Modes of Foreign Market Entry - chapter 11

These flashcards cover key concepts from the lecture on foreign entry modes, providing a study aid for understanding licensing, strategic alliances, and foreign direct investment.

What are the three main non-exporting modes of entry into foreign markets?

Licensing, Global Strategic Alliances, and Foreign Direct Investment.

What mode of entry has the strongest control over firm-specific advantages?

Exporting has the strongest control over firm-specific advantages.

What are the advantages of licensing as an entry mode?

Provides additional profitability with little initial investment and circumvents tariffs and quotas.

What are the disadvantages of licensing?

Returns may be lost, limited control over firm-specific advantages and marketing, and the licensee may become a competitor.

What is a foreign direct investment (FDI)?

Partial or full ownership of operations outside the home country involving joint ventures, minority or majority equity stakes, or acquisitions.

What is a strategic alliance?

Collaborations between companies for manufacturing, distribution, or R&D purposes where participants remain independent.

What are the pros of global strategic alliances?

Based on sharing vital information, assets, and technology between partners.

What are manufacturing alliances?

Shared manufacturing arrangements involving brands from both manufacturers.

What is the main purpose of joint ventures?

To build upon each partner’s strengths and share ownership of a newly-created business entity.

What are the key characteristics of joint ventures?

They involve shared ownership and operational benefits in a new entity formed by partners.

Why might a company choose foreign direct investment?

To acquire raw materials, lower manufacturing costs, avoid tariff barriers, and penetrate local markets.

How does political risk affect foreign direct investment?

Political risk can deter investment due to potential instability or unfavorable regulations.

What is the optimal entry mode for companies in emerging markets?

Joint Ventures or Strategic Alliances.

Define 'contract manufacturing' in the context of licensing arrangements.

A company provides technical specifications to a subcontractor or local manufacturer who then produces the product.

What factors influence the optimal entry mode for a company?

Market factors like emerging and high-growth markets, and company factors like strategic posture and resource availability.