Question

What term is used for an approach where firms initially use entry modes that allow them to maximize knowledge acquisition while minimizing the exposure of their assets?

Answer 1

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What term is used for an approach where firms initially use entry modes that allow them to maximize knowledge acquisition while minimizing the exposure of their assets?

>>>> Joint Venture

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Answer 2

A "gradual entry" or "incremental" approach is the term used to describe a strategy where firms initially use entry modes that enable them to maximise knowledge acquisition while minimising the exposure of their assets.

Some key points to explain this approach are:

• Gradual entry involves starting with a low-commitment, low-risk entry mode, such as exporting or licensing, before moving on to more commitment-heavy modes like joint ventures or wholly-owned subsidiaries.

• This approach allows firms to acquire knowledge about the target market and build relationships before making larger investments.

• Firms can also test the market, assess the competitive landscape and mitigate the risk of failure.

• Gradual entry approach is suitable for firms that are entering new and uncertain markets, lack experience, and have limited resources and capabilities.

• This approach is also advantageous for firms as it allows them to build a reputation, brand recognition, and customer base before entering the market in a larger capacity.

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