strategic management final exam
QUESTIONS AND ANSWERS
reasons companies enter foreign markets - ANSWER>>- gain access to new
customers & meet current customer needs
- lower costs through economies of scale, experience and increased purchasing
power
- further exploit core competencies
- gain access to new resources
- lower cost inputs of production
Exporting - ANSWER>>selling products to another country
What are the advantages of exporting? - ANSWER>>Low capital requirements,
economies of scale in utilizing existing production capacity, no distribution risk, no
direct investment risk
What are the disadvantages of exporting? - ANSWER>>Maintaining relative cost
advantage of home-based production, transportation and shipping costs,
exchange rates risk, tariffs and import duties, loss of channel control
Licensing and Franchising - ANSWER>>One organization giving another
organization the right to use its brand name, technology, or product in return for
a lump sum payment or fee based on sales.
What are some advantages of licensing and franchising? - ANSWER>>Low
resource requirements, Income from royalties and franchising fees, Rapid
expansion into many markets
,What are some disadvantages of licensing and franchising? -
ANSWER>>Maintaining control of proprietary know-how, Loss of operational and
quality control, Adapting to local market tastes and expectations
foreign subsidiary - ANSWER>>directly investing in a foreign country by setting up
a separate and independent production facility or office either b y acquisition or
internal development
Foreign Subsidiary Advantages - ANSWER>>High level of control, quick large-scale
market entry, avoids entry barriers
Foreign Subsidiary Disadvantages - ANSWER>>Costs of acquisition, complexity of
acquisition process, integration of the firm's structures, cultures, operations, and
personnel
Greenfield Strategy - ANSWER>>build a subsidiary from the ground up
Why would a greenfield strategy be appealing? - ANSWER>>- Creating an internal
startup is cheaper than making an acquisition
- Adding new production capacity will not adversely impact the supply-demand
balance in the local market
- A startup subsidiary has the ability to gain good distribution access
- A startup subsidiary will have the size, cost-structure, and resource strengths to
compete head-to-head against local rivals
What are the advantages of Greenfield strategy? - ANSWER>>High level of control
over venture, 'learning by doing' in the local market, direct transfer of the firm's
technology, skills, business practices and culture
What are the disadvantages of Greenfield strategy? - ANSWER>>Capital costs of
initial development, risks of loss due to political instability or lack of legal
protection of ownership, slowest form of entry due to extended time required to
construct facility
, Strategic Alliances and Joint Ventures - ANSWER>>cooperative agreement in
which home and host country firms work closely together
Strategic Alliances and Joint Ventures Advantages - ANSWER>>- Gaining partners
knowledge of local market conditions, achieving economies of scale through joint
ops, gaining technical expertise and local market knowledge, sharing distribution
facilities and dealer networks, mutual strengthening each partners access to
buyers, directing competitive energies more toward mutual rivals and less toward
another, establishing working relationships with key officials in the host-country
government.
Strategic Alliances and Joint Ventures Disadvantages - ANSWER>>Outdated
knowledge and expertise of local partners, cultural and language barriers, costs of
establishing the working arrangement, conflicting objectives and strategies or
deep differences of opinion about joint control, differences in corporate values
and ethical standards, loss of legal protection of proprietary technology or
competitive advantage, overdependence on foreign partners for essential
expertise and competitive capabilities
International Strategy - ANSWER>>Strategy for competing in 2 or more countries
simultaneously
Multidomestic Strategy - ANSWER>>Think Local- Act Local
One in which a firm varies its product offering and competitive approach from
country to country in an effort to be responsive to differing buyer preferences
and market conditions.
Multidomestic Strategy Advantages - ANSWER>>- Can meet the specific needs of
each market more precisely
- Can respond more swiftly to localized changes in demand
- Can target reactions to the moves of local rivals
- Can respond more quickly to local opportunities and threats
QUESTIONS AND ANSWERS
reasons companies enter foreign markets - ANSWER>>- gain access to new
customers & meet current customer needs
- lower costs through economies of scale, experience and increased purchasing
power
- further exploit core competencies
- gain access to new resources
- lower cost inputs of production
Exporting - ANSWER>>selling products to another country
What are the advantages of exporting? - ANSWER>>Low capital requirements,
economies of scale in utilizing existing production capacity, no distribution risk, no
direct investment risk
What are the disadvantages of exporting? - ANSWER>>Maintaining relative cost
advantage of home-based production, transportation and shipping costs,
exchange rates risk, tariffs and import duties, loss of channel control
Licensing and Franchising - ANSWER>>One organization giving another
organization the right to use its brand name, technology, or product in return for
a lump sum payment or fee based on sales.
What are some advantages of licensing and franchising? - ANSWER>>Low
resource requirements, Income from royalties and franchising fees, Rapid
expansion into many markets
,What are some disadvantages of licensing and franchising? -
ANSWER>>Maintaining control of proprietary know-how, Loss of operational and
quality control, Adapting to local market tastes and expectations
foreign subsidiary - ANSWER>>directly investing in a foreign country by setting up
a separate and independent production facility or office either b y acquisition or
internal development
Foreign Subsidiary Advantages - ANSWER>>High level of control, quick large-scale
market entry, avoids entry barriers
Foreign Subsidiary Disadvantages - ANSWER>>Costs of acquisition, complexity of
acquisition process, integration of the firm's structures, cultures, operations, and
personnel
Greenfield Strategy - ANSWER>>build a subsidiary from the ground up
Why would a greenfield strategy be appealing? - ANSWER>>- Creating an internal
startup is cheaper than making an acquisition
- Adding new production capacity will not adversely impact the supply-demand
balance in the local market
- A startup subsidiary has the ability to gain good distribution access
- A startup subsidiary will have the size, cost-structure, and resource strengths to
compete head-to-head against local rivals
What are the advantages of Greenfield strategy? - ANSWER>>High level of control
over venture, 'learning by doing' in the local market, direct transfer of the firm's
technology, skills, business practices and culture
What are the disadvantages of Greenfield strategy? - ANSWER>>Capital costs of
initial development, risks of loss due to political instability or lack of legal
protection of ownership, slowest form of entry due to extended time required to
construct facility
, Strategic Alliances and Joint Ventures - ANSWER>>cooperative agreement in
which home and host country firms work closely together
Strategic Alliances and Joint Ventures Advantages - ANSWER>>- Gaining partners
knowledge of local market conditions, achieving economies of scale through joint
ops, gaining technical expertise and local market knowledge, sharing distribution
facilities and dealer networks, mutual strengthening each partners access to
buyers, directing competitive energies more toward mutual rivals and less toward
another, establishing working relationships with key officials in the host-country
government.
Strategic Alliances and Joint Ventures Disadvantages - ANSWER>>Outdated
knowledge and expertise of local partners, cultural and language barriers, costs of
establishing the working arrangement, conflicting objectives and strategies or
deep differences of opinion about joint control, differences in corporate values
and ethical standards, loss of legal protection of proprietary technology or
competitive advantage, overdependence on foreign partners for essential
expertise and competitive capabilities
International Strategy - ANSWER>>Strategy for competing in 2 or more countries
simultaneously
Multidomestic Strategy - ANSWER>>Think Local- Act Local
One in which a firm varies its product offering and competitive approach from
country to country in an effort to be responsive to differing buyer preferences
and market conditions.
Multidomestic Strategy Advantages - ANSWER>>- Can meet the specific needs of
each market more precisely
- Can respond more swiftly to localized changes in demand
- Can target reactions to the moves of local rivals
- Can respond more quickly to local opportunities and threats
