midterm study guide

midterm study guide - MOR 492 Midterm Study Guide Managing...

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MOR 492 Midterm Study Guide Managing Global Expansion Five reasons why going global is imperative for medium to large companies (the stronger these are, the higher the potential returns are): 1. Growth: most markets are mature, emerging markets create fresh opportunities 2. Efficiency: can create cost advantages with economies of scale 3. Knowledge: must adapt to local area and have local know-how 4. Globalization of Customers: when customers are worldwide corporations and those who are internationally mobile, when customers globalize, the company must keep up Three things dictate this: Customers prefer…. consistency worldwide in the sourcing of products and services long-term partnerships AND allowing customers to do business with competitors overseas poses a risk to your business domestically 5. Globalization of Competitors: when competition goes abroad Two ways to leverage advantage: Develop a first move advantage to capture market growth Use multi-market presence to cross-subsidize Companies must choose which products to deploy: entire product line or only portions – releasing more products simultaneously increases risks Global expansion requires three capabilities: 1. Learning about foreign markets 2. Learning how to manage people in foreign locations 3. Learning how to manage foreign subsidiaries Deciding how to enter: 1. Potential returns (expected payoffs): high when five imperatives to expand are greater 2. Potential risks: the greater degree of local adaptation, the higher the risk of failure Choice of strategic markets: two dimensions determine strategic importance… 1. Market potential: current market size and growth expectations 2. Learning potential: two drivers Presence of sophisticated and demanding customers Force company to meet tough standards (quality, cost, etc.) Accelerate learning of tomorrow’s customer needs Force to innovate constantly and continuously Pace of relevant technology evolution: Can emerge from… leading-edge customers Competitors research centers firms in other industries Ability to exploit a market: depends on two factors… 1. Height of entry barriers, lowest when. . It is similar to domestic markets There are no regulatory constraints on trade and investments 2. The intensity of competition in the market Beachhead market: one that closely resembles the targeted strategic market but provides a safer opportunity to learn how to enter and succeed there (examples: Canada for the US, Austria for Germany, and Hong Kong for China) Mode of Entry: making the right choice is critical because it is expensive and difficult to enter later, depends on two things 1. Extent to which the firm will export or produce locally 2. Extent of ownership control over activities that will be performed locally in the target market Greater reliance of local production is appropriate under the following conditions:
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1. Size of local market is larger than minimum efficient scale of production
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midterm study guide - MOR 492 Midterm Study Guide Managing...

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