International Business Questions and Answers 100% Pass

International Business Questions and Answers 100% Pass Three basic decisions facing firms who are contemplating international expansion 1. Which market(s) to enter 2. When to enter, and on what scale 3. How to enter Goal is long profit potential Timing of Entry Entry is early when firm enters foreign market before others, and is late when other firms have already established themselves. First Mover Advantages Advantages that develop as the first firm to enter a market. Include a strong brand name, ability to capture dominant market share, ability to develop a cost average, ability to create loyalty and switching costs. First Mover Disadvantages Disadvantages that develop as the first firm to enter a market. Pioneering Costs Costs that an early entrant has to bear that a later entrant can avoid. Include time, effort, failure, mistakes, actual costs, and educational costs. What are the six ways to enter a foreign market? 1. Exporting 2. Turnkey Project 3. Licensing 4. Franchising 5. Joint Venture 6. Wholly Owned Subsidiary (a) Greenfield (b) Acquisition Exporting Sale of products produced in one country to residents of another Advantages of exporting Ability to realize location and experience curve economies. Cheap. Disadvantages of exporting High transportation costs, trade barriers, problems with local marketing agents. Also there could be more efficient manufacturers. Turnkey Projects A project in which a firm agrees to set up an operating plant for a foreign client. When the plant is fully able to operate, the firm hands over the "key" Advantages of turnkey Ability to earn returns from process technology skills in countries where FDI is restricted. Beneficial if there is a potential political or economical risk. Disadvantages of turnkey Creates efficient competitors, lack of long term market presence. Also it will cause the company to lose its technological advantage. Licensing Occurs when a firm (the licensor) gives the rights to another firm (licensee) to produce its product, the production process,