5 Market entry model - non-equity investment Flashcards
SME
small & medium size enterprises
companies with less than 500 employees
have fewer resources than larger firms & cannot simply buy up local firms to establish a foothold in a foreign market
Non-equity entry investment
SMEs
tent to reflect relatively smaller commitments to overseas markets
Export and contractual agreement
Export, Licensin, Franchising, International contracts
Equity investment
MNEs
normally require larger, harder to reverse commitment
Equity modes establish an organization overseas that the firm owns at least partially
Greenfield, Acquisition, Join Venture
Entrepreneurs
Founder &/owners of new business or manger of existing firms who identify and exploit new opportunities
International entrepreneurship
A combination of innovative, proactive and risk-seeking behavior that crosses national borders and is intended to create wealth in organizations
Non-equity internationalization strategy - goods
seller:
direct export
indirect export via domestic intermediary
indirect export with foreign distributor or agent
buyer:
direct import
indirect import
subcontracting of manufacturing
Non-equity internationalization strategy - Services
Seller:
Delivering services to customers abroad
attracting foreign customers to your location
Buyer:
Hiring consultants based abroad
subcontracting of services
Non-equity internationalization strategy - Combination of Good, services & right
Seller: licensor Franchisor Build long turn-key project build operate-transfer contracts Management contract
Buyer: licensee Franchisee Subcontracting R&D contracts
Sporadic export
Sporadic (or passive) exporting is usually prompted by unsolicited inquiries from customers who learned about the products
Direct export
represent the most basic mode, capitalizing on economics of scale in production concentrated in the home country and affording better control over distribution
Indirect export
exporting through an intermediary
Intermediaries are more common for standardized products and commodities, where competition focus on prices
2 types of indirect exports
Local sale agent: receive a commission on sales
distributors: they buy the products and sell it in the local market at their own risk & using their own channels
Export intermediary
link domestic seller with foreign buyers
International service export
cross-border services –> services that are sent across national borders (airline)
Serving foreign visitors –> delivery of services to people living in other counties (tourism, education)
Contractual models - Licensing
Firm A give to B right to use A’s proprietary technology, patent, trademark for a royalty fee paid to A by B. (Licensor give - licensee take)
Contractual models - Franchising
Typically covers entire business concepts: not only the products, service & trademark, but also the marketing strategy, operation manuals & quality control procedure
Contractual models - Turkey project
Project in which clients pay contractors to design and construct new facilities & train personnel
Contractual models - Design & build contract (DB)
contract combining the architectural or design work with the actual construction
Contractual models - Build-operate-transfer (BOT)
contract combining construction & temporary operation of a project eventually to be transferred to a new owner
Contractual models - consortium
project base temporary business owned & managed jointly by several firms
Contractual models - subcontracting
contract that involves outsourcing of an intermediate stage of a value chain
Contractual models - R&D contract
a subcontracting of R&D between firms
Contractual models - Management contracts
allowance to run a business, not owning it
Internationalization model - uppsala model
model of internationalization process focusing on learning processes
essence of the model: internationalization as a dynamic process of learning
experiential knowledge shapes the firm’s ability to recognize business opportunities, its perception of risk & the cost of deepening its involvement
Internationalization model - network internationalization model
overtime firm in a netwrok reinforces each others’ internationalization processes thus the expertise in a firm’s network grows both with new members joining, and with existing member gaining more experience
Internationalization model - stages model of internationalization
internationalization sees as a slow stage-by -stage process an SME goes through
Born global / international New Venture (INV)
stat up company that form inception seek to derive significant competitive advantage form the use of resources & the sale of outputs in multiple countries
INVs strategies include
- building an entrepreneurial team with international competencies
- cooperation with internationally active firms
- Learning form other operating in the foreign country
- acquiring resources abroad
Building resources for IB
Traditional internationalization process
- experiential learning and knowledge acquisitions
- network building and exploitation
Accelerated internationalization process
-building an entrepreneurial team with international experience
-learning for importing and inward foreign investors
learning form other operating in the foreign country
acquiring resources in the foreign country,
institutional environments
ability of internationally inexperienced firms to engage in international business is to a large extent shaped by:
- the institutional environment in the home country
- institutional distance between the home and host counties
