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International Marketing
Bu111 Final Review F2020 (Int'l Business, Strategic Expansion)
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List the 6 different entry strategies in Int'l business
1. Indirect Export
2. Sales Agent or Distributor
3. Licensing/Franchising
4. Alliances/Joint Ventures
5. Local Sales Office
6. Foreign Subsidiary
What is the most costly entry strategy and why?
Foreign subsidiary is the most costly because you have to setup a new plant in a different country
What is Indirect Export?
Indirect export is when you sell to an third party exporter, they identify where to sell and takes care of shipping and obtaining payment
What capabilities do you need for indirect export?
Literally nothing
What are the risks/costs associated with indirect export? (3 main risks)
1. No customer contact
2. No control over the destination
3. No control over pricing, promotion or foreign distribution strategy
Why would you choose to go with Indirect export? (3 reasons)
1. No additional cost
2. No knowledge of the market
3. No risk from foreign market political volatility
Under what conditions should you choose an Indirect Export strategy?
Sample answer:
You're a smaller business who doesnt have a lot of resources nor knowledge of a foreign market and dont mind losing the control on the product.
Name a KPI that would be negatively affected by choosing to go with an Indirect Export strategy?
Sample answer:
Net Promoter Score if your export partner does not respond to customer service or anything at all
What is a sales agent or distributor?
Hire an agent or distributor to sell your product using their local network and YOU MANUFACTURE DOMESTICALLY and ship abroad
What is the key difference between sales agent/distributor and indirect export?
With sales agent / distributor, you have to handle the logistics of shipping the product, indirect exporters handle that for you
What capabilities and resources will you need for a sales agent/distributor strategy?
1. Manufacture in sufficient quantity to satisfy the agent
2. The ability to adjust the product
3. some understanding of exporting and foreign markets
What factors should you consider when evaluating which country to go into? (7 Reasons)
Acronym: CARL PSD
C: Competition
A: Administrative Barriers
R: Reachability of Customers
L: Liability of Foreignness
P: Population
S: Spending (Average Spending)
D: Distance
What are the steps of deciding to go international and what frameworks would you use at each step?
1. Can we? (Diamond-E Internal)
2. Should We? (Diamond-E External)
3. Where? (PEST and Porter's Five Forces)
4. How? (Ansoff Matrix and Porter's Generic Strategies)
Why choose to go with a Sales Agent/Distributor (2 reasons)
1. You don't have the resources to easily enter the foreign market
2. Limited understanding of the foreign market.
What are some of the risks/costs associated with a sales agent/distributor strategy? (3 risk)
1. Share attention with other organizations
2. Limited Marketing Control
3. Subject to Trade Barriers
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Verified questions
QUESTION
If a company’s board of directors wants management to maximize shareholder wealth, should the CEO’s compensation be set as a fixed dollar amount, or should the compensation depend on how well the firm performs? If it is to be based on performance, how should performance be measured? Would it be easier to measure performance by the growth rate in reported profits or the growth rate in the stock’s intrinsic value? Which would be the better performance measure? Why?
QUESTION
Assume that it is now January 1, 2017. Wayne-Martin Electric Inc. (WME) has developed a solar panel capable of generating 200% more electricity than any other solar panel currently on the market. As a result, WME is expected to experience a 15% annual growth rate for the next 5 years. Other firms will have developed comparable technology by the end of 5 years, and WME’s growth rate will slow to 5% per year indefinitely. Stockholders require a return of 12% on WME’s stock. The most recent annual dividend $\left(\mathrm{D}_{0}\right)$, which was paid yesterday, was $1.75 per share. a. Calculate WME’s expected dividends for 2017, 2018, 2019, 2020, and 2021. b. Calculate the value of the stock today,$$\hat{\mathrm{P}}$_{0}$. Proceed by finding the present value of the dividends expected at the end of 2017, 2018, 2019, 2020, and 2021 plus the present value of the stock price that should exist at the end of 2021. The year end 2021 stock price can be found by using the constant growth equation. Notice that to find the December 31, 2021, price, you must use the dividend expected in 2022, which is 5% greater than the 2021 dividend. c. Calculate the expected dividend yield$\left($\mathrm{D}$_{1} / $\mathrm{P}$_{0}\right)$, capital gains yield, and total return (dividend yield plus capital gains yield) expected for 2017. (Assume that$$\hat{\mathrm{P}}$_{0}=$\mathrm{P}$_{0}$ and recognize that the capital gains yield is equal to the total return minus the dividend yield.) Then calculate these same three yields for 2022. d. How might an investor’s tax situation affect his or her decision to purchase stocks of companies in the early stages of their lives, when they are growing rapidly, versus stocks of older, more mature firms? When does WME’s stock become “mature” for purposes of this question? e. Suppose your boss tells you she believes that WME’s annual growth rate will be only 12% during the next 5 years and that the firm’s long-run growth rate will be only 4%. Without doing any calculations, what general effect would these growth rate changes have on the price of WME’s stock? f. Suppose your boss also tells you that she regardsWME as being quite risky and that she believes the required rate of return should be 14%, not 12%. Without doing any calculations, determine how the higher required rate of return would affect the price of the stock, the capital gains yield, and the dividend yield. Again, assume that the long-run growth rate is 4%.
QUESTION
As manager of your department, you have noticed that one of your employees has been complaining quite a bit Complaints range from the lack of recent wage increases to dissatisfaction with the work situation to gripes about another employee whistling on the job. Discuss with a partner how you might address the situation or the employee.
QUESTION
In 2015, Keenan Company paid dividends totaling $3,600,000 on net income of$10.8 million. Note that 2015 was a normal year and that for the past 10 years, earnings have grown at a constant rate of 10%. However, in 2016, earnings are expected to jump to $14.4 million and the firm expects to have profitable investment opportunities of$8.4 million. It is predicted that Keenan will not be able to maintain the 2016 level of earnings growth because the high 2016 earnings level is attributable to an exceptionally profitable new product line introduced that year. After 2016, the company will return to its previous 10% growth rate. Keenan’s target capital structure is 40% debt and 60% equity. a. Calculate Keenan’s total dividends for 2016 assuming that it follows each of the following policies: 1. Its 2016 dividend payment is set to force dividends to grow at the long-run growth rate in earnings. 2. It continues the 2015 dividend payout ratio. 3. It uses a pure residual dividend policy (40% of the $8.4 million investment is financed with debt and 60% with common equity). 4. It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual dividend policy. b. Which of the preceding policies would you recommend? Restrict your choices to the ones listed but justify your answer. c. Assume that investors expect Keenan to pay total dividends of$9,000,000 in 2016 and to have the dividend grow at 10% after 2016. The stock’s total market value is $180 million. What is the company’s cost of equity? d. What is Keenan’s long-run average return on equity? [Hint: g=Retention rate [math]\times[/math] ROE=(1.0-Payout rate)(ROE)] e. Does a 2016 dividend of$9,000,000 seem reasonable in view of your answers to parts c
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