Question

True/False: The advantage to being the late mover or follower strategy is that you learn from the mistakes that the first mover makes.

True/False: Firms have to choose between two different strategies of entry one is a non-equity strategy and the other is an equity strategy.

True/False:Joint ventures are considered a desirable strategy for firms that want tight control over the foreign operations.

Please also give a reasoning if you can, thanks!

Answer 1

Ans.1. True

Late movers have done well in the markets, albeit occasionally. The late movers can exploit the errors and missteps of the early-entrants (usually market leaders) and implement the learning in their business strategy to be more successful. This will prevent them from suffering the same fate of the early movers. For instance, the cellphone was invented by Motorola and Ericson and Nokia were the fast followers. However, the largest market share in the smartphone business segment is held by Samsung and other firms including Xiaomi and LG. The growth of the late movers including Samsung can be attributed to the fact that the company learned from the errors made by the predecessors and early movers. Motorola's early designs turned to be stodgy, dull, heavy and uninteresting. Samsung made handier and good-looking phones and increased its market share. Samsung and LG also leveraged the existing business channels and networks to the best extent. For instance, they found the most people are buying their phones through the communication company and carrier channels, that offer the phones at a more subsidized rate. The late movers exploited these channels to gain market share.

Ans. 2 True

A foreign and new market will provide more opportunities for business. However, there are new challenges as well. Businesses have two routes to make the entry into a foreign market viz. equity and non-equity mode.
Equity mode: equity modes of market entry involve huge capital investment and risks and may include foreign direct investment and joint venture market entry modes, among others. Here a firm starts its operations through the building of new facilities and marketing channels from scratch, or partners with another local firm to indulge in a symbiotic relationship. For instance, the new entrant may share technology while the partner may share distribution networks.

Non-equity modes- non-equity modes of market entry involve the least risks and investments. The entry mode may also provide for faster entry and commencement of operations. Non-equity modes of market entry include licensing and exporting. In these cases, no new venture partnership deals and agreements need to be drafted and no facility building takes place.

Ans 3. False

In a joint venture, a firm has to invest less when compared to foreign direct investment and building of facilities from a scratch. The partner, a local business, already has good knowledge of the various business aspects, including legal, economic, political and other aspects, and also has a market for the business offerings (product or service). The existing marketing channels are shared and provide for easy start and expansion of operations. However, joint venture lessens the control of the new firm as the business has to comply by the partner laid conditions, may have to share knowledge and resources, may have to share management, supervision, and control, and/or oblige the partner in other ways. On the other hand, a direct investment will bring full control of the operations in the foreign market.