BUSN 340 Questions and Answers 2024
Assume the Residential Division of KopperKopper Faucets had the following results last
year:
Net sales revenue
$6,240,000
Operating income
1,872,000
Average total assets
5,200,000
Management's target rate of return
13%
What is the division's profit margin ratio? - answer Annouk is experiencing the liability
of foreignness
Entering Foreign Markets - answer When entering foreign markets, firms come face-
to-face with the liability of foreignness
Liability of foreignness - answer }The inherent disadvantage faced by foreign firms in
host countries because of their nonnative status
}The rules of the game are different in different countries
}Local firms are already well versed in these rules
}Foreign firms must learn the new rules quickly
}Discrimination against foreign firms
}Formal
Informal
How does a Firm Overcome theLiability of Foreignness? - answer institution and
resource-based views
Institution-Based View:Overcoming the Liability of Foreignness - answer }Firms must
take actions deemed legitimate by the various formal and informal institutions
}Formal: risks due to differences in political, economic, and legal systems
}Informal: numerous differences in cultures, norms, and values create obstacles
Resource-Based View:Overcoming the Liability of Foreignness - answer }Firms must
deploy overwhelming resources and capabilities to offset the liability of foreignness
}The firm must still have some competitive advantage left.
Institutions, Resources and Foreign Market Entries - answer (picture on phone)
Entering Foreign Markets (2WIH) - answer }Boils down to three issues:
}When will you enter?
}Where will you enter?
,}How will you enter?
Where to Enter? - answer }In general, two considerations
}What are our strategic goals?
}What are the cultural, institutional, and geographic distances?
Where: Matching Strategic Goals with Location - answer }Natural resource seeking
}Countries possessing natural resources and related transportation and
communications infrastructure
}Market seeking
}Markets with strong demand and consumers willing to pay
}Efficiency seeking
}Economies of scale and an abundance of low-cost factors
}Innovation Seeking
}innovative individuals, firms, and universities
Where: Cultural & Institutional Distance - answer }Difference between cultures along
identifiable dimensions, such as:
}Hofstede's dimensions
}language
}religion
}Colony-colonizer
}Enter culturally similar countries first
}Enter more culturally distant countries later on
Where: Cultural & Institutional Distance - answer }Extent of similarity or dissimilarity
between the regulatory, normative, and cognitive institutions of two countries
Where: Geographic Distance - answer }Export first to closer neighbor countries
}Later to further countries
When - answer }Entry timing:
}early entrant into a country?
}late entrant into a country?
}Advantages:
}First-mover : benefit that accrues to firms that enter the market first and that later firms
do not enjoy
}Late-mover: benefit that accrues to firms that enter the market later and that early
entrants do not enjoy
When: First- and Later-Mover Advantages - answer }Some controversy
}What matters more:
}Who's first?
}Who got it right?
When: First Mover Advantages - answer }Proprietary, technological leadership
, }Preemption of scarce resources
}Avoid clashing with dominant domestic firms
}Build relationships with key stakeholders (e.g., governments)
When: Late-Mover Advantages - answer }Opportunity to free ride on first mover
investments
}Resolution of technological and market uncertainties
}First mover's difficulty to adapt to market changes
How to Enter - answer }Scale of Entry: amount of resources committed to entering a
foreign market
How to Enter: Large-Scale Entries - answer }Large-scale entries:
}Show a strategic commitment to certain markets
}Assure local customers and suppliers of long-term markets
}deter potential entrants
}But:
}Hard to reverse
}Limited strategic flexibility
}Huge losses when large-scale bets are wrong
How to Enter: Small-Scale Entries - answer }Small-scale entries
}Are less expensive
}Limit the downside risk
}Focus on organization learning
}But:
}They lack strong strategic commitment
}They have difficulties building market share
}They usually don't capture first-mover advantages
How to Enter: Modes of Entry:}Drought Masters (DM) of Austin, Texas have created an
atmospheric water generator, which basically turns the humidity in the air into drinking
water. The Drought Master Traveler is a small, portable model that can be hooked up to
solar power and can generate up to 10 gallons of fresh drinking water per day,
depending on the ambient humidity. Originally developed for the U.S. RV market, DM is
now fielding inquiries from countries around the world, including South Africa, India,
China and Brazil. It is considering exporting (either directly or indirectly) the Traveler to
some or all of these countries. Or perhaps licensing the technology and brand name.
What mode of entry is DM considering? - answer }Non-equity mode: Mode of
entering foreign markets through exports and/or contractual agreements
}Tends to reflect relatively smaller commitments to overseas markets
}Includes exports and contracts
How to Enter: Modes of Entry: }Drought Masters (DM) of Austin, Texas have created an
atmospheric water generator, which basically turns the humidity in the air into drinking
water. The Drought Master Traveler is a small, portable model that can be hooked up to
Assume the Residential Division of KopperKopper Faucets had the following results last
year:
Net sales revenue
$6,240,000
Operating income
1,872,000
Average total assets
5,200,000
Management's target rate of return
13%
What is the division's profit margin ratio? - answer Annouk is experiencing the liability
of foreignness
Entering Foreign Markets - answer When entering foreign markets, firms come face-
to-face with the liability of foreignness
Liability of foreignness - answer }The inherent disadvantage faced by foreign firms in
host countries because of their nonnative status
}The rules of the game are different in different countries
}Local firms are already well versed in these rules
}Foreign firms must learn the new rules quickly
}Discrimination against foreign firms
}Formal
Informal
How does a Firm Overcome theLiability of Foreignness? - answer institution and
resource-based views
Institution-Based View:Overcoming the Liability of Foreignness - answer }Firms must
take actions deemed legitimate by the various formal and informal institutions
}Formal: risks due to differences in political, economic, and legal systems
}Informal: numerous differences in cultures, norms, and values create obstacles
Resource-Based View:Overcoming the Liability of Foreignness - answer }Firms must
deploy overwhelming resources and capabilities to offset the liability of foreignness
}The firm must still have some competitive advantage left.
Institutions, Resources and Foreign Market Entries - answer (picture on phone)
Entering Foreign Markets (2WIH) - answer }Boils down to three issues:
}When will you enter?
}Where will you enter?
,}How will you enter?
Where to Enter? - answer }In general, two considerations
}What are our strategic goals?
}What are the cultural, institutional, and geographic distances?
Where: Matching Strategic Goals with Location - answer }Natural resource seeking
}Countries possessing natural resources and related transportation and
communications infrastructure
}Market seeking
}Markets with strong demand and consumers willing to pay
}Efficiency seeking
}Economies of scale and an abundance of low-cost factors
}Innovation Seeking
}innovative individuals, firms, and universities
Where: Cultural & Institutional Distance - answer }Difference between cultures along
identifiable dimensions, such as:
}Hofstede's dimensions
}language
}religion
}Colony-colonizer
}Enter culturally similar countries first
}Enter more culturally distant countries later on
Where: Cultural & Institutional Distance - answer }Extent of similarity or dissimilarity
between the regulatory, normative, and cognitive institutions of two countries
Where: Geographic Distance - answer }Export first to closer neighbor countries
}Later to further countries
When - answer }Entry timing:
}early entrant into a country?
}late entrant into a country?
}Advantages:
}First-mover : benefit that accrues to firms that enter the market first and that later firms
do not enjoy
}Late-mover: benefit that accrues to firms that enter the market later and that early
entrants do not enjoy
When: First- and Later-Mover Advantages - answer }Some controversy
}What matters more:
}Who's first?
}Who got it right?
When: First Mover Advantages - answer }Proprietary, technological leadership
, }Preemption of scarce resources
}Avoid clashing with dominant domestic firms
}Build relationships with key stakeholders (e.g., governments)
When: Late-Mover Advantages - answer }Opportunity to free ride on first mover
investments
}Resolution of technological and market uncertainties
}First mover's difficulty to adapt to market changes
How to Enter - answer }Scale of Entry: amount of resources committed to entering a
foreign market
How to Enter: Large-Scale Entries - answer }Large-scale entries:
}Show a strategic commitment to certain markets
}Assure local customers and suppliers of long-term markets
}deter potential entrants
}But:
}Hard to reverse
}Limited strategic flexibility
}Huge losses when large-scale bets are wrong
How to Enter: Small-Scale Entries - answer }Small-scale entries
}Are less expensive
}Limit the downside risk
}Focus on organization learning
}But:
}They lack strong strategic commitment
}They have difficulties building market share
}They usually don't capture first-mover advantages
How to Enter: Modes of Entry:}Drought Masters (DM) of Austin, Texas have created an
atmospheric water generator, which basically turns the humidity in the air into drinking
water. The Drought Master Traveler is a small, portable model that can be hooked up to
solar power and can generate up to 10 gallons of fresh drinking water per day,
depending on the ambient humidity. Originally developed for the U.S. RV market, DM is
now fielding inquiries from countries around the world, including South Africa, India,
China and Brazil. It is considering exporting (either directly or indirectly) the Traveler to
some or all of these countries. Or perhaps licensing the technology and brand name.
What mode of entry is DM considering? - answer }Non-equity mode: Mode of
entering foreign markets through exports and/or contractual agreements
}Tends to reflect relatively smaller commitments to overseas markets
}Includes exports and contracts
How to Enter: Modes of Entry: }Drought Masters (DM) of Austin, Texas have created an
atmospheric water generator, which basically turns the humidity in the air into drinking
water. The Drought Master Traveler is a small, portable model that can be hooked up to
