Chapter 15: Entering Developed and Emerging Markets

Companies that have a reputation based on ____ probably make the best allies in a strategic alliance.

"fair play"

What is a common motive in most strategic alliance agreements?

A means to enter markets

What are the two methods for establishing a wholly owned subsidiary?

Acquisition of an established firm Greenfield venture

What are the three factors that can lead to the success of a strategic alliance?

Alliance structure Alliance management Partner selection

The attractiveness of a country as a potential market should be assessed by balancing what three items associated with doing business in that country?

Benefits Costs Risks

What are three advantages associated with first-movers? (check all that apply)

Build sales volume Preempt rivals Create switching costs

What are three examples of intangible property that might be covered by a licensing agreement?

Designs Patents Copyrights

What is the term used for when one company enters markets before its competitors?

Early entry

True or False: Cultural differences do not typically play a role in acquisitions.

False

True or False: The most typical joint venture is a 60/40 venture, in which one party holds a 60 percent ownership stake and the other holds a 40 percent ownership stake.

False

True or false: As the pressure to reduce costs increases, the best entry modes are franchising and joint ventures.

False

Which three characteristics are associated with a good ally in a strategic alliance?

Helps the firm achieve strategic goals Unlikely to try and exploit alliance for its own ends Shares the firm's vision for purpose of alliance

Choose three reasons why acquisitions fail.

Inadequate preacquisition screening Culture clash between acquired and acquiring firms Not realizing gains from combining operations

In order to maximize the benefits of an alliance, a company should strive for what three factors? (Check all that apply)

Learn from the partners Build trust between the partners Be sensitive to cultural differences

What are the three basic decisions firms must make when looking at foreign expansion?

On what scale to enter markets Which markets to enter When to enter markets

When a company makes a commitment to enter a market on a large scale, this implies a _____ entry.

Rapid

Which three of these statements accurately describe franchising?

The franchisee commits to abiding by strict rules on how it does business The franchiser typically receives a royalty payment. It is similar to a license but with a longer time commitment

True or False: Colin's coffee company made a licensing deal with Folger's brand coffee. This is an example of a strategic alliance.

True

True or False: One advantage of a strategic alliance is that it can help the firm develop technological standards for the industry that will, in turn, benefit the firm.

True

True or False: When a company enters a market on a large scale, it would be common for potential competitors to decide against entering that market.

True

True or false: If a company is concerned with losing control over its technology, it might want to license the technology rapidly to foreign firms before imitation occurs.

True

True or false: In a licensing agreement, a company doesn't have to be responsible for the development costs of opening a foreign market.

True

Bart's company wants to structure an alliance with another firm but it wants to do this with the assurance of minimal risk. What three methods should Bart's company consider in order to achieve this?

Write contractual safeguards into an alliance agreement to avoid opportunism by a partner Make it difficult to transfer technology not meant to be transferred to a partner Both parties agree in advance to swap skills and technology that is coveted to ensure equitable gain

Nelson Warm Air Corp. entered into a short-term agreement with Hudson Heating as they developed systems to install in all rental units, such as apartments and town homes, throughout France. This short-term agreement is an example of _____.

a strategic alliance

A(n) _____ strategy is faster to complete.

acquisition

As a way to enter the foreign market, Camille's company is considering purchasing a business in their target market rather than trying to build a subsidiary from scratch. They are considering a(n) ______ strategy.

acquisition

Bob's Bicycle Company is planning to enter into foreign markets where there are already well-established incumbent enterprises and global competitors are also interested in establishing a presence. Based on these circumstances, Bob's Bicycle Company should enter the foreign markets via _____.

acquisition

When a company decides that it will take too long to establish a sizable presence in a country by using a greenfield venture, it might instead pay the firm to enter the country by using a(n) _____.

acquisition

The hubris hypothesis is used to explain why _____ fail(s).

acquisitions

What are the four advantages associated with a strategic alliance?

allow firms to share the fixed costs of developing new products brings together complementary skills that neither company could easily develop on their own helps a firm establish technological standards that will benefit the firm may facilitate entry into a foreign market

What are three advantages of acquisitions? Multiple select question.

beat out the competition fast to execute less risk than greenfield venture

Exporting, licensing, and establishing a joint venture are types of ______ companies can use.

entry modes

Not having to establish manufacturing operations overseas and being able to work to achieve experience curve and location economies are advantages of ______.

exporting

Which entry mode did many Japanese automakers use to gain access to US markets?

exporting

Meg's company was the initial producer of three-wheeled bikes in parts of Europe and benefited greatly because her company captured the demand early. This is an example of a _____ advantage.

first-mover

Fast food restaurants like McDonald's and Pizza Hut which have sold their trademark to thousands of operations around the world are good examples of _____.

franchising

The main criticism of a strategic alliance is that it ______.

gives the competition a low-cost way to access new technology and markets

What entry mode's major advantage is that a firm has more control over the kind of subsidiary it wants in a foreign market?

greenfield

Starting a subsidiary in a foreign country from "scratch" where nothing is established is called a(n) _____.

greenfield venture

The management team decided it would be more productive to build the foreign subsidiary from scratch than to try to change the culture that existed in the companies available to acquire. The team is planning a _____.

greenfield venture

When managing an alliance, relational capital refers to _____.

growing interpersonal relationships between managers of the firms

Strategic alliances tend to fail at a ____ (low or high?) rate.

high

When the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson came together to make mobile phones, they became known as Sony-Ericsson. They were sharing consumer electronics expertise and technological leadership in the communications sector. This is an example of a _____.

joint venture

Killian's company has developed proprietary technology that it wants to maintain control over when entering a foreign market. Because of this, Killian's company would NOT want to consider which two types of entry into the foreign market? (check all that apply)

joint venture licensing

What are the six modes companies use to enter foreign markets?

joint ventures wholly-owned subsidiaries turnkey projects franchising exporting licensing

Matt's company spent billions of dollars to acquire the financial investment operations of a company in Sweden. This would be an example of a _____ scale entry.

large

Stephen's US based company entered the European market long after its competitors had established themselves. This is known as ________ entry.

late

Even though the formula for the new paint process was created by Eliza's company, her company decided it didn't want the expense of manufacturing the paint so it provided the formula to another company in exchange for a royalty fee. This shows an advantage of _____.

licensing

Stanley invented a new way to make a book out of photos taken with a smart phone. He made an arrangement with Shutterfly which granted the company the right to use his idea in exchange for a 10% royalty fee each time his concept was sold. This is an example of a ____ agreement.

licensing

Mallory believes her company's newest technology product will be quickly imitated by others. In order to gain global acceptance before other companies imitate the product, Mallory's company should consider _____.

licensing the technology to foreign firms

Now that his company has developed an alliance with a partner firm in Argentina, it has become Kendrik's job to recognize any cultural differences there are between the two firms. Kendrik is in the process of _____ the alliance.

managing

Nora's company is considering going into a foreign market. They have determined which markets to go into and the timing for going into them. What other basic entry decision do they need to make?

on what scale should they go in

TRW Automotive has clauses in each of its contracts with Japanese auto component suppliers which bar the Japanese firms from supplying US-owned auto companies with component parts. This protects TRW from the possibility of these Japanese firms from entering into alliance with TRW just to gain access to US markets. By including this clause in its contracts, TRW is avoiding the threat of _____.

opportunism

Turnkey projects would be commonly associated with which three industries? (check all that apply)

pharmaceutical metal-refining chemical

What benefits are associated with entering a market on a large scale?

puts limitations on other institutions considering entry easier to attract customers

A successful alliance is the result of building interpersonal relationships between the firms' managers. This is known as _____ capital.

relational

The entry mode that may allow competitors to access markets and technology at a low cost is a ___________.

strategic alliance

Which form of market entry refers to a cooperative agreement between potential or actual competitors?

strategic alliance

The hubris hypothesis blames _____ as the reason why acquisitions fail.

top management

Bruce works as a contractor and agrees to oversee every aspect of a new plant a US company is building in Norway. Next week he enters the final phase of the project as he organizes the training of all company personnel. This is an example of a(n) ____ project.

turnkey

The potential for risk is higher when considering a foreign market with a politically _____ nation.

unstable

Firms that are pursuing a global standardization strategy tend to prefer establishing this strategy through _____.

wholly owned subsidiary

The best way for a company to profit from technological know-how that it wants to maintain control over when entering a foreign market, is to enter the market through a(n) _____.

wholly owned subsidiary

When Kent's US-based firm acquired an established European investment firm, it used that firm to promote its financial products. Kent's company owns 100% of the stock of the European firm making it a ____.

wholly owned subsidiary