B A EXAM 3 key terms

Explain why firm undertake acquisition

Acquisition are often driven by synergistic, hubrisitic, and managerial motives

Competitive Dynamics

Actions and responses undertaken by competing firms.

An American fast-food chain that moves into Canada by buying an existing Canadian fast-food chain represents what type of entry mode?

Equity WOS

All of the following are examples of no equity entry mode into a foreign country except:

FDI

A firm that only exports goods with no fdi in a foreign country is usually categorized as an MNE

False

A new organization that is created and jo owned by two or more parents companies is called as joint tenant

False

For first-movers, their pioneering status guarantees them continued success

False

Foreign-owned firms in host countries typically experience "the foreign advantage"

False

Cultural distance is the opposite of institutional distance.

False.

tactic collusion

Firms indirectly coordinate actions by signaling their intention to reduce output and maintain pricing above competitive levels.

products that are made by an entrepreneurs in his or her home country and sold to customers in other countries are called:

direct export

Strategic investment

one firm investing in another as a strategic investor

when an investors loans small sum of money ($50 to $300() to entrepreneurs is an attempt to lift them to lift them out of the poverty level, this is called:

microfinancing

merger

the combination of operations and management of two firms to establish a new legal entity

Franchising is typically used in service industries such as fast-food chains.

true

Societies that are collectivistic and have high uncertainty-avoidance tend to have fewer entrepreneurs.

true

Worldwide, SMEs create about half of the total value added to products.

true

counterattack

A set of actions in response to attack.

Participate in three leading debates concerning foreign market entries.

1) Liability vs assets of foreignness 2) global vs regional geographic diversification, and 3) old-line Vs emerging multinational

Participate in two leading debates concerning alliances and acquisitions

1) alliances vs acquisitions 2) majority JVs vs versus minority JVs

Participate in two leading debates concerning competitive dynamics

1) competition vs anti dumping 2) competitive strategy vs antitrust policy

Discuss how alliances perform

1) equity 2)learning 3)nationality 4) relational capabilities may affect alliance performance

Worldwide, SMEs generate what percentage of employment?

60 to 90 percent

According to Roman and verbeke, about how many MNEs were classifies as truly global in 2001?

9

Worldwide, small- and medium-sized companies (SMEs) account for about what percentage of firms?

95 percent

international entrepreneurship

A combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create wealth in organizations.

A green-field operation is:

A factory of offices built from scratch

letter of credit (L/C)

A financial contract that states that the importer's bank will pay a specific sum of money to the exporter upon delivery of the merchandise.

price leader

A firm that has a dominant market share and sets "acceptable" prices and margins in the industry.

Export Intermediaries

A firm that performs an important middleman function by linking domestic sellers and foreign buyers that otherwise would not have been connected.

microfinance

A practice to provide micro-loans ($50-$300) used to start small businesses with the intention of ultimately lifting the entrepreneurs out of poverty.

Born global firms (or international new ventures)

A start-up company that attempts to do business abroad from inception.

Define alliances and acquisitions

A strategic is voluntary agreement of cooperation between firms. An acquisition is a transfer of the control of operation and management from one firm (target) to another

game theory

A theory that studies the interactions between two parties that compete and/or cooperate with each other.

Acquisition

A transfer of the control of operations and management from one firm (target) to another (acquirer), the former becoming a until of the latter.

learning by doing

A way of learning, not by reading books but by engaging in hands-on activities.

Relational (collaborative) capability

Ability to manage interfirm relationships

describe how alliances are formed

Alliances are typically formed when managers go throughout a three stages decision process.

predatory pricing

An attempt to monopolize a market by setting prices below cost and intending to raise prices to cover losses in the long run after eliminating rivals.

Dumping

An exporter selling goods below cost.

Cartel (trust)

An output- and price-fixing entity involving multiple competitors.

Contractual (non-equity-based) alliance

Association between firms that is based on contracts and does not involve the sharing of ownership.

identify the drivers for attack, counterattacks and signaling.

Attacks need to be aware of the three drivers for counterattacks 1.)awareness 2.) motivation, 3.) capability. without king directly to competition, firms can use various means to signal rivals

compare and contrast first-mover and late-mover advantages (when to enter).

Each has pros and cons, and there is no conclusive evidence pointing to one direction.

small and medium-sized enterprises (SMEs)

Firms with fewer than 500 employees in the United States and with fewer than 250 employees in the European Union.

Benefits that come to firms that enter a market first and that late-entrants do not have are called:

First-mover advantage

which is NOT one of the 4Fs of entrepreneurial financials? -family -friends -founders -foreigners

Foreigners

Articulate how institutions and resources influence alliances and acquisition.

Formal institutions influence alliances and acquisitions throughout antitrust and entry mode concerns informal institutions affect alliances and acquisitions throughout normative and cognitive pillars. The impact of resources on alliances and acquisitions throughout normative and cognitive pillars. The impact of resources on alliances and acquisitions is illustrated by the VRIO framework

antitrust policy

Government policy designed to combat monopolies and cartels.

Competition policy

Government policy governing the rules of the game in competition.

What are the three characteristics associated with growing entrepreneurial?

Growth Innovation, Financing

Prisoner's Dilemma

In game theory, a type of game in which the outcome depends on two parties deciding whether to cooperate or to defect.

How does Institution affect entrepreneurship?

Institution enables and constrains entrepreneurship around the world.

All of the following are examples of no equity entry mode into a foreign country except:

JVs

Benefits that come to firms that enter a market after many other have done so and that early entrants do not have re called:

Late-mover advantage

Antidumping laws

Law that makes it illegal for an exporter to sell goods below cost abroad with the intent to raise prices after eliminating local rivals.

In a minority JV, the corporate parent company has:

Less than 50% equity

managerial motives

Managers' desire for power, prestige, and money, which may lead to decisions that do not benefit the firm overall in the long run

Understand why acquisitions often fail

Many acquisitions fail because managers fail to address pre -acquisitions and post-acquisition problems

stage model

Model of internationalization that portrays the slow step-by-step (stage-by-stage) process an SME must go through to internationalize its business.

mutual forbearance

Multimarket firms respect their rivals' spheres of influence in certain markets, and their rivals reciprocate, leading to tacit collusion.

A dominos pizza restaurant that is opened in chin represents what type of entry mode?

No equity contractual agreement

Collusive price setting

Price setting by monopolists or collusion parties at a level higher than the competitive level.

Articulate how resources and capabilities influence competitive dynamic.

Resource similarity and market commonality can yield a powerful framework for competitor analysis.

How does resources affect entrepreneurship?

Resources and capabilities largely determine entrepreneurship success and failure.

Cross-market retaliation

Retaliatory attacks on a competitor's other markets if this competitor attacks a firm's original market.

contender strategy

Strategy that centers on a firm engaging in rapid learning and then expanding overseas.

dodger strategy

Strategy that centers on cooperating through joint ventures with MNEs and sell-offs to MNEs.

extender strategy

Strategy that centers on leveraging homegrown competencies abroad.

defender strategy

Strategy that centers on local assets in areas in which MNEs are weak.

Blue Ocean Strategy

Strategy that focuses on developing new markets ("blue ocean") and avoids attacking core markets defended by rivals, which is likely to result in a bloody price war or a "red ocean."

Capacity to punish

Sufficient resources possessed by a price leader to deter and combat defection.

resource similarity

The extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm.

market commonality

The overlap between two rivals' markets.

concentration ratio

The percentage of total industry sales accounted for by the top four, eight, or twenty firms.

competitor analysis

The process of anticipating rivals' actions in order to both revise a firm's plan and prepare to deal with rivals' response.

participating in two leading debates concerning entrepreneurship

Traits vs. institutions and Slow vs. rapid internationalization.

A new organization that is created and jointly owed by two or more parents companies is called a JV

True

Cultural distance is a subset of institutional distances

True

Foreign-owned firms is host countries typically experience a "liability of foreigners"

True

Switching cost due to brand loyalty to a first-mover company are a barrier to entry for late entrant to a country.

True

Draw implication for action

Understanding the rules of the games domestic and international competition around the world. strengths resources and capabilities for more effective competitor analysis develop skills in competitor analysis that guide decision making on attacks counterattacks , and cooperation

entrepreneurs

a founder and/or owner of a new business or managers of existing firms who identifies and exploits new opportunities.

strategic alliance

a voluntary arrangement of cooperation beetwen firms

indirect exports

a way to reach overseas customers by exporting through domestic-based export intermediaries

Equity-based alliance

alliance based on ownership or financial interest between the firms

learning race

alliance in which partners aim to outrun each other by learning the "tricks" from the other side as fast as possible

Entrepreneurial firm

also defined as SMEs

serial entrepreneur

an entrepreneur who starts, grows, and sells several businesses throughout his/her career

attack

an initial set of actions to gain competitive advantage

real option

an investment in real operations as opposed to financial capital

Venture Capitalists (VCs)

an investor who provides risk capital for early stage ventures

wealthy individuals investors who become a source of entrepreneurship financing for a start up business are called:

angels

Cross-shareholding

both firms investing in each other to become cross-shareholders

collusion

collective attempts between competing firms to reduce competition

Outline how formal institutions affect domestic competition and international competition

domestic = antitrust laws focus on collection and predatory pricing Internationally= anti dumping laws discriminate against foreign firms and protect domestic firms.

Founders and/ or owners of new business or manager of existing firms who identify and exploit new opportunities are called

entrepreneurs

Entrepreneurial firms can also internationalize without venturing abroad.

exporting indirectly supply foreign firms becoming foreign firms becoming licenses/franchises of foreign firms joining foreign entrant as alliance partners, and harvesting and exiting throughout sell-offs to foreign entrants.

Licensing is typically used in service industries such as fast-food chains.

false

Only MNEs have the resources to do business globally.

false

SMEs typically operate only domestically, and only large MNEs typically do business in other countries.

false

Societies that are individualistic and have low uncertainty-avoidance tend to foster fewer entrepreneurs.

false

worldwide, SMEs create about 60 percent of the values added to products

false

in the U.S, small - and medium-sized companies (SMEs) ARE DEFINED AS HAVING

fewer than 500 employees

Franchising

firms A's agreement to give firm B the right to use A's proprietary assets for a royalty fee paid to A by B. This is typically done in service industries.

multimarket competition

firms competing against each other in several product or geographic markets

explicit collusion

firms directly negotiate output and pricing and divide markets

follow the comprehensive model of foreign market entries (how to enter).

how to enter depends on the scale of entry:large-scale versus small-scale entries. A comprehensive model of foreign market entries first focuses on the equity (ownership) issue. The second step focuses on marketing the actual selection, such as exports, contractual agreements, JVs and WOS.

Define entrepreneurship

identification and exploring of previously unexplored opportunities.

due diligence

investigation prior to signing contracts

antitrust laws

laws that makes cartels (trust) illegal.

Microfinancing is defined as:

loaning small sums of money ($50 to %300) to entrepreneurs in an attempt to lift them out of poverty level.

Definition of Entrepreneurs

may be founded and owned of new business or managers of existing firms

Hubris

overconfidence in one's capabilities

Understanding the industry conditions conductive to cooperation and collusion

such industries tend to have: 1.) smaller number of rivals, 2.) a price leader, 3.) homogeneous products, 4.) high entry barriers 5.) high market commonality (mutual forbearance)

Acquisition premium

the difference between the acquisition price and the market value of target firms

Strategic Fit

the effective matching of complementary strategic capabilities

Entrepreneurship

the identification and exploitation of previously unexplored opportunities

As a firm moves from direct exports, to licensing, to FDI, the resources required for operating the business typically increase.

true

direct exports

the sale of products made by firms in their home country to customers in other countries

Organization Fit

the similarity in cultures, systems, and structures.

Distinguish international strategies that enter foreign marketing from those that stay in domestic markets.

they enter through the entry model: direct export licensing/franchising FDI

Draw managerial implication

understand the rules of game governing competition in foreign markets. develop overwhelming resources and capabilities to offset the liability of foreignness match efforts in market entry witch strategic goals.

Discuss how local firms fight MNEs

when confronting MNEs, locals firms choose a variety of strategies choices: 1) defender 2) extender 3) dodger 4.) contender

Understand how institutions and resources affect the liability of foreignness

when entering foreign markets, firms confront a liability of foreignness. both institution-based and resources-based views advise ,mangers on how to overcome such liability.

match the quest for location-specific advantages with strategy goals (where to enter)

where to enter depends certain foreign countries location specific advantage and firms strategies goals, such as seeking 1) natural resources 2) market 3.) efficiency, and 4) innovation.