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level: W07 Entering foreign markets (Part II)

Questions and Answers List

level questions: W07 Entering foreign markets (Part II)

Question	Answer
Going after the market with the most appealing characteristics	When chosing a foreign market to expand to, what does a "rational optimization" mean?
It is a model used for understanding how a company decides to internationalize. A foreign market is selected based on how large the psychic distance is. Psychic distance reflects differences in language, culture, political systems, level of education, or level of industrial development, etc. i.e, A company will chose a host country for expansion that resembles the home country.	what is the "Uppsala model"?
The Uppsala model relies on gaining knowledge progressively about the market in which you operate. The internationalization process is developed through time and can in the short term consist of outsourcing activities. In the long run advanced market knowledge is obtained by strategic investments, purchasing subsidaries or FDI's in manufacturing factories.	Link these two concepts: "Uppsala model" & "Internationalization process".
They are in the moment of founding trying to aim for a global market. They often arise from countries with smaller domestic markets such as Israel and Finland. Especially suitable for IT companies.	Describe the characteristics of a "Born Global" company
-Cost advantages: Mass production --> Economies of scale. -Geographic space: Securing attractive locations, marketing channels, etc. -Technological advantages: innovations before competitors. -Differentiation advantages: Creating switching costs and reputation advantages. -Political advantages: Establishing collaborative relations with the local government.	What are the benefits from entering a foreign market early?
Good R&D capability Good product development capability Firm reputation (innovation)	What is required from a company before entering a market as a first mover?
Good learning capability (absorptive capacity) Responsive to customer needs Flexible organizational structure/strategy	What is required from a company before entering a market as a second mover?
Efficient manufacturing Firm reputation Good marketing skills Since established players already exists in the market, the need for flexibility is important for a late comer if trends shifts leading to a different type of demand.	What is required from a company before entering a market as a late mover?