CH 8 Entry Strategies in Global Business and MNEs

Entry Strategies

Methods used by companies to enter global markets.

Emerging Economies

Nations with developing markets and industries.

Multinational Enterprises (MNEs)

Companies operating in multiple countries simultaneously.

Foreign Direct Investment (FDI)

Investment made by a company in foreign assets.

Host Country Perspective

Viewpoint of a country receiving foreign investments.

Risk-Return Trade-Off

Balance between potential risk and expected rewards.

Export-Import Business

Low-risk international trade involving goods exchange.

International Trade Financing

Methods to fund and facilitate global trade.

Internet's Role in Trade

Online platforms simplifying international business transactions.

Licensing

Granting rights to produce and sell products abroad.

Licensor

Entity providing rights to a foreign partner.

Licensee

Entity receiving rights to manufacture and sell products.

Transportation Costs

Expenses related to moving goods internationally.

Franchising

Business model allowing local operators to use brand.

Parent Firm

Company that grants rights to franchisees.

Franchisee

Local operator paying for rights to operate a franchise.

Specialized Equipment

Tools and machinery provided by franchisor to franchisee.

Startup Costs

Initial expenses incurred to establish a business.

Annual License Fee

Recurring payment made by licensee to licensor.

Market Penetration

Strategy to enter and gain market share.

Competition in Trade

Rivalry among businesses in international markets.

Penalty Clauses

Contractual provisions to protect licensor's interests.

Franchise Fee

Payment for rights to operate a franchise.

Technical Assistance

Support in location, layout, and equipment usage.

Strategic Alliances

Cooperative ventures for mutual revenue gain.

Non-Equity Arrangements

Partnerships without shared ownership stakes.

Marketing Alliance

Cooperation in niche market promotions.

Production Alliance

Partners manufacture and exchange specialized components.

Alliance Partner Selection

Crucial for strategic alliance success.

International Joint Ventures

Jointly owned business for foreign market entry.

Risk Sharing

Partners distribute financial risks in ventures.

Joint Production

Collaborative manufacturing to enhance revenue.

Local Partner

Essential for understanding domestic market conditions.

Cross-Border Mergers

Merging domestic and foreign firms for competitiveness.

Acquisitions

Purchasing foreign firms to implement strategies.

Market Access

Instant entry to foreign markets through mergers.

Reputation of Acquired Firm

Important for successful market integration.

Capital Investment

Significant funds required for acquisitions.

Cultural Differences

Challenges in merging organizations from different countries.

Wholly-Owned Subsidiaries

New facilities built and operated by domestic firms.

High Capital Requirement

Large investments needed for wholly-owned subsidiaries.

Supply Chain Management

Modern standards for efficient subsidiary operations.

Environmental Standards

Subsidiaries designed to be environmentally sound.

International Standards

Facilities built to meet global operational criteria.

Subsidiaries

Local branches of MNEs in foreign markets.

Multinational Enterprises (MNEs)

Firms operating in multiple countries with foreign assets.

Emerging-market MNEs

MNEs originating from developing economies.

Competitive Advantages

Unique strengths enabling firms to outperform rivals.

Core Competencies

Essential capabilities that drive a firm's success.

Maximizing Shareholder Wealth

Primary goal of firms in free enterprise systems.

Revenue Maximizing Strategies

Approaches MNEs use to increase international sales.

High-Growth Markets

Countries with rapidly increasing economic potential.

Stable, High-Income Markets

Economies with consistent income and consumption levels.

Monopolistic Market Structures

Markets with few competitors and high profit margins.

Trade Restricted Sectors

Industries protected by government trade barriers.

Foreign Direct Investment (FDI)

Investment in foreign assets to establish business presence.

Cost Minimizing Strategies

Methods MNEs employ to reduce operational expenses.

Economies of Scale

Cost advantages gained by increasing production volume.

Factor Input Cost

Variations in production costs across different countries.

Exchange Rate Movements

Fluctuations in currency values affecting investment returns.

Market Saturation

Condition where a market has no growth potential.

Per-Capita Income

Average income earned per person in a given area.

Middle Class Growth

Increase in the segment of society with disposable income.

Profit Margins

Difference between revenue and costs expressed as a percentage.

Global Strategic Motives

Reasons MNEs pursue international business opportunities.

Risks in Global Operations

Challenges faced by MNEs in foreign markets.

Foreign Direct Investment (FDI)

Investment made by a company in another country.

Strengthening Currency

When a country's currency increases in value.

Risk Minimizing Strategies

Methods to reduce financial risks in investments.

Diversification

Spreading investments to reduce risk exposure.

Correlation of Returns

Relationship between domestic and foreign project returns.

Product Life Cycle Theory

Stages products go through: introduction, growth, maturity, decline.

Ownership Advantages

Unique benefits that firms possess for FDI.

Location Advantages

Benefits derived from a country's economic and political systems.

Internalization Advantages

Benefits from controlling foreign operations directly.

Host Country Perspective

View of FDI as complementing domestic investments.

Investment Climate

Environment that encourages profitable investments.

Benefits of FDI

Creates jobs, technology access, and management skills transfer.

Costs of FDI

Negative impacts on environment and local communities.

Corporate Social Responsibility

MNEs' obligation to consider social impacts.

Political Interference

MNEs influencing host country governance and policies.

Economic Reforms

Changes to improve a country's economic conditions.

Transparent Governance

Clear and accountable government operations.

Rule of Law

Legal framework ensuring fair treatment and justice.

Job Creation

Increase in employment opportunities from investments.

Tax Revenues

Government income from taxes on businesses.

Economic Development

Improvement in economic health and living standards.

Labor Productivity

Efficiency of labor in producing goods or services.

Entry Strategies

Methods companies use to enter foreign markets.

Emerging-market economies

Nations with developing industries and markets.

Host country perspective

Viewpoint of the country receiving foreign investment.

Risk profile

Willingness to accept financial loss in business.

Risk-return trade-off

Higher risk can lead to greater potential rewards.

Sources of risk

Factors causing potential financial loss in business.

Export-Import Business

Trading goods internationally for domestic consumption.

Licensing

Granting rights to manufacture/sell products for fees.

Franchising

Parent company allows local operators to use brand.

Manufacturing advantages

Lower costs from local production in target countries.

Penalty clauses

Contractual terms to protect licensors in licensing.

Strategic Alliances

Cooperation between firms without joint ownership.