MGT302 Final Exam Study Guide
ALL ANSWERS LATEST
SOLUTION SPRING FALL-2022
AID GRADE A+
Tacit Knowledge – Information that is intuitive and difficult to articulate or codify in writing; Ex.
swimming or riding a bike (you would want to show a person v. just tell them if they’ve never done
these things before)
• Can be gained through personal experience or interaction
• Shared knowledge might be dispersed throughout the company
Codified Knowledge – Information that can be easily captured in the form of text, tables, or
diagrams; Ex. Jamba Juice recipes, procedures, etc. on how to make smoothies
• Product specifications, scientific formulas and computer programs are examples of codified
knowledge
First Mover Advantages versus Pioneering Costs
First Mover Advantages: this is the advantage gained by the first business/company to enter
into a new market, can achieve huge market potential and growth as a result
Pioneering Costs: costs the firm has to bear that a later entrant can avoid; can arise when the
business system in a foreign country is so different from that in a firms home market that the
enterprise has to devote considerable time efforts and expense to learning the rules of the
game.)
Externalities
knowledge ‘spillovers’- general knowledge related to a specific industry or idea; comes from
sheer concentration of intellectual talent, and a network of informal contacts that allows firms
to benefit from each other’s knowledge generation.
Basic Entry Decisions:
• Which foreign markets – Choose markets close to home and easily moved to
• Timing the entry – First mover advantage for new entrants can lead to brand becoming
synonymous with the solution of a problem; Ex. Apple iPod is synonymous with mp3
players/portable music problem in the mind of the consumers
o Switching costs for customers implemented by first mover can further solidify customer
use/base
o First mover mistakes can end up benefiting later entrants
• Scale of entry – Do we want to enter a foreign market on a very large scale? (Show up and
make a large statement) Or should we show up slowly? Resources may determine this for
you
Strategic Commitments
Decision that has a long-term impact and is difficult to reverse such as entering a foreign
market on a large scale; can have important influence on the nature of competition in a
market; limits a company’s strategic flexibility.
Exporting – The sale of products produced in one country to residents of another country
• Direct exporting – Company conducts all phases of the sale and transfer of the
merchandise to a buyer
• Indirect exporting – Firm hires the expertise of someone else to facilitate the exchange
, for a fee; Advantage of knowledge/expertise in foreign market; Disadvantages:
o Limits access to local information
o Lack of control over intermediaries
Advantages:
• Avoids the costs of establishing manufacturing operations in the host country
• Minimizes risk and investment
• Rapid speed of entry
• May realize experience curve and location economies
Disadvantages:
• Current production location may not have location economies
• Transportation costs
• Trade barriers and tariffs
• Company viewed as an outsider
• May not learn about customers and competitors
• Exchange rate risk
Conditions Favouring Exporting:
• Limited sales potential in target country
• Little product adaptation required
• High target country production costs
• Liberal import policies
• High political risk
Turnkey Projects – When a firm agrees to set up an operating plant for a foreign client and then
hand over the “keys” when the plant is fully operational (staff, licenses, etc.); Ex. Enron turnkey plants
in India
Advantages:
• Can earn a return on knowledge asset
• Less risky than conventional FDI
Disadvantages:
• Arrangement does not create long-term interest in the foreign country
• May create a competitor
Licensing – Allows for another company/person to use your name, production process, etc. for a fee;
tends to be a limited (usually short term) agreement; Ex. purchase of ASU apparel off campus would
be purchase of licensed clothing – someone went out a obtained legal approval of producing ASU
products (i.e. Walmart); An arrangement in which the owner of an intellectual property (the licensor)
grants another firm (the licensee) the right to use that intellectual property in exchange for payment;
the licensor grants the licensee the right to use production processes, to reproduce a copyrighted
item, to use the brand name, or to use a trademark for a specified period of time in exchange for
royalties or other compensation
Advantages:
• Reduces development costs and risks of establishing foreign enterprise
• Establish a physical presence without costs
• Speed of entry
• Reduces exposure to political risk
• Overcomes trade and investment barriers
• May be the only way to develop applications of intangible property
Disadvantages:
• Difficult to maintain control over assets and know-how
• Damage to firm reputation
• Monitoring costs
, • Income dependent on licensee’s performance
• Licensee earns the majority of the profit
• Partners can become competitors
• Inability to exploit experience curve
• Cannot coordinate strategic moves
Conditions Favouring licensing:
• Import and investment barriers
• Legal protection of IPRs
• Low sale potential in target country
• Large cultural distance
• Licensee lack ability to become a competitor – When contract is up, easy for licensee to
turn into a competitor since they know how to create the product and don’t necessarily
need the brand name, etc.
• Technology likely to be quickly outdated
Cross-Licensing Agreements
Two firms license intangible products (knowledge) to each other in order to reduce inherent
risks of licensing.
Opportunism / Acting Opportunistically
The conscious policy and practice of taking selfish advantage of circumstances, with little
regard for principles, cannot necessarily be predicted
When you act opportunistically, you will jump from project to project, from business model to
business model, trying to make money in whatever ways you manage to discover, someone
without a vision; has no incentive to work, very hard to become successful in that manner
Master Franchise Agreements
Recruits, trains and supports individual franchises. A master franchisee sells sub
franchises..
Franchising – Similar to licensing but less limited; Ex. Jamba Juice franchises have legal right to
look/feel/be the same as a ‘regular’ Jamba Juice; An arrangement in which one firm (the franchisor)
allows another (the franchisee) the right to use an entire business system in exchange for fees,
royalties, or other forms of compensation; commonly used in the fast-food industry and the hotel
industry
Advantages:
• Quick, low-cost entry into numerous locations
• Reduces costs and risk of establishing enterprise
• Expansion of name brand identification and market reach
• Can leverage the franchisee’s local knowledge
Disadvantages:
• Problems of assuring quality control and operating standards, especially in geographically
distant locations
• Can tarnish franchisor’s image – Dirty franchise store will reflect poorly on company image;
Ex. One dirty Quizno’s can make people who visit that one not want to visit any other
Quizno’s
• Conflicts and disputes likely
ALL ANSWERS LATEST
SOLUTION SPRING FALL-2022
AID GRADE A+
Tacit Knowledge – Information that is intuitive and difficult to articulate or codify in writing; Ex.
swimming or riding a bike (you would want to show a person v. just tell them if they’ve never done
these things before)
• Can be gained through personal experience or interaction
• Shared knowledge might be dispersed throughout the company
Codified Knowledge – Information that can be easily captured in the form of text, tables, or
diagrams; Ex. Jamba Juice recipes, procedures, etc. on how to make smoothies
• Product specifications, scientific formulas and computer programs are examples of codified
knowledge
First Mover Advantages versus Pioneering Costs
First Mover Advantages: this is the advantage gained by the first business/company to enter
into a new market, can achieve huge market potential and growth as a result
Pioneering Costs: costs the firm has to bear that a later entrant can avoid; can arise when the
business system in a foreign country is so different from that in a firms home market that the
enterprise has to devote considerable time efforts and expense to learning the rules of the
game.)
Externalities
knowledge ‘spillovers’- general knowledge related to a specific industry or idea; comes from
sheer concentration of intellectual talent, and a network of informal contacts that allows firms
to benefit from each other’s knowledge generation.
Basic Entry Decisions:
• Which foreign markets – Choose markets close to home and easily moved to
• Timing the entry – First mover advantage for new entrants can lead to brand becoming
synonymous with the solution of a problem; Ex. Apple iPod is synonymous with mp3
players/portable music problem in the mind of the consumers
o Switching costs for customers implemented by first mover can further solidify customer
use/base
o First mover mistakes can end up benefiting later entrants
• Scale of entry – Do we want to enter a foreign market on a very large scale? (Show up and
make a large statement) Or should we show up slowly? Resources may determine this for
you
Strategic Commitments
Decision that has a long-term impact and is difficult to reverse such as entering a foreign
market on a large scale; can have important influence on the nature of competition in a
market; limits a company’s strategic flexibility.
Exporting – The sale of products produced in one country to residents of another country
• Direct exporting – Company conducts all phases of the sale and transfer of the
merchandise to a buyer
• Indirect exporting – Firm hires the expertise of someone else to facilitate the exchange
, for a fee; Advantage of knowledge/expertise in foreign market; Disadvantages:
o Limits access to local information
o Lack of control over intermediaries
Advantages:
• Avoids the costs of establishing manufacturing operations in the host country
• Minimizes risk and investment
• Rapid speed of entry
• May realize experience curve and location economies
Disadvantages:
• Current production location may not have location economies
• Transportation costs
• Trade barriers and tariffs
• Company viewed as an outsider
• May not learn about customers and competitors
• Exchange rate risk
Conditions Favouring Exporting:
• Limited sales potential in target country
• Little product adaptation required
• High target country production costs
• Liberal import policies
• High political risk
Turnkey Projects – When a firm agrees to set up an operating plant for a foreign client and then
hand over the “keys” when the plant is fully operational (staff, licenses, etc.); Ex. Enron turnkey plants
in India
Advantages:
• Can earn a return on knowledge asset
• Less risky than conventional FDI
Disadvantages:
• Arrangement does not create long-term interest in the foreign country
• May create a competitor
Licensing – Allows for another company/person to use your name, production process, etc. for a fee;
tends to be a limited (usually short term) agreement; Ex. purchase of ASU apparel off campus would
be purchase of licensed clothing – someone went out a obtained legal approval of producing ASU
products (i.e. Walmart); An arrangement in which the owner of an intellectual property (the licensor)
grants another firm (the licensee) the right to use that intellectual property in exchange for payment;
the licensor grants the licensee the right to use production processes, to reproduce a copyrighted
item, to use the brand name, or to use a trademark for a specified period of time in exchange for
royalties or other compensation
Advantages:
• Reduces development costs and risks of establishing foreign enterprise
• Establish a physical presence without costs
• Speed of entry
• Reduces exposure to political risk
• Overcomes trade and investment barriers
• May be the only way to develop applications of intangible property
Disadvantages:
• Difficult to maintain control over assets and know-how
• Damage to firm reputation
• Monitoring costs
, • Income dependent on licensee’s performance
• Licensee earns the majority of the profit
• Partners can become competitors
• Inability to exploit experience curve
• Cannot coordinate strategic moves
Conditions Favouring licensing:
• Import and investment barriers
• Legal protection of IPRs
• Low sale potential in target country
• Large cultural distance
• Licensee lack ability to become a competitor – When contract is up, easy for licensee to
turn into a competitor since they know how to create the product and don’t necessarily
need the brand name, etc.
• Technology likely to be quickly outdated
Cross-Licensing Agreements
Two firms license intangible products (knowledge) to each other in order to reduce inherent
risks of licensing.
Opportunism / Acting Opportunistically
The conscious policy and practice of taking selfish advantage of circumstances, with little
regard for principles, cannot necessarily be predicted
When you act opportunistically, you will jump from project to project, from business model to
business model, trying to make money in whatever ways you manage to discover, someone
without a vision; has no incentive to work, very hard to become successful in that manner
Master Franchise Agreements
Recruits, trains and supports individual franchises. A master franchisee sells sub
franchises..
Franchising – Similar to licensing but less limited; Ex. Jamba Juice franchises have legal right to
look/feel/be the same as a ‘regular’ Jamba Juice; An arrangement in which one firm (the franchisor)
allows another (the franchisee) the right to use an entire business system in exchange for fees,
royalties, or other forms of compensation; commonly used in the fast-food industry and the hotel
industry
Advantages:
• Quick, low-cost entry into numerous locations
• Reduces costs and risk of establishing enterprise
• Expansion of name brand identification and market reach
• Can leverage the franchisee’s local knowledge
Disadvantages:
• Problems of assuring quality control and operating standards, especially in geographically
distant locations
• Can tarnish franchisor’s image – Dirty franchise store will reflect poorly on company image;
Ex. One dirty Quizno’s can make people who visit that one not want to visit any other
Quizno’s
• Conflicts and disputes likely
