Foreign_Market_Entry (1)

Foreign_Market_Entry - 12-1Chapter 12Entering Foreign Markets12-2Foreign Market EntryFirms can enter foreign markets or franchising to host country

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Unformatted text preview: 12-1Chapter 12Entering Foreign Markets12-2Foreign Market EntryFirms can enter foreign markets throughexportinglicensing or franchising to host country firmsa joint venture with a host country firma wholly owned subsidiary in the host country to serve that market The advantages and disadvantages of each entry mode is determined bytransport costs and trade barrierspolitical and economic risksfirm strategy12-3Basic Entry DecisionsA firm expanding internationally must decidewhich markets to enter (where)when to enter them and on what scalehow to enter them (the choice of entry mode)12-4Which Foreign Markets?Firms need to assess the long run profit potential of each marketThe most favorable markets are politically stable developed and developing nations with free market systems, low inflation, and low private sector debtThe less desirable markets are politically unstable developing nations with mixed or command economies, or developing nations where speculative financial bubbles have led to excess borrowing Success firms usually offer products that have not been widely available in the market and that satisfy an unmet need12-5Timing of EntryFirms entering a market early can gain first mover advantages includingthe ability to pre-empt rivals and capture demand by establishing a strong brand namethe ability to build up sales volume in that country and ride down the experience curve ahead of rivals and gain a cost advantage over later entrantsthe ability to create switching costs that tie customers into their products or services making it difficult for later entrants to win business12-6Timing of EntryFirst mover disadvantagesare the disadvantages associated with entering a foreign market before other international businessesThese may result inpioneering costs(costs that an early entrant has to bear that a later entrant can avoid) such asthe costs of business failure if the firm, due to its...
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This note was uploaded on 10/17/2011 for the course ECON 101 taught by Professor Thompson during the Spring '11 term at Michigan State University.

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Foreign_Market_Entry - 12-1Chapter 12Entering Foreign Markets12-2Foreign Market EntryFirms can enter foreign markets or franchising to host country

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