chap09_GM6e_TIF (1)

Global Marketing, 6e (Keegan/Green) Chapter 9 Global Market Entry Strategies: Licensing, Investment, and Strategic Alliances 1) Companies like Bill Blass, Hugo Boss, and other global design icons typically generate more revenue from licensing deals for jeans, fragrances, and watches than from their high-priced couture lines. Answer: TRUE Diff: 2 Page Ref: 265-267 AACSB: Reflective Thinking 2) Licensing is a contractual agreement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation. Answer: TRUE Diff: 1 Page Ref: 265 3) Licensing enables companies to circumvent tariffs, quotas, or similar export barriers. Answer: TRUE Diff: 2 Page Ref: 266 AACSB: Reflective Thinking 4) Licensing agreements offer unlimited market control. Answer: FALSE Diff: 2 Page Ref: 266 AACSB: Reflective Thinking 5) Apple's failure to license its technology in the pre-Windows era arguably cost the company tens of billions of dollars. Answer: TRUE Diff: 2 Page Ref: 267 6) Companies may find that the upfront easy money obtained from licensing turns out to be a very expensive source of revenue. Answer: TRUE Diff: 2 Page Ref: 267 AACSB: Reflective Thinking 7) Sony was the first company to manufacture and market a transistor radio. Answer: FALSE Diff: 2 Page Ref: 267 AACSB: Reflective Thinking 8) Sony's worldwide success in manufacturing and marketing transistor radios in the 1950s stemmed from its joint venture arrangement with an American corporation. Answer: TRUE Diff: 1 Page Ref: 267 1 Copyright © 2011 Pearson Education, Inc. 9) One of the cornerstones of Apple Computers' business strategy has been licensing its famed operating system. Answer: TRUE Diff: 2 Page Ref: 267 AACSB: Reflective Thinking 10) Starbucks' relentless pursuit of new market opportunities in Germany and other countries illustrates the fact that most firms face a limited range of strategy alternatives. Answer: FALSE Diff: 1 Page Ref: 265 AACSB: Reflective Thinking 11) A company that emphasizes direct investment as a market entry strategy is subject to a higher degree of political risk than a company that relies heavily on exporting. Answer: TRUE Diff: 1 Page Ref: 265 AACSB: Reflective Thinking 12) Franchising is a variation of licensing strategy in which there is a contract between the parent company franchiser and a franchisee that allows the franchisee to operate a business developed by the franchiser in return for all rights for operations. Answer: FALSE Diff: 2 Page Ref: 267 AACSB: Reflective Thinking 13) In China, regulations require foreign franchisers to directly own two or more stores for a minimum of one year before franchising. Answer: TRUE Diff: 1 Page Ref: 269 AACSB: Analytic Skills 14) McDonald's has the largest number of overseas sites according to a listing in the Wall Street Journal (2006). Answer: FALSE Diff: 1 Page Ref: 268 15) Franchising in a global market is actually a market entry strategy that is typically executed with less localization than licensing. Answer: TRUE Diff: 2 Page Ref: 269 AACSB: Reflective Thinking 16) Foreign direct investment figures reflect investment flows out of the home country as companies invest in or acquire plants, equipment, or other assets. Answer: TRUE Diff: 2 Page Ref: 269-270 AACSB: Reflective Thinking 2 Copyright © 2011 Pearson Education, Inc. Answer: TRUE Diff: 2 Page Ref: 271-272 AACSB: Analytic Skills 20) The joint venture between Corning Glass and Mexican manufacturer Vitro failed primarily due to conflicts arising out of cultural differences. The venture was terminated since Daewoo prevented the import of GM cars to Korea. Answer: FALSE Diff: 2 Page Ref: 270-271 AACSB: Reflective Thinking 19) A lesson that can be learned from Anheuser-Busch's experience in Japan is that it is better to give control to a local partner via a licensing agreement rather than making a major investment. Inc." Answer: FALSE Diff: 2 Page Ref: 274-275 AACSB: Reflective Thinking 24) In 2008 the largest merger and acquisition deal in the pharmaceutical industry.17) Foreign investment can take the form of outright acquisition. Answer: FALSE Diff: 2 Page Ref: 272-273 22) An example of a successful joint venture is Ericsson's cell phone alliance with Sony. Answer: FALSE Diff: 2 Page Ref: 276 3 Copyright © 2011 Pearson Education. is an example of an equity stake. Roche's acquisition of Genentech. Answer: TRUE Diff: 2 Page Ref: 273 AACSB: Analytic Skills 23) "Greenfield investment" is a phrase sometimes used interchangeably with the phrase "licensing agreement. Answer: TRUE Diff: 2 Page Ref: 272 21) GM and South Korea's Daewoo Group formed a joint venture which helped Daewoo improve its competitiveness. . Answer: TRUE Diff: 2 Page Ref: 270 AACSB: Reflective Thinking 18) A joint venture with a local partner represents another form of strategy that is similar to exporting and licensing. greater control. Answer: TRUE Diff: 2 Page Ref: 277 AACSB: Analytic Skills 31) To succeed in global markets. All this indicates that strategy preference may change over time. Bayer AG.S. Answer: FALSE Diff: 2 Page Ref: 274 AACSB: Reflective Thinking 27) If government restrictions prevent majority or 100 percent ownership by foreign companies. Answer: TRUE Diff: 2 Page Ref: 274 AACSB: Reflective Thinking 26) Monsanto and the German pharmaceutical company. . firms can rely exclusively on the technological superiority or core competence which made them successful in the past. For non-food products. Answer: TRUE Diff: 2 Page Ref: 275 AACSB: Reflective Thinking 29) Following its bankruptcy filing in 2009. distribution. GM divested itself of several non-core businesses and brands. Answer: TRUE Diff: 2 Page Ref: 276 AACSB: Reflective Thinking 30) Borden ended licensing and joint venture arrangements for branded food products in Japan and set up its own production. or higher profits. and marketing capabilities for dairy products. Answer: TRUE Diff: 2 Page Ref: 274 AACSB: Reflective Thinking 28) Japan's Fuji Photo Film Company invested hundreds of millions of dollars in the United States after the U. the investing company will have to settle for a minority equity stake. Answer: FALSE Diff: 2 Page Ref: 279 AACSB: Reflective Thinking 4 Copyright © 2011 Pearson Education. recently entered a joint venture.25) Companies may move from licensing or joint venture strategies to ownership in order to achieve faster expansion in a market. Borden has maintained joint venture relationships with Japanese partners in flexible packaging and foundry materials. including Saab. Inc. government ruled that Fuji was guilty of dumping. companies have reason to be concerned. a company serves many markets in a few countries. or other cash-rich entity.32) Sony entered into a strategic partnership with Samsung in order to produce flat-panel TV screens due to the high product development costs. a horizontal "keir etsu" is a form of business alliance between companies in a particular group headed by a trading company. Answer: TRUE Diff: 2 Page Ref: 280 AACSB: Reflective Thinking 33) Some companies prefer global strategic partnerships to joint ventures because. Answer: FALSE Diff: 1 Page Ref: 286-289 38) "Digital keiretsu" refers to alliances between companies in several industries that are undergoing transformation and convergence. Inc. Answer: FALSE Diff: 2 Page Ref: 290-291 AACSB: Reflective Thinking 5 Copyright © 2011 Pearson Education. Answer: TRUE Diff: 2 Page Ref: 283 AACSB: Reflective Thinking 35) In Japan. U. Answer: TRUE Diff: 2 Page Ref: 286-289 AACSB: Reflective Thinking 37) The South Korean government has recently abandoned the "chaebol" industry structure in favor of the "keiretsu" structure. Answer: TRUE Diff: 2 Page Ref: 286-289 AACSB: Reflective Thinking 39) In a country and market concentration strategy. . Answer: FALSE Diff: 2 Page Ref: 279-280 AACSB: Reflective Thinking 34) The CFM partnership between General Electric (USA) and Snecma (France) is a notable example of a successful GSP. with a GSP. there is less risk of strengthening a competitor. Answer: TRUE Diff: 2 Page Ref: 286-289 AACSB: Reflective Thinking 36) Because "keir etsu" relationships are crossing the Pacific and directly affecting the American market. bank.S. E) adaptation for local tastes. C) leveraging and exploiting by licensee. A) joint ventures B) licensing C) 100 percent ownership D) exporting E) franchising Answer: D Diff: 2 Page Ref: 265 AACSB: Reflective Thinking 42) Licensing as a market entry mode has several disadvantages and opportunity costs. . a company seeks out the world market for a product. B) agreement may have short life. Answer: C Diff: 2 Page Ref: 267 AACSB: Reflective Thinking 6 Copyright © 2011 Pearson Education. B) franchising. licensing agreements should provide for: A) contract manufacturing. C) cross licensing. Answer: E Diff: 2 Page Ref: 265-267 AACSB: Reflective Thinking 43) In order to prevent a licensor-competitor from gaining unilateral benefit. D) similar product or technology development by licensee.40) In country and market diversification strategy. E) adaptations by licensee to fit local tastes. Answer: FALSE Diff: 2 Page Ref: 290-291 AACSB: Reflective Thinking 41) For Starbucks and other companies whose business models include a service component it is not recommended that they use this method for going global. which does not include: A) limited market control. Inc. D) strategic decision-making. Samsung and Hyundai can sell the new computers everywhere except the U. Japan. A) joint ventures B) licensing C) exporting D) franchising E) acquisition Answer: D Diff: 2 Page Ref: 267 AACSB: Reflective Thinking 46) In the mid-1990s. Samsung and Hyundai. or other intangible assets in return for a royalty payment. to build computers based on NCR's "parallel processing" technology. Western Europe. a chicken restaurant chain based in Central America is using the following method for expanding operation in the United States. and Australia. as well as the fast-food industry.S. technology. This arrangement is typical of which entry strategy? A) joint ventures B) licensing C) 100% ownership D) exporting E) global strategic alliances Answer: B Diff: 2 Page Ref: 265-267 AACSB: Reflective Thinking 47) The specialty retailing industry. NCR signed an agreement allowing two South Korean companies. know-how.. company name.44) ________ represent(s) a market entry strategy whereby one company permits a foreign company to make use of its patents. . Inc. favors ________ for global growth: A) licensing B) investment C) franchising D) joint ventures E) strategic alliances Answer: C Diff: 2 Page Ref: 269 AACSB: Reflective Thinking 7 Copyright © 2011 Pearson Education. A) Joint ventures B) One hundred percent ownership C) Licensing D) Exporting E) Global strategic alliances Answer: C Diff: 2 Page Ref: 265-267 AACSB: Reflective Thinking 45) Pollo Campero. in essence. C) local market knowledge. E) Yum Brands. Inc. D) FDI. Answer: C Diff: 2 Page Ref: 268 51) Honda has invested $550 million in building an assembly plant in Greensburg. and South Korea's LG Electronics purchased a 58% stake in Zenith Electronics. E) granting franchisees leeway to tailor menu offerings to suit local tastes. C) franchising. D) cross licensing. Answer: D Diff: 3 Page Ref: 269 AACSB: Analytic Skills 50) Based on rankings by the Wall Street Journal (2006) the company which has the most overseas franchised sites is: A) Domino's Pizza. Answer: D Diff: 2 Page Ref: 269-270 AACSB: Reflective Thinking 8 Copyright © 2011 Pearson Education. B) licensing. which form of market entry? A) joint ventures B) franchising C) 100% ownership D) exporting E) acquisition Answer: B Diff: 2 Page Ref: 269 AACSB: Reflective Thinking 49) McDonald's success in franchising in global markets can be attributed to several factors which does not include: A) a well known global brand name. B) a business system that can be easily replicated. .48) The agreements that allow McDonald's franchisees around the globe to use McDonald's trademarked name and menu items represent. Indiana. C) 7-Eleven. IKEA spent nearly $2 billion to open stores in Russia. D) McDonald's. All of these are examples of: A) acquisition. E) exporting. B) Subway. GM executives were planning to have a stripped-down reengineered car based on its Opel model. B) it sported a very low sticker price. Answer: C Diff: 2 Page Ref: 271 AACSB: Reflective Thinking 55) In a joint venture with Russian manufacturer AvtoVAZ. D) it has a very high sticker price. E) Anheuser-Busch reverted to a licensing agreement with Kirin Brewery. Answer: B Diff: 2 Page Ref: 271 AACSB: Reflective Thinking 9 Copyright © 2011 Pearson Education. C) Russia. B) Lithuania. it has to face tough competition in several countries. . D) Anheuser-Busch entered into a joint venture with Kirin Brewery. the smallest brewery in Japan. Answer: B Diff: 2 Page Ref: 264-265 AACSB: Reflective Thinking 53) Which of the following does not fit into the sequence of experiences Anheuser-Busch had in Japan? A) Anheuser-Busch first entered Japan by means of a licensing agreement with Suntory. Answer: D Diff: 2 Page Ref: 270-271 AACSB: Reflective Thinking 54) GM executives are looking for a joint venture with AvtoVAZ. E) it has a Russian name. D) Kazakhstan. C) Anheuser-Busch dissolved the joint venture with Kirin Brewery.52) Starbucks has been successful in various global markets. In China the challenge comes from the traditional Chinese tea house. B) Chinese consumers prefer carry-out. the market leader. E) Turkey. However. Starbucks found that the Chinese consumers have different tastes and behavior patterns which include all of the following except: A) Chinese consumers prefer drinking in the cafes. D) store traffic is heaviest in the afternoon. C) it has an American name. E) Chinese need to be educated about coffee. the largest carmaker in: A) Germany. however. B) Anheuser-Busch created a joint venture with Kirin Brewery. the market research revealed that a "Made-in-Russia" car would only be acceptable if: A) it has a German name. Inc. C) Chinese consumers go to cafes to socialize. D) control and coordination. A) a joint venture between B) licensor for C) licensee for D) franchisee for E) franchisor for Answer: A Diff: 2 Page Ref: 273 AACSB: Reflective Thinking 58) The president of a Mexican company recently remarked. "Business in Mexico is done on a consensus basis. Answer: D Diff: 2 Page Ref: 270-272 AACSB: Reflective Thinking 57) Sony Ericsson is a ________ Sweden's Telefonaktiebolaget LM and Japanese consumer electronics giant Sony Corporation. C) achieve synergy.S. However. E) the language barrier. E) market entry.56) Joint ventures have proven successful for many companies." A few months later. C) the cancellation of NAFTA. B) market knowledge. D) the U. very genteel and sometimes slow by U. the Chinese government allows foreign companies to participate in its market only if those companies agree to establish operations with local Chinese enterprises. the Mexican company and its U. Answer: B Diff: 2 Page Ref: 272 AACSB: Multicultural and Diversity 59) As a general rule.S. Inc. Judging by the president's remark. joint venture partner parted company. there are certain disadvantages which does not include: A) risk sharing. government's insistence on quick negotiations.S. . standards. Which market entry mode would be the appropriate choice under these circumstances? A) acquisition B) licensing C) joint venture D) exporting E) franchising Answer: C Diff: 2 Page Ref: 272-273 AACSB: Reflective Thinking 10 Copyright © 2011 Pearson Education. B) cultural differences. one important reason for the "divorce" was: A) failure of one partner to live up to the terms of the contract. Inc. the Czech automaker? A) GM B) Volkswagen C) Ford D) DaimlerChrysler E) Renault Answer: B Diff: 3 Page Ref: 275 62) Which automaker owns an equity stake in Japan's Nissan Motor? A) GM B) Volkswagen C) Ford D) DaimlerChrysler E) Renault Answer: E Diff: 3 Page Ref: 275 63) Gerber's woes in France illustrate some of the disadvantages of which market entry strategy? A) joint ventures B) licensing C) 100% ownership D) exporting E) franchising Answer: B Diff: 2 Page Ref: 277 AACSB: Reflective Thinking 11 Copyright © 2011 Pearson Education.60) Which automaker currently has a joint venture with Hindustan Motors (India)? A) Volkswagen B) Ford C) GM D) Renault E) Mazda Answer: C Diff: 3 Page Ref: 272 AACSB: Reflective Thinking 61) Which of the following currently owns a 70% stake in Skoda. . B) Participants share benefits of the alliance. Answer: E Diff: 2 Page Ref: 279 AACSB: Reflective Thinking 12 Copyright © 2011 Pearson Education. Inc. and other areas. E) Greenfield operations.64) ________ is a market entry mode that traditionally has been used by companies that. D) Participants make ongoing contributions in technology. C) global strategic partnerships. needed a partner to manufacture products for sale in the partner's home country market. D) strategic international alliances. products. D) Participants focus on an individual country market. B) Participants share benefits as well as control. Answer: D Diff: 2 Page Ref: 279-281 AACSB: Reflective Thinking 67) The terminology used to describe the new forms of cooperation strategies varies widely and the phrases used include all of the following except: A) collaborative agreements. E) Participants share benefits of the alliance. for one reason or another. Answer: E Diff: 2 Page Ref: 279-281 AACSB: Reflective Thinking 66) Which of the following is not a characteristic of global strategic alliances? A) Participants maintain independence outside the framework of alliance. A) Acquisition B) Strategic alliance C) Joint venture D) Exporting E) Licensing Answer: C Diff: 2 Page Ref: 277 AACSB: Reflective Thinking 65) Which of the following is not a characteristic of global strategic alliances? A) Participants maintain independence outside the framework of alliance. B) strategic alliances. products. C) Participants share control over the performance of the assigned tasks. . and other areas. E) Participants agree not to compete in areas unrelated to the alliance. C) Participants make ongoing contributions in technology. B) Harmony is not the most important measure of success. Partners must be viewed as equals. E) none of the above Answer: E Diff: 2 Page Ref: 279-281 AACSB: Reflective Thinking 70) "Discussion and consensus must be the norms." When applied to global strategic partnerships. E) focus on a single national market or a specific problem. . B) sharing technological developments.68) GSPs (Global Strategic Partnerships) are attractive for several reasons which does not include: A) sharing high product development costs." When applied to global strategic partnerships. this statement indicates the importance of which factor? A) mission B) strategy C) governance D) culture E) organization Answer: C Diff: 2 Page Ref: 281 AACSB: Reflective Thinking 71) "Successful GSPs create win-win situations. D) continuous transfer of technology between partners. C) securing access to national and regional markets. this statement indicates the importance of which factor? A) mission B) strategy C) governance D) culture E) organization Answer: A Diff: 2 Page Ref: 281-282 AACSB: Reflective Thinking 13 Copyright © 2011 Pearson Education. Inc. C) All employees and managers must understand where cooperation ends and competitive compromise begins. D) :Learning from partners is critically important. Answer: E Diff: 2 Page Ref: 279-281 AACSB: Reflective Thinking 69) Which of the following does not fit in with the factors that should be considered by companies forming GSP's? A) Partners are competitors to each other. where participants pursue objectives on the basis of mutual advantage. Answer: C Diff: 2 Page Ref: 284-286 AACSB: Reflective Thinking 14 Copyright © 2011 Pearson Education. E) potential for growth in service sector. E) frictional loss. D) balance between partners. A) 50 B) 25 C) 20 D) 60 E) 75 Answer: C Diff: 3 Page Ref: 283 74) The success of CFM International (the strategic partnership between GE and Snecma) can be attributed to which of the following? A) compatibility of the partners B) capability of the partners C) commitment of the partners D) all of the above E) none of the above Answer: D Diff: 2 Page Ref: 283 AACSB: Reflective Thinking 75) A number of factors combine to make Russia an excellent location for an alliance which does not include: A) a well-educated workforce. B) a feeling of mutual disillusionment. C) abundance of supplies. and Kawasaki. Inc. D) potential for economic growth. C) difference in expectations.72) According to a 1991 report by McKinsey & Co. B) quality is important to Russian consumers. Fuji. Answer: A Diff: 3 Page Ref: 282 AACSB: Analytic Skills 73) Boeing developed the wide bodied aircraft. the 777 with about ________ percent of the work subcontracted out to Mitsubishi. . problems of alliances between Western and Japanese firms were related to all of the following factors except: A) objective levels of performance. Mitsubishi is a vertical keiretsu. . D) joint ventures. Toyota outsources about 75 percent.76) Which of the following is NOT true of Japanese keiretsu? A) promotes risk sharing B) promotes long-term employment C) ensures low prices for Japanese consumers D) blocks foreign suppliers from the Japanese market E) relationships are cemented by bank ownership Answer: E Diff: 3 Page Ref: 286-289 AACSB: Analytic Skills 77) Which of the following is true about Japanese keiretsu? A) Toyota is a vertical keiretsu. Inc. E) none of the above Answer: A Diff: 3 Page Ref: 286-289 AACSB: Analytic Skills 78) Which of the following statements most accurately describes the extent to which GM and Toyota outsource components? A) GM and Toyota each outsource approximately 50 percent of their components. D) Neither GM nor Toyota outsources a significant proportion of its components. B) Toyota outsources about 50 percent of its components. B) Toyota is a horizontal keir etsu. B) relationship enterprise. C) franchising. C) Toyota and Mitsubishi are both horizontal keiretsu. D) Toyota and Mitsubishi are both vertical keiretsu. E) keiretsu. GM outsources about 75 percent. Answer: B Diff: 2 Page Ref: 290 AACSB: Reflective Thinking 15 Copyright © 2011 Pearson Education. Mitsubishi is a horizontal keiretsu. C) GM outsources about 50 percent of its components. Answer: C Diff: 3 Page Ref: 287-288 AACSB: Analytic Skills 79) The next stage in the evolution of the global strategic alliance is predicted to be in the form of: A) mergers and acquisition. E) GM and Toyota each outsource approximately 25 percent of their components. names and logos to producers of clothing. or other design elements that fit with the local tastes of a particular country or region. because the licensee is typically a local business that will produce and market the goods or services on a local or regional basis. This allows Disney to create synergies based on its core theme park.80) Saab markets two luxury car models. Licensing is a contractual arrangement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties. companies can circumvent tariffs. What are the advantages of using licensing as entry mode? Answer: Walt Disney Company generates nearly $ 15 billion in annual revenues from licensed merchandise. and other popular characters which have gained familiarity all over the world. or some other form of compensation. movies. toys. Inc. motion pictures. Secondly. . Winnie the Pooh. Its licensees have considerable leeway to adapt colors." Thirty percent of Saab's sales come from the USA. Which strategy does Saab appear to be using? A) country concentration/market segment concentration B) country diversification/market segment concentration C) country concentration/market segment diversification D) country diversification/market segment diversification E) none of the above Answer: A Diff: 2 Page Ref: 290-291 AACSB: Reflective Thinking 81) Walt Disney Company has successfully adapted licensing as a market entry mode in different countries. Diff: 2 Page Ref: 265-267 AACSB: Reflective Thinking 16 Copyright © 2011 Pearson Education. licensees are granted considerable autonomy by the licensor to freely adapt the licensed goods to an extent to suit the local tastes and preferences. and television shows. quotas. materials. with most of the rest from Western Europe. First of all. both prized by drivers for their "quirkiness. There are two key advantages associated with licensing as a market entry mode. license fees. and watches for sale throughout the world. and television businesses. Disney licenses trademarked cartoon characters. as well as Mickey Mouse. thanks to the popularity of their theme parks. or similar export barriers. What are the benefits of franchising and how does it differ from other modes of entry? Answer: Franchising involves a contract between a parent company (franchiser) and a franchisee that allows a franchisee to operate a business developed by the franchiser in return for a fee and adherence to franchise-wide policies and practices. The licensing firm can specialize in product design and marketing. Other advantages include limited commitment of financial and managerial resources and quick entry into target countries.scale investment. McDonald's is a very good example of the success that can be achieved through franchising. Diff: 2 Page Ref: 267-269 AACSB: Reflective Thinking 17 Copyright © 2011 Pearson Education. Inc. for example. provides technical specifications of products to be manufactured to the subcontractor who then oversees production. Inhumane working conditions and hiring underage workers have also been points of criticism by many governmental and private organizations. Many of the famous American restaurant chains have used franchising to enter and to develop in other countries.82) Nike provides technical specifications to a subcontractor or local manufacturer for its products. This definition is very similar to that of licensing since franchising itself is another variation of licensing strategy. What is this arrangement called and what are its major benefits and drawbacks? Answer: This type of arrangement is referred to as "contract manufacturing. This is especially helpful when the target market is too small to justify full. Also. Nike has to face this problem if workers in the contracted companies are underpaid. Franchising is a market entry strategy that is typically executed with less localization than licensing. It has great appeal to local entrepreneurs who are very anxious to learn and apply franchising. It also provides it franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific preferences and tastes. One disadvantage would be that the licensed companies may become subject to public scrutiny and criticism for several reasons. there is the possible advantage of securing labor and resources at less cost than in the licensors home country or manufacturing plant. . while transferring responsibility for ownership of manufacturing facilities to contractors and subcontractors. which has been found to be very successful in the United States. Violations of sustainable business practices have also come under scrutiny." Nike. McDonald's has a well-known global brand name and a business system that can be easily replicated in multiple country markets. The specialty retailing industry favors franchising as a market entry mode. Diff: 2 Page Ref: 267-269 AACSB: Reflective Thinking 83) McDonald's and other fast food restaurants have benefitted tremendously by using franchising as a mode of entry into different countries. A company can also use the joint venture experience to learn about a new market environment. Corning Glass. One company may be helpful in providing knowledge about local markets and availability of resources and the other company may have a brand name and well established reputation in the market. Another disadvantage is that of potential for conflict between partners. The main disadvantage associated with joint venture is that a company may incur very significant costs associated with control and coordination issues that arise when working with partners in another country. Mexican managers viewed the Americans as too direct and aggressive. Another disadvantage is that a dynamic joint venture partner can evolve as a stronger competitor. joint venture does not work in all circumstances and at times licensing works as well. What are the disadvantages of joint venturing? Answer: Many companies have experienced difficulties. Joint ventures also allow partners to achieve synergy by combining different value chain strengths. some serious. whereas the American managers believed Mexicans took too much time to make important decisions. . the market leader with a 90% stake in the venture. it had a minuscule share of the market. Also. Anheuser-Busch first entered the Japanese market in order to cross the difficult barrier by entering into a licensing agreement with Suntory. Diff: 3 Page Ref: 272-273 AACSB: Reflective Thinking 18 Copyright © 2011 Pearson Education. Joint venture is recommended for companies which lack enough resources or technical know-how. by pursuing joint venture entry strategies. Sharing of risk is a very important advantage when a company is entering a new and unfamiliar region. Finally. Also. Why is this strategy so attractive to companies interested in entering other markets in the world? Answer: A joint venture with a local partner represents a more extensive form of participation in foreign markets than either exporting or licensing. Corning Glass and Vitro. all the disadvantages have to be taken into account when entering into a joint venture agreement. when working with partners under joint venture agreement. Kirin gained a lot of knowledge about the beer market globally. This strategy is attractive for several reasons such as the sharing of risk. the smallest of the brewers in Japan. Thus. a company can limit its financial risks as well as exposure to political uncertainty. in cases where the governmental policies restrict the full ownership of the companies by foreign businesses. A joint venture is an entry strategy for a single target country in which the partners share ownership of a newly created business entity. On the other hand. joint venture is the only option to enter. The beer market did not increase substantially for Anheuser-Busch and the joint venture was losing money. Although Budweiser became popular. Anheuser-Busch decided to dissolve the joint venture and reverted to a licensing agreement with Kirin. GM and South Korea's Daewoo had joint venture to produce cars for the Korean market. had a joint venture. Thus. Mexico's largest industrial manufacturer. and GM have learned a lot by using joint venture as a mode of entry into a foreign market. GM developed Daewoo's competitiveness and finally Daewoo terminated the venture since their cars were not allowed for exportation. Thus. Anheuser-Busch then created a joint venture with Kirin Brewery. Kirin's distribution channel was very helpful and Anheuser-Busch was able to use some of Kirin's facilities. In order for the joint venture relationship to work well both partners must share rewards as well as risks. Some of their experiences are not very positive. Inc. These often arise out of cultural differences. there can be a complimentary effect by linking the attributes of both the companies. Diff: 2 Page Ref: 270-273 AACSB: Reflective Thinking 85) Companies like Anheuser-Busch.84) Joint ventures are becoming very popular as entry mode into foreign markets. global markets are more accessible. Also. Samsung is the leader in the manufacturing technology into world-class products. and new communication technologies and trends have emerged. the participants retain their national and ideological identities. However. product life cycles have shortened. Both Sony and Samsung are in direct contact with each other and there is good sharing of resources. and unpredictable. (3) The partners' vision and effort are truly global. Flat-panel TV market is the newest market that has a great potential. be it local or foreign? Answer: Recent changes in the political. economic. discuss attributes that are needed for a fine working partnership. There are five attributes that are described as important for this type of collaboration. both sides should be able to learn from each other. whether global or otherwise. Global firms are under intense pressure to respond and adapt quickly. extending beyond home countries and the home regions to the rest of the world. Trade barriers are less. and technological environments of the global firms have prompted the need for strategies that are more current rather than the traditional strategies. (1) Two or more companies should develop a joint long-term strategy aimed at achieving world leadership by pursuing cost-leadership. Inc. with resource pooling representing norms. innovation. sociocultural. All these converging environmental forces or changes require different unprecedented global strategies that take into account collaborations which were not thought of at any period of time. dynamic. and updating global strategies that takes care of the demands. They can learn from Sony how the present technology can be advanced. seek to collaborate with another firm. Today's competitive environment is described as turbulent. consumer needs and wants have changed. (5) When competing in markets excluded from the partnership. or a combination of two. Diff: 2 Page Ref: 279-281 AACSB: Reflective Thinking 19 Copyright © 2011 Pearson Education. differentiation. there are strong strategic implications for the global organizations and new challenges for the global marketer. . They have to pursue "entrepreneurial globalization" by developing unique and flexible organizational capabilities. (4) The relationship should be organized along horizontal not vertical lines.86) Why would any firm. These factors may provide unprecedented opportunities. continual transfer of resources laterally between partners is required. Answer: A true global strategic partnership requires a mutual collaboration between partners. Also. Sony and Samsung are both global companies that market global brands throughout the world. (2) The relationship should be reciprocal with each partner bringing in specific strengths that can prove to be mutually beneficial. Both Sony and Samsung are well established and have sufficient key products in the world market that they will be able to retain their national and ideological identities as well as competitive edge. Diff: 2 Page Ref: 278-279 AACSB: Reflective Thinking 87) A true global strategic partnership is unique and different. Samsung and Sony are two major companies jockeying for leadership in the global television market. Using the example of Sony's strategic alliance with Samsung. the study found that short-term goals can result in the foreign partner limiting the number of people allocated to the joint venture. Each must contribute to the alliance and each must depend on the other to a degree that justifies participation in the alliance. Although it is not a market entry strategy per se. businesses. including the capital market. .S. expectations. Clyde Prestowitz provided the following example to show how keiretsu relationships have a potential impact on U. The original goals of the venture are lost as each new manager takes their turn. identified four common problem areas that have gone wrong in alliances between Japanese and Western firms. Lastly. Diff: 2 Page Ref: 286-289 AACSB: Analytic Skills 20 Copyright © 2011 Pearson Education. A study by McKinsey & Co. Hitachi was pushing Nissan to show preference for Hitachi and the U. Describe what it is and how it can affect U. keiretsu owns more than half of the Japanese businesses. it played an integral part in the international success of the Japanese companies as they sought new markets. some companies involved in GSPs establish a "collaboration section. In California alone. There is little original corporate memory or reminder of the initial intent of the venture. Unintended transfers are therefore guarded and controlled. whereas the Western partner sought relatively quick and risk-free financial returns. and approaches. Keiretsu relationships are often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and nonfinancial suppliers. Thus. These concerns if addressed adequately and before any formal agreement is signed will be helpful in taking care of later concerns. share information. and coordinate prices. Also.S. Because keiretsu relationships are crossing the Pacific and directly affecting the American market.S." This department is designed to serve as a gatekeeper through which requests for access to people and information must be channeled. The Japanese partner saw itself emerging from the alliance as a leader in its business or building a new basis for the future. the U. Answer: Japan's keiretsu represents a special category of cooperative strategy which is an interbusiness alliance or enterprise group. Another common cause of problems was found to be due to friction. Hitachi executives called for solidarity since both Nissan and Hitachi were members of the same big six keiretsu.88) Why are alliances between Western companies and Asian competitors so different if not difficult? What are some of the concerns and how can those be addressed? Answer: Western companies may find themselves to be at a disadvantage in GSPs with an Asian competitor. Inc. Diff: 2 Page Ref: 282-283 AACSB: Reflective Thinking 89) Japanese keiretsu is considered to be a strong cooperative strategy that will have an impact in global marketing. and component parts markets. keiretsu executives can legally sit on each other's boards. This mainly stemmed from differences in management philosophy. Other keiretsu businesses are moving into different parts of the United States. businesses. When it appeared that the purchase of Cray computer was pending. primary goods markets. The second area of concern related to the balance between partners. keiretsu serves as a cartel that have the government's blessing. To limit transparency. companies have a reason for concern. Cray was the worldwide leader in supercomputers and Hitachi had no functional product to offer. In the1980s Nissan was in the market for a supercomputer to use in car design. frictions and unnecessary problems. It exists in a broad spectrum of markets. Two vendors under consideration were Cray and Hitachi.S. had to put pressure on both Nissan and the Japanese government to have the sale proceed with Cray. . Thus. (4) Country and market diversification is the corporate strategy of a global. It also has a competitive advantage due to cost. This strategy is desirable since it serves the world customer as well as a company can achieve a greater accumulated volume at a lower cost. Inc. This is typically a starting point for most companies and it matches with limited company resources and market investment needs. American companies that decide to diversify in the U. (3) Country diversification and market concentration is the classic global strategy whereby a company seeks out the world market for a product. which involves targeting a limited number of customer segments in a few countries. multibusiness company such as Matsushita. This is the strategy followed by well-managed businesses that serve a distinct need and customer category. market as opposed to going international have also followed this strategy. Faced with these situations what are the strategies that can be followed? Answer: There are four different dimensions that emerge in combination to produce four different sets of strategies that are described as follows. (2) Country concentration and market diversification. Diff: 2 Page Ref: 290-291 AACSB: Reflective Thinking 21 Copyright © 2011 Pearson Education. (1) Country and market concentration. based on the level of involvement desired and available resources one of the above-mentioned strategies should be selected. in which a company serves many markets in a few countries.S. Many European companies have followed this strategy.90) Companies are faced with the decision whether to expand by seeking new markets in existing countries or seeking new country markets for already identified and served market segments.