Shared Flashcard Set


Test 2 Chapter 8 International Expansion and Global Market
MGT 450 International Business Test 2
Undergraduate 4

Additional Management Flashcards




International Market Due Diligence

Involves analyzing foreign markets for their potential size, accessibility, cost of operations, and buyer needs and practices to aid the company in deciding whether to invest in entering that market.

PESTEL Analysis

An important and widely used tool that helps present the big picture of a firm's external environment in political, economic, sociocultural, technological, environmental, and legal contexts, particularly as related to foreign markets; analyzes for market growth or decline and, therefore, the position, potential, and direction for a business.

PESTEL Analysis outline
  1. Political

    1. How stable is the political environment in the prospective country?
    2. What are the local taxation policies? How do these affect your business?
    3. Is the government involved in trading agreements, such as the European Union (EU), the North American Free Trade Agreement (NAFTA), or the ASEAN (Association of Southeast Asian Nations) Free Trade Agreement?
    4. What are the country’s foreign-trade regulations?
    5. What are the country’s social-welfare policies?
  2. Economic

    1. What are the current and forecast interest rates?
    2. What is the current level of inflation in the prospective country? What is it forecast to be? How does this affect the possible growth of your market?
    3. What are local employment levels per capita, and how are they changing?
    4. What are the long-term prospects for the country’s economy, gross domestic product (GDP) per capita, and other economic factors?
    5. What are the current exchange rates between critical markets, and how will they affect production and distribution of your goods?
  3. Sociocultural

    1. What are the local lifestyle trends?
    2. What are the country’s current demographics, and how are they changing?
    3. What is the level and distribution of education and income?
    4. What are the dominant local religions, and what influence do they have on consumer attitudes and opinions?
    5. What is the level of consumerism, and what are the popular attitudes toward it?
    6. What pending legislation could affect corporate social policies (e.g., domestic-partner benefits or maternity and paternity leave)?
    7. What are the attitudes toward work and leisure?
  4. Technological

    1. To what level do the local government and industry fund research, and are those levels changing?
    2. What is the local government’s and industry’s level of interest and focus on technology?
    3. How mature is the technology?
    4. What is the status of intellectual property issues in the local environment?
    5. Are potentially disruptive technologies in adjacent industries creeping in at the edges of the focal industry?
  5. Environmental

    1. What are the local environmental issues?
    2. Are there any pending ecological or environmental issues relevant to your industry?
    3. How do the activities of international activist groups (e.g., Greenpeace, Earth First!, and People for the Ethical Treatment of Animals [PETA]) affect your business?
    4. Are there environmental-protection laws?
    5. What are the regulations regarding waste disposal and energy consumption?
  6. Legal

    1. What are the local government’s regulations regarding monopolies and private property?
    2. Does intellectual property have legal protections?
    3. Are there relevant consumer laws?
    4. What is the status of employment, health and safety, and product safety laws?
Factors Favoring Industry Globalization
  1. Markets

    1. Homogeneous customer needs
    2. Global customer needs
    3. Global channels
    4. Transferable marketing approaches
  2. Costs

    1. Large-scale and large-scope economies
    2. Learning and experience
    3. Sourcing efficiencies
    4. Favorable logistics
    5. Arbitrage opportunities
    6. High research-and-development (R&D) costs
  3. Governments

    1. Favorable trade policies
    2. Common technological standards
    3. Common manufacturing and marketing regulations
  4. Competition

    1. Interdependent countries
    2. Global competitors

The sale of products or services in one country that are sourced in another country.


Contracting with a third party to do some of a company's work on its behalf.


Taking some business function out of the company's country of origin to be performed in another country, generally at a lower cost.

International Outsourcing

The term for both outsourcing and offshoring work, or outsourcing to a non-domestic third party.

Strategic Alliances

An international entry mode involving a contractual agreement between two or more enterprises stipulating that the involved parties will cooperate in a certain way for a certain time to achieve a common purpose.

Greenfield Ventures
An international entry mode involving the establishment of a new, wholly owned subsidiary.
International Expansion Entry Modes
Type of Entry Advantages Disadvantages
Exporting Fast entry, low risk Low control, low local knowledge, potential negative environmental impact of transportation
Licensing and Franchising Fast entry, low cost, low risk Less control, licensee may become a competitor, legal and regulatory environment (IP and contract law) must be sound
Partnering and Strategic Alliance Shared costs reduce investment needed, reduced risk, seen as local entity Higher cost than exporting, licensing, or franchising; integration problems between two corporate cultures
Acquisition Fast entry; known, established operations High cost, integration issues with home office
Greenfield Venture (Launch of a new, wholly owned subsidiary) Gain local market knowledge; can be seen as insider who employs locals; maximum control High cost, high risk due to unknowns, slow entry due to setup time

An international entry mode involving the granting of permission by the licenser to the licensee to use intellectual property rights, such as trademarks, patents, or technology, under defined conditions.


An international entry mode in which a firm gains control of another firm by purchasing its stock, exchange stock, or, in the case of a private firm, paying the owners a purchase price.

CAGE Framework

The analytical framework used to understand country and regional differences along the distance dimensions of culture, administration, geography, and economics.

CAGE Framework chart
Cultural Distance
Administrative Distance

Geographic Distance

Economic Distance

Attributes Creating Distance

Different languages

Absence of colonial ties

Physical remoteness

Differences in consumer incomes

Different ethnicities; lack of connective ethnic or social networks

Absence of shared monetary or political association

Lack of a common border

Differences in costs and quality of the following: 
• Natural resources 
• Financial resources 
• Human resources 
• Infrastructure 
• Intermediate inputs 
• Information or knowledge

Different religions

Political hostility

Lack of sea or river access

Different social norms

Government policies

Size of country
Institutional weakness

Weak transportation or communication links
Differences in climates

Institutional Void

The absence of key specialized intermediaries found in the markets of finance, managerial talent, and products, which otherwise reduce transaction costs.

SWOT (Strengths, weaknesses, opportunities, and threats)

A strategic management tool that helps an organization take stock of its internal characteristics (strengths and weaknesses) to formulate an action plan that builds on what it does well while overcoming or working around weaknesses and also asses external environmental conditions (opportunities and threats) that favor or threaten the organization's strategy.

Scenario Planning

A process of analyzing possible future events by considering alterative possible outcomes (scenarios).


Six Basic Steps of Scenario Planning

  1. Step 1. Choose the target issue, scope and time frame that the scenario will explore. The scope will depend on your level of analysis (i.e., industry, subindustry, or strategic group), the stage of planning, and the nature and degree of uncertainty and the rate of change. Generally, four scenarios are developed and summarized in a grid. The four scenarios reflect the extremes of possible worlds. To fully capture critical possibilities and contingencies, it may be desirable to develop a series of scenario sets.
  2. Step 2. Brainstorm a set of key drivers and decision factors that influence the scenario. This could include social unrest, shifts in power, regulatory change, market or competitive change, and technology or infrastructure change. Other significant changes in external contexts, like natural disasters, might also be considered.
  3. Step 3. Define the two dimensions of greatest uncertainty. These two dimensions form the axes of the scenario framework. These axes should represent two dimensions that provide the greatest uncertainty for the industry. 
  4. Step 4. Detail the four quadrants of the scenarios with stories. Describe how the four worlds would look in each scenario. It’s often useful to develop a catchy name for each world as a way to further develop its distinctive character. One of the worlds will likely represent a slightly future version of the status quo, while the others will be significant departures from it. As shown in the credit union scenarios, Chameleon describes a world in which both the competitive playing field and technology undergo radical change, while Wallet Wars is an environment of intense competition but milder technological change. In contrast, in Technocracy, the radical changes are in technology, whereas in Credit Union Power, credit unions encounter only minor changes on either front.
  5. Step 5. Identify indicators that could signal which scenario is unfolding. These can either be trigger points that signal the change is taking place or milestones that mean the change is more likely. An indicator may be a large industry supplier like Microsoft picking up a particular but little-known technological standard.
  6. Step 6. Assess the strategic implications of each scenario. Microscenarios may be developed to highlight and address business-unit-specific or industry-segment-specific issues. Consider needed variations in strategies, key success factors, and the development of a flexible, robust strategy that might work across several scenarios.

In the context of scenario planning, forces for change whose direction - and sometimes timing - can be predicted.


In the context of scenario planning, forces for change whose direction and pace are largely unknown.

Supporting users have an ad free experience!