6 Multinational Firms and Market Entry Free Online FlashCards

What makes a business a multinational enterprise?

A multinational enterprise (MNE) has a parent company in one country and one or more foreign affiliates, coordinating activities across countries.

What is foreign direct investment (FDI)?

Foreign direct investment (FDI) is investment in an enterprise in another country intended to create a lasting interest and significant influence in its management.

How does exporting enter a foreign market?

Exporting means making products in one country and selling them in another, directly or through agents and distributors.

What does licensing allow a foreign business to do?

Licensing lets a foreign business use intellectual property, such as a patent, technology, or trademark, in return for fees or royalties.

What does franchising grant to a foreign operator?

Franchising grants a foreign operator the right to use a business format and brand, usually with ongoing guidance and operating requirements.

What distinguishes an equity joint venture from cooperation without shared ownership?

A strategic alliance involves cooperation with a foreign partner; an equity joint venture is a form with shared ownership of a business.

What is a wholly owned subsidiary?

A wholly owned subsidiary is an operation established or acquired abroad and owned entirely by the entering firm.

What is a greenfield investment?

A greenfield investment creates a new operation from the ground up, allowing the firm to design facilities and processes to fit its strategy.

What factors should guide a firm's choice of foreign-market entry mode?

A firm should weigh market opportunities against needed resources and control, considering factors such as rules, partner reliability, cultural differences, IP protection, and its ability to manage abroad.

What risks can make FDI more demanding than exporting?

FDI commits more than exporting and can expose a firm to unfamiliar regulations, political uncertainty, and challenges managing across cultures.

Must firms follow one fixed sequence of entry modes?

Firms may use different entry modes in different countries or change modes as experience and strategy evolve; entry choices are not necessarily a one-way sequence.

What voting-power threshold commonly indicates a direct-investment relationship?

International statistics commonly use ownership of at least 10% of voting power as evidence of a direct-investment relationship; this does not necessarily mean full control.