Market Entry Strategies and Vertical Integration

These flashcards cover key concepts related to market entry strategies, vertical integration, and transaction cost economics discussed in the lecture.

First Entrant

The first company to enter a new market, benefiting from being the pioneer and shaping the industry.

Closing Cost

The associated costs incurred when entering a new market, often including market research and setup.

Vertical Integration

The process where a company expands its operations into different stages of production within its industry.

Upstream

The stages in production closer to raw materials.

Downstream

The stages in production closer to the final customer.

Backwards Integration

A type of vertical integration where a company expands backward into its supply chain.

Forwards Integration

A type of vertical integration where a company expands forward into the distribution of its products.

Insourcing

The process of using an organization's own resources or personnel to complete a task.

Outsourcing

The practice of hiring an external organization to perform services or create goods that were previously done in-house.

Transaction Cost Economics (TCE)

A theory that deals with the costs associated with economic exchanges and the process of organizing transactions.

Minimum Efficient Scale

The lowest output level at which long-run average costs are minimized.

Diminished Flexibility

The loss of adaptability in decision-making due to prior large investments or commitments.

Cultural Revolution

The significant shift in consumer behavior and market acceptance stemming from the entry of foreign businesses, such as McDonald's in Russia.

Market Feedback

Information obtained from consumers in response to a product to assess its viability and make necessary adjustments.

TCE's Core Argument

Jobs can be performed either internally (insourcing) or externally (outsourcing), with firms choosing the option that minimizes costs.