MNE Entry Strategy Exam Questions and Answers Rated 100%

MNE Entry Strategy Exam Questions and Answers Rated 100% What choice should be made based off the "relative long-term growth and profit potential"? - Answers The choice of market for an MNE to enter. What are the various modes of entering a foreign market? (and how many are there?) - Answers 1. Exporting 2. Licensing 3.Franchising 4. Joint Ventures 5. Wholly owned subsidiaries 6. Acquisition 7. Turnkey Contracts List the strategic alliances between potential or actual competitors. - Answers 1. Cross-shareholding deals 2. Licensing arrangements 3. Formal Joint Ventures 4. Informal Cooperative arrangements When deciding to enter a foreign market, what factors must you balance? - Answers The benefits, the costs, and the risks associated with doing business in a country. Long-term economic benefits are a function of which 3 factors with regards to basic MNE entry decisions? - Answers 1. Size of the market (demographics) 2. Present wealth (purchasing power) 3. Future wealth of consumers (economic growth) A country's capacity for growth tends to be greater in less developed nations. Additionally, costs and risks are typically lower in advanced economies with stable politics. What kind of country is ideal to invest in with regards to long-term economic benefits? - Answers The "benefit-cost-risk" trade-off is likely more favourable in politically stable developed and developing nations with a market-based economy. The key is to have no dramatic upsurges in either inflation or private-sector debt. What are the different entry timings available to an MNE? - Answers Early: MNE enters a foreign market before other foreign firms. Late: MNE enters after other MNE firms have established themselves. What is first-mover advantage? Give 3 advantages. - Answers The ability to pre-empt rivals and capture demand by establishing a strong brand name and customer satisfaction. The ability to build sales volume in the country and ride down the experience curve ahead of rivals, giving an early entrant a cost advantage over later entrants. The ability to create switching costs that tie customers into the products or services. What is first-mover disadvantage? Give 4 disadvantages. - Answers Pioneering costs which arise when the foreign firm has to devote effort, time and expense to learn the rules of the new market. Liability with being the first foreign firm. More likely to fail than if you enter relatively soon after a few other firms. Pioneering cost of promoting and establishing a product offering to customers who may not know about the product yet. Early entrants face the risk of regulation change, which changes the prior assumptions about the country. Give a case study example of a first-mover. - Answers Uber. Didn't care for regulation and went in guns blazing. They lost the Chinese market and faced considerable regulatory backlash in many European capitals. Large-scale entry vs Small-scale entry. What are the advantages and disadvantages of each? - Answers LS: commitment of significant resources which implies rapid entry. This is a long-term strategy that is difficult to reverse. However, makes it easier for a firm to attract customers who believe the firm is here to stay. Additionally, this strategy will slow down other MNEs who might have wanted to enter the foreign market. It is worthy to note that the firm will have less resources to expand elsewhere via this strategy... limits their flexibility. Important to identity how competitors may react to this, but it is likely the firm will capture first-mover advantages associated with demand pre-emption, scale economies and switching costs. SS: allows a firm to learn about a market while limiting its exposure. Makes it hard to build market share and first-mover advantages. However it does avoid potential losses. What are the Pros and Cons of Exporting? - Answers Firms usually start by exporting before later switching to another mode of service. Pros: avoids substantial costs of establishing operations in the host country, and helps achieve experience curve and location economies at home via the increased sales volume. Cons: there might be lower-cost locations elsewhere. Additionally, tariff barriers can make exporting uneconomical as well as risky if they are to change. Not having a presence in a host nation may require to delegate to local agents. What are the Pros and Cons of a Turnkey contract? - Answers Pros: Ability to earn returns from process technology skills in countries where FDI is restricted. Cons: Creation of efficient competitors and a lack of long-term market presence. What are the Pros and Cons of Licensing? - Answers Pros: Low development costs and risks, with a moderate commitment/involvement Cons: Lack of control over technology. Inability to realise location and experience curve economies. Inability to engage in global strategic coordination. What are the Pros and Cons of Franchising? - Answers Pros: Low development costs and risks. Possible circumvention of import barriers. Strong sales potential. Cons: Lack of control over quality and an inability to engage in global strategic coordination. What are the Pros and Cons of joint ventures? - Answers Pros: Access to local partner's