GMS 522 FINAL EXAM ACTUAL QUESTIONS
AND ANSWERS WITH 100% SOLUTIONS
Internationalization - -defined as the process by which firms become more engaged in
international markets.
-the process involves varying degrees of financial and other resource commitments to
foreign markets and of course, various degrees of risk
Mode of Entry - central to the process of internationalization is the selection of an entry
mode. These range from low commitment modes such as exporting high commitment
modes such as foreign direct investment
Motivation - the motivation for internationalization may either be proactive (firm wants
to) or reactive (firm has little choice)
Uppsala or U model - the firm first expands to a psychically close market and having
become familiar with that market, will target slightly more distant markets. experiential
knowledge is the major driver of its pattern of internationalization. The Uppsala model
has been criticized for its linear approach to the internationalization process
Dunnings OLI framework - firms expand abroad to capitalize on ownership, location
and internalization advantages
Advantages of Dunnings OLI framework - -ownership of foreign assets will confer on
the firm a competitive advantage in the foreign market which is not enjoyed by
competing firms that do not own such assets
-location confers advantages in terms of tax or other investment incentives offered by
the gov't of the host country or a more favorable industrial relations climate for the firm's
operations
-internalization of firm-specific advantages such as proprietary technology confers
benefits to the firm over alternatives such as licensing
Springboard or latecomer perspective - emerging market firms internationalize in order
to overcome limitations inherent in their home-country environment, such as small
market size, institutional immaturity or a relatively unsophisticated consumer base. To
accomplish this firms aggressively acquire strategic assets from MNCs in developed
countries
Systematic four-step process - 1)Macro segmentation
2)Preliminary screening
3)Secondary screening
,4)Final security selection
Macro Segmentation - -develop segmentation criteria
-apply to group countries
Preliminary screening - -develop additional criteria
-apply to reduce the # of candidate countries
Secondary screening - -firm assesses its own capabilities relative to the market
Final security selection - -conduct site visit
Selecting Foreign Markets - the end result of the process is the selection of one country
from the universe of potential candidates by a process of elimination
International consumer segmentation - consumers in cross-national segments may
have more in common with their counterparts in other countries than they do with citizen
of their own countries. If this is the case a two-stage model may be appropriate in which
segmentation is undertaken at both the country and consumer levels
Country Level Screening - macro-segmentation based on overall market attractiveness
Consumer level screening - micro-segmentation based on personal and societal values
Types of Entry modes - -export
-intermediate
-hierarchical
Export Modes - low risk-low return modes which provide limited control for the
exporting firm
Intermediate Modes - modes which provide for the sharing of the risks and rewards of
market entry commensurate with the share of ownership of each partner
Hierarchical Modes - modes in which firm has complete control of the operation but
also exposure to a higher level of risk
Exporting - involves the manufacture of a product in one country and its sale in one or
more foreign countries
Two forms of exporting - -direct
-indirect
Direct Exporting - exporters transact with an intermediary based in the foreign market
, Indirect Exporting - exporter transacts with an intermediary based in its home country.
This intermediary takes responsibility for getting the exporter's product into foreign
country. Domestic transaction from standpoint of the exporter
Advantages to exporting - -requires little by way of managerial skills or knowledge of
the foreign market
-carries with it minimal risk for the firm
-does not involve significant costs for the firm
Disadvantages mto mexporting m- m m-lower mreturns mrelative mto mother mentry mmodes
-little mcontrol mover mhow mthe mproduct mis mpositioned mand msold min mthe mforeign mmarket
-little mopportunity mto mdevelop ma mdeep munderstanding mof mthe mforeign mmarket
Types mof mIntermediaries m- m m-export mbuying magents
-export mimport mbroker
-export mmanagement mcompany
-trading mfirms
-distributors
-agents
Export mbuying magents m- m mthese magents mare mresident min mthe mcountry mof mthe
mmanufacturer mbut mwork mon mbehalf mof ma mforeign mbuyer
Export-import mbroker m- m mbrokers mbring mbuyer mand mseller mtogether. mThey mare mspecialist
mfirms mand mhave mdeep mexpertise min ma mrelatively mnarrow mrange mof mproduct mcategories
Export mmanagement mcompany m- m mThese mare mdomestic mfirms mwhich mact mon mbehalf mof
ma m# mof mnon-competing mexporters m.Take mtitle mto mthe mproduction mthey mhandle mand
mmarket mthem minternationally mfor mtheir mown maccount mor mthey mmay mact mas magents
Trading mfirms m- m mfind mbuyers min mforeign mmarkets mand mnegotiate mdistribution
marrangements mfor mother mcompanies. mTrade mfinancing mand mforeign mexchange
mtransaction mare malso mwithin mtheir mscope mof mactivities
Distributors m- m mindependent mfirms mbased min mthe mforeign mcountry mand mare mnot maffiliated
mwith mthe mmanufacturer. mThey mpurchase mproducts mfrom mthe mmanufacturer mand mtake
mresponsibility mfor mmarketing mthem min mthe mtarget mforeign mcountry
Agents m- m mindependent mcompanies mbased min mthe mforeign mtarget mcountry mand mprovide
mrepresentation mfor mthe mmanufacturing mfirm. mThese mintermediaries mdo mnot mtake mtitle mto
mthe mproducts mthey mhandle
Licensing m- m mone mfirm m(the mlicensor) mgrants mthe mright mto muse mits mintellectual mproperty
mto manother mfirm m(the mlicensee) min mexchange mfor mfinancial mcompensation mreferred mto
mas ma mroyalty
AND ANSWERS WITH 100% SOLUTIONS
Internationalization - -defined as the process by which firms become more engaged in
international markets.
-the process involves varying degrees of financial and other resource commitments to
foreign markets and of course, various degrees of risk
Mode of Entry - central to the process of internationalization is the selection of an entry
mode. These range from low commitment modes such as exporting high commitment
modes such as foreign direct investment
Motivation - the motivation for internationalization may either be proactive (firm wants
to) or reactive (firm has little choice)
Uppsala or U model - the firm first expands to a psychically close market and having
become familiar with that market, will target slightly more distant markets. experiential
knowledge is the major driver of its pattern of internationalization. The Uppsala model
has been criticized for its linear approach to the internationalization process
Dunnings OLI framework - firms expand abroad to capitalize on ownership, location
and internalization advantages
Advantages of Dunnings OLI framework - -ownership of foreign assets will confer on
the firm a competitive advantage in the foreign market which is not enjoyed by
competing firms that do not own such assets
-location confers advantages in terms of tax or other investment incentives offered by
the gov't of the host country or a more favorable industrial relations climate for the firm's
operations
-internalization of firm-specific advantages such as proprietary technology confers
benefits to the firm over alternatives such as licensing
Springboard or latecomer perspective - emerging market firms internationalize in order
to overcome limitations inherent in their home-country environment, such as small
market size, institutional immaturity or a relatively unsophisticated consumer base. To
accomplish this firms aggressively acquire strategic assets from MNCs in developed
countries
Systematic four-step process - 1)Macro segmentation
2)Preliminary screening
3)Secondary screening
,4)Final security selection
Macro Segmentation - -develop segmentation criteria
-apply to group countries
Preliminary screening - -develop additional criteria
-apply to reduce the # of candidate countries
Secondary screening - -firm assesses its own capabilities relative to the market
Final security selection - -conduct site visit
Selecting Foreign Markets - the end result of the process is the selection of one country
from the universe of potential candidates by a process of elimination
International consumer segmentation - consumers in cross-national segments may
have more in common with their counterparts in other countries than they do with citizen
of their own countries. If this is the case a two-stage model may be appropriate in which
segmentation is undertaken at both the country and consumer levels
Country Level Screening - macro-segmentation based on overall market attractiveness
Consumer level screening - micro-segmentation based on personal and societal values
Types of Entry modes - -export
-intermediate
-hierarchical
Export Modes - low risk-low return modes which provide limited control for the
exporting firm
Intermediate Modes - modes which provide for the sharing of the risks and rewards of
market entry commensurate with the share of ownership of each partner
Hierarchical Modes - modes in which firm has complete control of the operation but
also exposure to a higher level of risk
Exporting - involves the manufacture of a product in one country and its sale in one or
more foreign countries
Two forms of exporting - -direct
-indirect
Direct Exporting - exporters transact with an intermediary based in the foreign market
, Indirect Exporting - exporter transacts with an intermediary based in its home country.
This intermediary takes responsibility for getting the exporter's product into foreign
country. Domestic transaction from standpoint of the exporter
Advantages to exporting - -requires little by way of managerial skills or knowledge of
the foreign market
-carries with it minimal risk for the firm
-does not involve significant costs for the firm
Disadvantages mto mexporting m- m m-lower mreturns mrelative mto mother mentry mmodes
-little mcontrol mover mhow mthe mproduct mis mpositioned mand msold min mthe mforeign mmarket
-little mopportunity mto mdevelop ma mdeep munderstanding mof mthe mforeign mmarket
Types mof mIntermediaries m- m m-export mbuying magents
-export mimport mbroker
-export mmanagement mcompany
-trading mfirms
-distributors
-agents
Export mbuying magents m- m mthese magents mare mresident min mthe mcountry mof mthe
mmanufacturer mbut mwork mon mbehalf mof ma mforeign mbuyer
Export-import mbroker m- m mbrokers mbring mbuyer mand mseller mtogether. mThey mare mspecialist
mfirms mand mhave mdeep mexpertise min ma mrelatively mnarrow mrange mof mproduct mcategories
Export mmanagement mcompany m- m mThese mare mdomestic mfirms mwhich mact mon mbehalf mof
ma m# mof mnon-competing mexporters m.Take mtitle mto mthe mproduction mthey mhandle mand
mmarket mthem minternationally mfor mtheir mown maccount mor mthey mmay mact mas magents
Trading mfirms m- m mfind mbuyers min mforeign mmarkets mand mnegotiate mdistribution
marrangements mfor mother mcompanies. mTrade mfinancing mand mforeign mexchange
mtransaction mare malso mwithin mtheir mscope mof mactivities
Distributors m- m mindependent mfirms mbased min mthe mforeign mcountry mand mare mnot maffiliated
mwith mthe mmanufacturer. mThey mpurchase mproducts mfrom mthe mmanufacturer mand mtake
mresponsibility mfor mmarketing mthem min mthe mtarget mforeign mcountry
Agents m- m mindependent mcompanies mbased min mthe mforeign mtarget mcountry mand mprovide
mrepresentation mfor mthe mmanufacturing mfirm. mThese mintermediaries mdo mnot mtake mtitle mto
mthe mproducts mthey mhandle
Licensing m- m mone mfirm m(the mlicensor) mgrants mthe mright mto muse mits mintellectual mproperty
mto manother mfirm m(the mlicensee) min mexchange mfor mfinancial mcompensation mreferred mto
mas ma mroyalty
