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18 Cards in this Set
- Front
- Back
factors that're different b/t or within countries
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cost/tax factors
demand factors regulatory/economics factors sociopolitical factors strategic factors |
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what're the 3 key decisions to make when entering a market?
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1- when to enter
2- where to enter 3- how to enter |
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factors included when determining cost/tax factors of a country being entered into
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transportation costs
wage rate availability & costs of land construction costs costs of raw materials/resources financing costs tax rates investment incentives profit repatriation |
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cost/tax factors and explain
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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? |
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economic/regulatory factors
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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 |
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demand factors & explain
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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 |
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sociopolitical factors & explain
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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 |
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strategic factors & explain
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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 |
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maquiladoras
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factories established south of the US-Mexico border by US companies b/c of lower labor costs, reduced TC and no tariff burdens
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2 types of FDI related investment modes
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firms actually own property, assets, projects in host country
1- WOS 2- JV |
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4 types of operations in transfer-related entry
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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 |
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2 ways of timing on when to enter a foreign market?
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1- first mover
2- late investor |
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disadvantages of early mover
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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 |
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2 types of JV & explain
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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 |
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trade-offs in choosing b/t trade, transfer & FDI related investments
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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 |
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advantages of early mover
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1- preemptive opportunities --> build brand name
2- establish brand loyalty, greater market power 3- strategic benefits --> low competition, first access to infrastructure & channels |
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3 categories of entry modes & amount of risk associated w/ each
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1- trade-related --> low risk, little committment
2- transfer-related --> inb/t each 3- FDI related --> high risk, long-term committment |
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2 types of WOS & explain
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1- greenfield investment --> starting entity from scratch
2- cross-border acquisition --> buying already-existing firm |