International Business Chapter 10

Foreign Market Entry Strategies

- exporting - licensing - joint ventures - franchising - turnkey project - wholly owned subsidiary

Large scale entry

- strategic commitments - a decision that has a long-term impact and is difficult to reverse - may cause rivals to rethink market entry - may lead to indigenous competitive response

country of origin effect

The positive or negative perception of firms and products from a certain country.

Resource-based view

Value, Rarity, Imitability, Organization

wholly owned subsidiary

foreign subsidiary that is totally owned and controlled by an organization

entry mode

institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a market

Reciprocity

mutual exchange

Institution-based view

regulatory risks, trade and investment barriers, differences in cultures, norms, and values

Liabilities of foreignness

-Nonnative status -Newness -Emergness

Linking, leverage, and learning advantages

A firm's quest of linkage (L) advantages, leverage (L) advantages, and learning (L) advantages, which are typically associated with multinationals from emerging economies

Non-Equity Modes of Entry

A mode of entry (exports and contractual agreements) that tends to reflect relatively smaller commitments to overseas markets.

Build-operate-transfer (BOT) agreement

A non-equity mode of entry used to build a longer-term presence by building and then operating a facility for a period of time before transferring operations to a domestic agency or firm.

turnkey project

A project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational.

Greenfield operation

Building factories and offices from scratch (on a proverbial piece of "green field" formerly used for agricultural purposes).

Equity Modes of Entry

JVs and wholly owned subsidiaries • Demonstrate strategic commitment to certain markets, local customers and suppliers • Deters potential entrants

first-mover advantage

The ability of an innovative company to achieve long-term competitive advantages by being the first to offer a certain product in the marketplace

small scale entry

allows a firm to learn about a foreign market while limiting the firm's exposure to that market

joint venture

an agreement between two or more companies to share a business project

research and development (R&D)

a set of activities intended to identify new ideas that have the potential to result in new goods and services

institutional voids

absence of institutions that facilitate exchanges between buyers and sellers

late-mover advantage

benefits that accrue to firms that enter the market later and that early entrants do not enjoy

Co-marketing

efforts among a number of firms to jointly market their products and services