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.