This is the potential financial loss that entrepreneurs are willing to take in a business.
Risk profil
This is states that the greater the risk or or the loss of capital invested entrepreneurs are willing to take, the greater the rewards or profit they are likely to reap.
Risk-return trade-off
What are the sources of risk?
Ownership
Operation
Asset transfer
This penetrates foreign markets by exporting or importing merchandise at competitive prices for domestic consumption.
Export-Import Business
This provides a foreign partner with the rights and/or technology to manufacture and sell products or services in a target country for an annual fee.
Licensing
This is when specialized equipment, service, and/or startup costs is provided in return for an annual fee for rights to manufacture or sell its products.
Franchising
True or False: The export-import business is a relatively low-risk operation given the fact that capital is not tied up and it is relatively easy to enter or exit the business.
True
Which has greater risk? Licensing or pure international trade business?
Licensing
Which has more risk? Franchising or licensing?
Franchising
This is an agreement between two or more firms that do not involve the creation of a separate entity with joint ownership and in which the firms stand to gain revenues and maximize profits through cooperation for a given period of time.
Strategic alliances
This is a business jointly owned and operated by two or more firms (one local host country and one foreign) that pool their resources to penetrate the host country’s markets, share in profits, and share commercial risk.
International Joint Ventures
This involve relationships between two or more firms that stand to gain revenues through cooperation. It does not involve the creation of a separate entity.
Strategic alliances
This is the purchase of established firms abroad with the goal of using the existing production, marketing, and distribution networks and of having instant access to foreign markets that fit the purchasing firm’s global strategy.
Foreign Acquisitions
These are new facilities built and operated overseas that require large investment of capital because these new establishments are tailored to the exact needs of the home country firm.
Subsidiaries
This is when the home country firm purchases the host country firm and implements its own international strategy.
Cross-Border Acquisitions
This is when a firm enters a foreign market where the two firms combine and where the management of both companies play an active role in business development and execution.
Cross-Border Merger
These are a home country’s new facilities overseas as an alternative to acquiring a foreign firm.
Green field plants
These are firms that are headquartered in one country, but own and control significant manufacturing, services, R&D (research and development) facilities, or other business entities in other countries.
Multinational enterprises (MNEs)
Here, the overriding objective of firms wanting to invest abroad is to maximize shareholder wealth.
Free Enterprise System
This theory states that the key economic advantages for using FDI are ownership, country-specific advantages, and internalization advantages.
Dunning’s Eclectic Theory of FDI
This is a new phase in the evolution of the multinational corporation, where work is sourced wherever it is most efficient and the corporation transcends nationality altogether.
Stateless corporation
This is a tool people use to coordinate their actions to obtain something they seek or value.
Organization
This is the formal system of task and authority relationships that control how people coordinate their actions and use resources to achieve organizational goals.
Organizational structure
This is a business subunit that consists of a collection of functions or departments that share responsibility for producing a particular product or service.
Division
