Intro to International business - Ch. 11, 12, 13

16 flashcards · Other · by Daniel F.

1. Entry mode types

   Non equity (through contract) Exporting Arnold: maintain relationship Licensing Franchising Equity (through ownership) Greenfield Acquisitions highest commitment Joint ventures cooperate with rival, learning race

2. David Arnold: When selling in foreign markets...

   should maintain relationships with local distributors over long-term even after they establish their own network

3. Why establish relation with foreign distributor

   They have the knowledge about the local market, regulations and business practices They know where to hire the appropriate staff They know potential customers Their FSA is location-bound and helps overcome the distance that the internationalizing firm has to deal with

4. Beachhead strategy

   Local distributors often serve as a beachhead. when you go into the host country, you need to focus your strength and concentrate on winning a small area, which is the beachhead, that becomes the stronghold from which you will have advance into the rest of the market.

5. Foreign distributor stages

   Initial Success Success is easy to capture as the low hanging fruit. A new product in a new market sells itself. There are new and enthusiastic partners Flattening success and sometimes even decline After the first success, the market becomes more difficult, because there are new entrants and the competition increases Questioning its local partner The MNE start questioning the local partner and may: Take over control of the distribution channel Build a self-owned distribution channel Arnold: fi…

6. MNEs have to find the balance between three competing objectives when (Foreign distributing)

   Strategic control over important customers Benefits from local market knowledge and market access Risk reduction when faced with high demand uncertainty in the new market

7. Arnold provides a list of seven guidelines that should help the MNE to avoid the commonly observed pattern of local market underperformance as a result of under investment

   Proactively select locations and only then distributors Focus on distributors market development capabilities: It is critical to find the best 'company fit' in terms of strategy, culture, willingness to invest etc. rather than finding distributors with the right market fit. Manage distributors as long-term partners: This approach will make distributors willing to invest more strategic marketing and long term development. Provide resources to support distributors for market development: committi…

8. Benefits of strategic alliances

   Allowing firms to share risk and costs Allowing firms to benefit from their complementary resources Allows the quicker development of capabilities to deliver products and services valued by the output market.

9. Principles of successful strategic alliances

   Collaboration is competition in a different form Harmony is not the most important measure Of success Cooperation has its limits. Companies must defend against competitive compromise. Learning from partners is paramount

10. costs of a strategic alliance

    A risky learning race starts Knowledge sharing becomes dysfunctional because of bounded reliability Managers pay too much attention to the learning race and forget about the goal of the strategic alliance

11. The nature of the FSAs contributed by an MNE to an international alliance affects how easily these FSAs will diffuse to a partner.

    Mobility: the ease of moving the complete physical constructions of how to duplicate an FSA. The more mobile, the easier it may diffuse. Embeddedness: an FSA is embedded if it cannot easily be shared through actors outside the firm, without problems of interpretation or absorption across cultures. The more embedded the FSA, the less easily it is to diffuse

12. Alliance-specific advantages (ASAs)

    ASAs have international exploitation potential, but are embedded in alliances and cannot be simply transferred to the individual partner firms.

13. Problems with M&As

    Pre- and post-integration obstacles: Each firm has its own FSA, which are partly location-bound. If the distance is large, it will be more difficult to integrate these FSAs. Plus even for FSAs that are transferable, it is not easy to integrate these Purchase price premiums: As a result of firms competing for a firm that can be taken over, the price increases.

14. Senior management biases on M&As

    Managers like M&As too much, due to boundedness Top line obsession: focus too much on growth of sales, not profits. The bounded reliability problem here is that managers only pursue their own interests Stock price exploitation: in case of overvalued stock prices, managers would like to benefit from that. Here the bounded reliability problem is opportunistic behavior Grooved thinking: "this is the way we always did it" Herd behavior: copy paste behavior of managers, doing what the competitor doe…

15. Alliances are preferred over M&As when

    Each firm only needs a subset of the FSAs of the partner It is difficult to dispose of the prospective partner's unusable resources because they are firm specific: If you buy the whole firm and cannot sell the parts of it you do not like In a strategic allience you get what you need and there are no legal problems

16. Herfindahl index

    measure of market share concentration large = low market shares high = small amount of firms