Chapter 11
What are international trade expressions for buyers and sellers?
Buyers = Importers
Sellers = Exporters
Name one advantage of first-mover and one of late-mover.
First-mover: Proprietary, technological leadership, Pre-emption of scarce resources, Establishment of entry barriers for late entrants, Relationships & connections with key stakeholders.
Late-movers: Opportunity to free-ride on first mover investments, Resolution of technological & market uncertainty, First mover’s difficulty to adapt to market changes
Define Oligopoly.
market structure with only small number of competing firms -> firms don’t compete by driving down prices – rather interact in strategic ways to beat competitor.
Explain the prisoners' dilemma.
A situation where the outcome is dependant on two parties, which could either choose to cooperate or defect with each other without knowing the decision of the opposite party.
Define institutional distance and cultural distance.
Institutional: Extend of similarity and or dissimilarity between the regulatory, normative and cognitive institutions of two countries.
Cultural: Difference between two cultures n terms of values in terms of values or subjective affinity.
What's the difference between a strategic alliance and a joint venture?
Strategic alliance: collaboration between independent firms using equity modes, non-equity contractual agreements or both
Joint Venture: new corporate entity created & jointly owned by two parent companies
What is an AMC framework and why is it used?
conceptual framework of awareness, motivation, capability indicating when firms are likely to attack and counterattack each other.
What are the bill of lading and the letter of credit?
Bill of lading (B/L): document certifying the delivery of goods to a ship or train; seller can use it to claim the delivery of goods
Letter of credit (L/C): financial contract that states that the importer’s bank will pay a specific sum of money to the exporter upon delivery of the merchandise -> helps to overcome lack of trust
Name one advantage and one disadvantage of using EX intermediaries.
Advantages: Economies of scale, Worry-free
Disadvantages: Risk of taking advantage of information asymmetries
What is a WOS?
Wholly-owned subsidiaries (WOS): subsidiary in another country entirely owned by parent multinational
If two firms have a high market commonality, they are less likely to restrain from aggressively going after each other.
True or False and why?
False
The two companies are more likely to restrain from aggressive actions towards the other company.
What's the advantage of standardisation and what's the disadvantage of local adaption.
• advantage of standardisation: economies of scale in exploitation of capabilities of global firm (product development, production, marketing)
• disadvantage of local adaption: require creation or acquisition of local resources (eg mass-market brands)
Name an advantage and disadvantage of subcontracting.
advantage: cost savings on labour-intensive processes
disadvantage: limited control over what is going inside subcontractor’s plant
What factors does a company need to consider when thinking about entry strategies?
1. Marketing -> global standardisation vs. local adaption
2. Human Resources
3. Logistics
What's the difference between tacit and explicit collusion?
Tacit collusion: firms indirectly coordinate actions by signalling their intention to reduce output and maintain pricing above competitive levels
Explicit collusion: firms directly negotiate output, fix pricing, divide markets; mostly illegal
Making sure you don't overpay and taking over a company that had complementary resources and capabilities are both purposes of a conventional acquisition. True or False?
False: Not overpaying is a risk of conventional acquisition.
State and define the three internationalisation process models.
Uppsala model: internationalisation is dynamic process of learning in which firms take decisions over their next step based on what they know at the time.
Network internationalisation model: Uppsala model in extended form: incorporating firms’ networks
Stages models: models depicting internationalisation as a slow stage-by-stage process an SME must go through
Name all four reasons why MNEs create subsidiaries to enter new markets abroad.
1. natural resources
2. market
3.efficiency enhancing -> reduce cost of production
4. innovation
State and define the two ways of predicting the market.
1) Economic forecasting: technique using econometric models to predict likely future value of key economic variables -> usually not good at predicting when trends change (few insights into range of possible developments)
2) Scenario planning: technique generating multiple scenarios of possible future states of industry
Name four managing international contracts
Licensing
Franchising
turnkey projects
design-and-build contract
build-operate-transfer
consortium
subcontracting
R&D contract
management contract