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18 Cards in this Set

  • Front
  • Back
factors that're different b/t or within countries
cost/tax factors
demand factors
regulatory/economics factors
sociopolitical factors
strategic factors
what're the 3 key decisions to make when entering a market?
1- when to enter
2- where to enter
3- how to enter
factors included when determining cost/tax factors of a country being entered into
transportation costs
wage rate
availability & costs of land
construction costs
costs of raw materials/resources
financing costs
tax rates
investment incentives
profit repatriation
cost/tax factors and explain
transportation costs- cost & convenience incurred transporting materials back & forth b/t countries
wage rate- MNEs go where its cheapest
availability & costs of land- space for expansion & gov policy on renting also
construction costs
cost of raw materials & resources- many firms outsource locally
financing costs- uncertain foreign exchange policy & political risk need to be considered
tax rate- influence a firm's profitability
investment incentives- countries will offer these to attract FDI into their country and foreign investors
profit repatriation- are there restrictions to how much?
economic/regulatory factors
industrial policies- gov policies can control entrants in, social benefits, profit margins
FDI policies- foreign exchanges, location requirements, type of entry mode
availability of special economic zones- ETDZs, FTZs, or HTDZs, how d'ing countries attract FDI
demand factors & explain
market size & growth- size & growth rate of markets provide opportunities & potentials
presence of customers- the closer u r to customers the more efficient & cost effective it is
local competition- comes from both local and foreign rivals
sociopolitical factors & explain
political instability- critical to survival, profitability of a firm (repatriation, expropriation)
cultural barriers- communication b/t employees & headquarters are crucial
local business practices- combining firm-specific knowledge w/ country-specific knowledge is key
gov efficiency & corruption- "soft" infrastructure has a greater impact than does "hard" infrastructure
attitudes towards foreign business- locate in an area that has a positive view of ur firm & home country
community char- surrounding community affects foreign expatriates lives
pollution control- firm able to comply w/ pollution standards
strategic factors & explain
investment infrastructure- availability & ease of conducting business
manufacturing concentration- close proximity of other manufacturers is cost effective (justintime systems)
industrial linkages- close proximity of complementary services (auditing, consulting, marketing)
workforce productivity- availability of skilled workers
inbound & outbound logistics- close proximity of suppliers & buyers
factories established south of the US-Mexico border by US companies b/c of lower labor costs, reduced TC and no tariff burdens
2 types of FDI related investment modes
firms actually own property, assets, projects in host country
1- WOS
2- JV
4 types of operations in transfer-related entry
1- leasing --> leasing equipment/machines to a local foreign company who cant afford it
2- franchising --> rights r handed over franchisee who abides by strict rules
3- licensing --> rights of a product are granted to foreign firm for specified period of time
4- build-operate-transfer --> IN consortium of companies build and construct entire operation & when completed hands over to investor who trained its local personnel
2 ways of timing on when to enter a foreign market?
1- first mover
2- late investor
disadvantages of early mover
1- environmental uncertainty --> underdeveloped market, gov uncertainty in dealing w/ FDI companies
2- operational risks --> shortage of physical, human resources, underdeveloped support resources and infrastructure available
2 types of JV & explain
1- equity JV --> forming a new entity where ownership is based on the amount of capital invested into it
2- collective JV --> profits r assigned by contract
trade-offs in choosing b/t trade, transfer & FDI related investments
1- moving towards FDI results in a higher risk, it could = a higher return
2- moving towards FDI results in more resource commitment & = more organizational control
advantages of early mover
1- preemptive opportunities --> build brand name
2- establish brand loyalty, greater market power
3- strategic benefits --> low competition, first access to infrastructure & channels
3 categories of entry modes & amount of risk associated w/ each
1- trade-related --> low risk, little committment
2- transfer-related --> inb/t each
3- FDI related --> high risk, long-term committment
2 types of WOS & explain
1- greenfield investment --> starting entity from scratch
2- cross-border acquisition --> buying already-existing firm