GMS 522 CHAPTER #8 EXAM
QUESTIONS AND ANSWERS
Licensing - Intermediate entry modes - Answer-share risks and benefits)
Licensing - Negotiation - Answer-transfer, R&D, opportunity costs understanding of
tech/geo/time
Licensor - Answer-No capital, Less market risk, No market knowledge :(, no govt action
Licensee - Answer-Reduced risk of R&D failure, licensors ongoing cooperation/ support
Franchising - Answer-parent company grants independent entity right to do specific
business - Intermediate entry mode (share risks and benefits)
Franchisor - Answer-earns management fee from franchisee - fast food, hotel, car
rentals
International franchising - Answer-direct - several franchisees, indirect - master
franchisee build out
Foreign sales subsidy - Answer-parent owned = risk, sales functions/market-knowledge
= ^$
Foreign direct investment - Answer-capital flows abroad to create/expand long-term
interest - Thorough research (Long-term = difficult/expensive to unwind, be confident)
Reasons for FDI - Answer-Market/trade/cost related, need to follow customers, govt
incentives
Reasons for FDI - Market - Answer-rapid access to larger markets, acquire firm already
established, Maintain market share / contact with customers in major market
Reasons for FDI - Trade - Answer-Circumvent trade barriers, Local political knowledge
= deal with market regulations, Country of origin effects (if country is well known)
Reasons for FDI - Cost - Answer-Lower labor/transportation costs, Access to natural
resources
Reasons for FDI - Need to follow customers - Answer-Clients may find suitable new
suppliers in overseas markets and discontinue contracts. Better to move with them.
Reasons for FDI - Govt incentives - Answer-tax exemptions, govt relocation grants
(Amazon)
QUESTIONS AND ANSWERS
Licensing - Intermediate entry modes - Answer-share risks and benefits)
Licensing - Negotiation - Answer-transfer, R&D, opportunity costs understanding of
tech/geo/time
Licensor - Answer-No capital, Less market risk, No market knowledge :(, no govt action
Licensee - Answer-Reduced risk of R&D failure, licensors ongoing cooperation/ support
Franchising - Answer-parent company grants independent entity right to do specific
business - Intermediate entry mode (share risks and benefits)
Franchisor - Answer-earns management fee from franchisee - fast food, hotel, car
rentals
International franchising - Answer-direct - several franchisees, indirect - master
franchisee build out
Foreign sales subsidy - Answer-parent owned = risk, sales functions/market-knowledge
= ^$
Foreign direct investment - Answer-capital flows abroad to create/expand long-term
interest - Thorough research (Long-term = difficult/expensive to unwind, be confident)
Reasons for FDI - Answer-Market/trade/cost related, need to follow customers, govt
incentives
Reasons for FDI - Market - Answer-rapid access to larger markets, acquire firm already
established, Maintain market share / contact with customers in major market
Reasons for FDI - Trade - Answer-Circumvent trade barriers, Local political knowledge
= deal with market regulations, Country of origin effects (if country is well known)
Reasons for FDI - Cost - Answer-Lower labor/transportation costs, Access to natural
resources
Reasons for FDI - Need to follow customers - Answer-Clients may find suitable new
suppliers in overseas markets and discontinue contracts. Better to move with them.
Reasons for FDI - Govt incentives - Answer-tax exemptions, govt relocation grants
(Amazon)
