Exam 8: Entry Strategies in Global Business

When MNEs go abroad, they generally do so for two major reasons. There could be massive competition in the home market or firms may genuinely identify new business opportunities abroad based upon the company's competitive advantage in production, technology and management.

Strategic alliances are primarily aimed at enhancing goodwill.

Trade barriers lead to decreased competition from abroad, and raise prices and profits of domestic firms. Interestingly, such protection over time will often lead to higher-quality domestic products and services.

A relatively simple approach to diversification is to identify overseas projects that have performance levels that are highly correlated to domestic cash flows or project returns over time.

When it comes to franchising, the parent company's objective is to make sure that when a customer visits its franchisee in any country, the quality of products and services provided are similar in every store.

Who identified three key economic "advantages" that firms should have for FDI to occur?

Which industry is especially well-known for franchising?

U.S. corporations have been pouring investments into China to build manufacturing facilities to produce goods for the local and export markets. Since economists expect the Chinese yuan to appreciate against the dollar in the future, the forthcoming Chinese yuan profits of U.S. MNEs when converted to U.S. dollars will be high. This is an example of U.S. companies cutting costs by _____.

McDonald's, Burger King, and Subway are all examples of businesses that operate as ______.

The ultimate objective of most joint ventures is _____.

Differentiate between strategic alliances and international joint ventures.

In a free enterprise system, the main objective of firms that invest abroad is to maximize _____ wealth.

Microsoft (United States), Toyota (Japan), Lenovo, (China), and Petrobras (Brazil)are just a few of the hundreds of large multinational enterprises that are based in one country but own and operate establishments in others.

Scenario - Boseman Clothier, Inc. Boseman Clothier, Inc. has been in operation for over 75 years.  It is based in South Carolina, USA and is a well-recognized name in the industry.  It produces custom fitted men's suits that are in high demand throughout the world.  The average cost of one of its suits is in excess of five thousand U.S. dollars.  Boseman proudly states it has more customer orders than its one store can fill within the next six months.  With growing demand from overseas, the company has recently decided to open operations in four foreign markets next year. Boseman realizes the potential of this move will generate increased revenues for the company.  One of the options it is contemplating is exploring forming an international joint venture.  Boseman is also entertaining the thought of opening operations differently in each of the four new foreign markets.  The company feels the use of different strategies may increase its odds of generating profits in each different market. Boseman Clothier, Inc. has indicated it would like to use different entry strategies for each of the four markets it plans to enter.  Which of the following would not be considered a benefit from using licensing in the other foreign markets it plans to enter?

An agreement between two or more firms that do not involve the creation of a separate entity with joint ownership and in which the firms stand to gain revenues and maximize profits through cooperation for a given period of time refers to _______.

Scenario - Lewis Fabrication Lewis Fabrication was founded in 2001 and is based in Maryland, USA.  This company manufactures custom designed motorcycle parts and currently has over two thousand U.S. customers.  Due to the growing number of inquiries received from foreign countries such as Japan, Canada, China, and Indonesia, Lewis Fabrication has decided to begin operations on a global scale. The owners realize there is much to learn before undertaking this monumental step.  However, financial projections indicate about $1 million in profit is very likely in the first year of going global.  The owners are very excited and looking forward to the business expansion. The global markets in which Lewis Fabrication plans to expand provides this company with the opportunity for entering relatively high-growth markets with a product that is in demand.  Which one of the following would Lewis Fabrication be least likely to expect to find in this type of market?  

ABC Manufacturing is exploring entering the global arena. Describe the three lowest risk entry strategies in global business for ABC.

In a free enterprise system, the overriding objective of firms wanting to invest abroad is to _____.

A business that is jointly owned and operated by two or more firms that pool their resources to penetrate host country markets, generate and split profits, and share commercial risk is called a(n)_____.

A major reason why growth-oriented MNEs establish operations abroad is to diversify and minimize risk so that overall corporate cash flows and earnings will be relatively stable.