UCF GEB3375 Final Exam EXAM(Graded A+ actual test)

Market screening - Answer-means of identifying and ranking foreign market opportunities by using selection criteria to reduce the total number of countries under consideration Basic needs potential (1st screening) - Answer-Influenced by climate, geography, natural resources Some needs are easy to assess (e.g. industrial goods); others more difficult, especially when they are desires (chocolate) Data include imports, local production etc. Example of market indicators and market factors (2nd screening) - Answer-Market indicators - Economic data used to measure relative market strength of countries or geographic areas (ex: Market size). Trends in inflation, currency exchange, interest rates, credit availability, paying habits Market factors - Economic data that correlate highly with market demand for a product Examples of Political and Legal forces (3rd screening) - Answer-Barriers to entry-import/export barriers Limits on foreign ownership Limits on repatriation of earnings Stable government policies (different from government stability) Exporting Advantages - Answer-increase overall sales volume, improve market share, and generate profit margins that are often more favorable than in the domestic market increase economies of scale, reducing per unit cost of manufacturingdiversify customer base, reducing dependence on home markets stabilize fluctuations in sales associated with economic cycles or seasonality demand minimize the cost of foreign market entry; the firm can use exporting to test new markets before committing greater resources through FDI minimize risk and maximize flexibility compared to other entry strategies leverage the capabilities and skills of foreign distributors and other business partners located abroad Exporting Disadvantages - Answer-Requires firm to acquire new capabilities and redirect organizational resources Sensitive to tariffs and other trade barriers Sensitive to exchange rate fluctuations Compared to FDI, firm has fewer opportunities to learn about customers, competitors, and the marketplace Licensing and Franchising - Answer-Licensing - An arrangement in which the owner of intellectual property grants another firm the right to use that property for a specified period of time in exchange for royalties or other compensation. Franchising - arrangement in which the firm allows another the right to use an entire business system in exchange for fees, royalties, or other compensation. Often more comprehensive and longer-term than licensing.Most typical arrangement is business format franchising in which the franchisor transfers to the franchisee a total business method-including production and marketing methods, sales systems, procedures, training, and the use of its name. Responsibilities of licensee/ licensor - Answer-In a typical deal, the licensee pays the licensor a fixed amount upfront and an ongoing royalty (usually 2-5 %) on gross sales generated from using the licensed asset. The fixed amount covers the licensor's initial costs of transferring the licensed asset to the licensee, including training, engineering, or adaptation. Certain types of licensable assets, such as copyrights and trademarks, have much lower transfer costs. Advantages and disadvantages of licensing - Answer-Advantages for licensor -Low investment -Low involvement -Low effort, once established -Low-cost initial entry strategy Disadvantages for licensor -Performance depends on the foreign licensee -Licensor has limited control over its asset(s) abroad -Runs the risk of creating a future competitor Trademark licensing - Answer-Involves a firm granting another firm permission to use its proprietary names, characters, or logos for a specified period of time in exchange for a royalty. Copyright licensing - Answer-A copyright gives the owner the exclusive right to reproduce art, music, literature, software, and other such works, as well as prepare derivative works, distribute copies, or perform or display the work publicly.Know-how licensing/ agreement - Answer-involves a contract in which the focal firm provides technological or management knowledge about how to design, manufacture, or deliver a product or a service (common in semiconductor or pharmaceutical industries) Greenfield investment - Answer-Establishing a new operation in a foreign country from scratch Greenfield investment advantages and disadvantages - Answer-Advantages -high level of direct control over the investment enterprise -easier and more effective adaptation to the foreign market -more adept at crafting advertising and marketing efforts with maximum effectiveness within a specific market environment Disadvantages -very expensive -tougher to overcome the already established competition -Multinational enterprises can be a disadvantage on the short term because of governmental regulations