MGT 302
Final Exam Study Guide ALL ANSWERS 100% CORRECT
SPRING-FALL 2022 GUARANTEE GRADE A+
Terms and Concepts:
1. Tacit Knowledge- Info that is intuitive and difficult to codify in writing. gained from
experience/interaction. shared knowledge might be dispersed throughout company
2. Codified Knowledge- Info easily captured/shared in the form of text, tables, or diagrams.
can't undo. Ex: Product Specifications, Scientific Formula, and Computer Program
3. First Mover Advantages- are the economic and strategic advantages that accrue to early
entrants into a market/industry
4. Pioneering Costs- costs that an early entrant has to bear that a later entrant can avoid,
such as the time and effort in learning the rules, failure due to ignorance, and the liability
of being a foreigner. Costs can arise when the business system in a foreign country is so
different from that in a firm’s home market that the enterprise has to devote considerable
effort, time, and expense to learning the rules of the game. costs include the costs of
business failure if the firm, due to its ignorance of the foreign environment, makes major
mistakes. costs also include the costs of promoting and establishing a product offering,
including the costs of educating customers.
5. Externalities- knowledge spillovers. that firms can benefit from such externalities by
locating close to their source
6. Strategic Commitments- such as rapid large-scale market entry, can have an important
influence on the nature of competition in a market.
7. Entry modes:
a. Exporting- low risk to test the waters, but also need to consider costs
i. Advantage- avoids the cost of establishing manufacturing operations in the
host country. Helps a firm achieve experience curve and location
economies. Minimize risk and investment. Rapid speed of entry.
ii. Disadvantage- if it is cheaper to make somewhere else then exporting a
local good isn’t good. High transportation cost especially for bulk. Tariff
barriers make exporting hard. To get around these problems you need to se
up wholly owned subsidiaries in foreign nations to handle local marketing,
sales, and service. Need standard products. Payment concerns. Exchange
rate risk
iii. Direct- you deal with all phases of the sale and transfer of the product
iv. Indirect- hiring someone else for logistics. Increase sales with little effort
but you lose the control and personal relationship
b. Turnkey Projects- contractor agrees to handle every detail of the project for a
foreign client, including the training of operating personnel then “hand over the
key.”
, i. Advantage- can earn great economic return from assets. Less risky than
conventional FDI.
ii. Disadvantage- firm that enters the deal will have no long-term interest in
the foreign country. Firm that enters the project with a foreign enterprise
may create a competitor. Also if a firm has technology that it the
competitive advantage and gives it away through the project then they lose
that competitive advantage to competitors.
c. Licensing- the owner of the intellectual property allows another firm to use the
legal rights for a specific period of time in exchange for payment. Coke license to
apparel companies.
i. Advantage- reduce cost and risk of establishing foreign enterprise.
Establish physical presence. Overcome trade and investment barriers.
Rapid speed of entry. Reduces exposure to political risk
ii. Disadvantage- difficult to maintain control over assets and knowledge.
Partners can become competitors. Damage to firms reputation. Income
dependent on licensee’s performance. Licensee earns the majority of the
profit. Monitoring costs. Narrow
iii. Cross-licensing agreements-
1. enable firms to hold each other hostage, which reduces the
probability that they will behave opportunistically toward each
other.
2. a firm might license some valuable intangible property to aforeign
partner, but in addition to a royalty payment, the firm might also
request that the foreign partner license some of its valuable know-
how to the firm
d. Franchising- one firm allows another the right to use the entire business systems
in exchange for fees, royalties or other compensation. Worldwide. McDonalds
i. Advantage- quick, low cost entry in a lot of locations. Reduce costs and
risk. Expansion of brand name and mkt reach. Can leverage the
franchisees’ local knowledge
ii. Disadvantage- can’t assure quality control and operating standards. Can
ruin franchisor’s image. Conflict and disputes likely. May create future
competitors.
iii. Master Franchise Agreements- subsidiary at least partly owned by the
firm. Joint venture between McDonalds and a local firm. Each location
has a manager
e. Strategic Alliance- bring together 2 or more skills. Better off together
i. Types:
1. Joint Venture- created a new company. Joint ownership ofthe
new legal entity
a. Advantage- benefits from partner’s knowledge. Combines
resources of the companies. Reduces cultural distance.
Share cost/risk w partner. Overcome ownership restrictions.
Reduces political risk.
b. Disadvantage- risk giving control of tech to partner. Slow
decision making. Potential for conflicts. Lack of synergy.
Cultural barriers. Difficult dissolution process.
i. Synergy- working together to benefit each other
2. Non-Equity- no shared equity, but still collaborating. Pursue
a set of agreed goals while remaining independent
Final Exam Study Guide ALL ANSWERS 100% CORRECT
SPRING-FALL 2022 GUARANTEE GRADE A+
Terms and Concepts:
1. Tacit Knowledge- Info that is intuitive and difficult to codify in writing. gained from
experience/interaction. shared knowledge might be dispersed throughout company
2. Codified Knowledge- Info easily captured/shared in the form of text, tables, or diagrams.
can't undo. Ex: Product Specifications, Scientific Formula, and Computer Program
3. First Mover Advantages- are the economic and strategic advantages that accrue to early
entrants into a market/industry
4. Pioneering Costs- costs that an early entrant has to bear that a later entrant can avoid,
such as the time and effort in learning the rules, failure due to ignorance, and the liability
of being a foreigner. Costs can arise when the business system in a foreign country is so
different from that in a firm’s home market that the enterprise has to devote considerable
effort, time, and expense to learning the rules of the game. costs include the costs of
business failure if the firm, due to its ignorance of the foreign environment, makes major
mistakes. costs also include the costs of promoting and establishing a product offering,
including the costs of educating customers.
5. Externalities- knowledge spillovers. that firms can benefit from such externalities by
locating close to their source
6. Strategic Commitments- such as rapid large-scale market entry, can have an important
influence on the nature of competition in a market.
7. Entry modes:
a. Exporting- low risk to test the waters, but also need to consider costs
i. Advantage- avoids the cost of establishing manufacturing operations in the
host country. Helps a firm achieve experience curve and location
economies. Minimize risk and investment. Rapid speed of entry.
ii. Disadvantage- if it is cheaper to make somewhere else then exporting a
local good isn’t good. High transportation cost especially for bulk. Tariff
barriers make exporting hard. To get around these problems you need to se
up wholly owned subsidiaries in foreign nations to handle local marketing,
sales, and service. Need standard products. Payment concerns. Exchange
rate risk
iii. Direct- you deal with all phases of the sale and transfer of the product
iv. Indirect- hiring someone else for logistics. Increase sales with little effort
but you lose the control and personal relationship
b. Turnkey Projects- contractor agrees to handle every detail of the project for a
foreign client, including the training of operating personnel then “hand over the
key.”
, i. Advantage- can earn great economic return from assets. Less risky than
conventional FDI.
ii. Disadvantage- firm that enters the deal will have no long-term interest in
the foreign country. Firm that enters the project with a foreign enterprise
may create a competitor. Also if a firm has technology that it the
competitive advantage and gives it away through the project then they lose
that competitive advantage to competitors.
c. Licensing- the owner of the intellectual property allows another firm to use the
legal rights for a specific period of time in exchange for payment. Coke license to
apparel companies.
i. Advantage- reduce cost and risk of establishing foreign enterprise.
Establish physical presence. Overcome trade and investment barriers.
Rapid speed of entry. Reduces exposure to political risk
ii. Disadvantage- difficult to maintain control over assets and knowledge.
Partners can become competitors. Damage to firms reputation. Income
dependent on licensee’s performance. Licensee earns the majority of the
profit. Monitoring costs. Narrow
iii. Cross-licensing agreements-
1. enable firms to hold each other hostage, which reduces the
probability that they will behave opportunistically toward each
other.
2. a firm might license some valuable intangible property to aforeign
partner, but in addition to a royalty payment, the firm might also
request that the foreign partner license some of its valuable know-
how to the firm
d. Franchising- one firm allows another the right to use the entire business systems
in exchange for fees, royalties or other compensation. Worldwide. McDonalds
i. Advantage- quick, low cost entry in a lot of locations. Reduce costs and
risk. Expansion of brand name and mkt reach. Can leverage the
franchisees’ local knowledge
ii. Disadvantage- can’t assure quality control and operating standards. Can
ruin franchisor’s image. Conflict and disputes likely. May create future
competitors.
iii. Master Franchise Agreements- subsidiary at least partly owned by the
firm. Joint venture between McDonalds and a local firm. Each location
has a manager
e. Strategic Alliance- bring together 2 or more skills. Better off together
i. Types:
1. Joint Venture- created a new company. Joint ownership ofthe
new legal entity
a. Advantage- benefits from partner’s knowledge. Combines
resources of the companies. Reduces cultural distance.
Share cost/risk w partner. Overcome ownership restrictions.
Reduces political risk.
b. Disadvantage- risk giving control of tech to partner. Slow
decision making. Potential for conflicts. Lack of synergy.
Cultural barriers. Difficult dissolution process.
i. Synergy- working together to benefit each other
2. Non-Equity- no shared equity, but still collaborating. Pursue
a set of agreed goals while remaining independent
