's exposure.

Exporting

A mode of entry where production occurs in the home country and sales occur in a foreign country; it avoids local manufacturing costs but may face high transport costs and tariffs.

Turnkey operations

A project where a contractor handles every detail for a foreign client, including training, and hands over the "key" to a plant ready for full operation.

Licensing

An arrangement where a licensor grants rights to intangible property (patents, designs, etc.) to a licensee for a specific period in exchange for a royalty fee.

Cross-licensing agreements

Agreements used to reduce the risk of losing proprietary assets in licensing by having firms license their own know-how to each other.

Franchising

A specialized form of licensing used primarily by service firms where the franchisor sells intangible property and insists the franchisee abide by strict business rules.

Joint Ventures

A firm that is jointly owned by two or more otherwise independent firms, often established as $50-50$ partnerships.

Wholly owned subsidiary

An entry mode where the firm owns $100\%$ of the stock, either by setting up a new operation or acquiring an established firm.

Technological know-how

A core competency where firms should generally avoid licensing and joint ventures to prevent losing control over their competitive advantage, unless the advantage is transitory.

Management know-how

A core competency where the risk of losing control is low, and the benefits of using brand names frequently favor licensing or franchising.

Greenfield Strategy

Building a subsidiary from the ground up; ideal for transferring organizationally embedded competencies, skills, and routines.

Acquisition

Acquiring an existing company to quickly execute entry and preempt competitors, though it carries risks of overpaying or cultural clashes.

Strategic alliances

Cooperative agreements between potential or actual competitors, ranging from formal joint ventures to short-term contractual agreements.

Partner Selection

The process of choosing an alliance partner who helps achieve strategic goals, shares the firm's vision, and will not exploit the alliance.

Structure of the alliance

The design of an alliance meant to prevent unwanted technology transfer and provide contractual safeguards against opportunism.

Management of the alliance

The coordination of an alliance through interpersonal relationships, cultural sensitivity, and the diffusion of learned knowledge through the organization.