Chapter 09 Flashcards
Factors in the selection of an entry method in a foreign market
- business environment in targeted country
- the firms resources
- competitive context in targeted foreign market
- risk - reward equation associated with entering a new market.
Common stages in the process of corporate internationzalization
- Exporting
- Sales subsidiaries
- International Division
- Multinational
- Global or transnational
- Alliances, partners, and consortia
Export management companies
Specialized firms hired to handle some, most, or all of other firms’ export-related tasks and activities.
(gives exporting assistance)
Types of exporting
Direct exporting, Indirect, Intracorporate
Direct Exporting
When sales of a firm’s products or services directly involve foreign customers.
Indirect exporting
When a domestic firm sells its product to another domestic firm, which alters the product and then exports it.
Intracorporate exporting
When a firm located in one country sells a product to an affiliated firm (or the firm’s subsidiary) in another country.
firm adaptability
is generally low in developed countries, and high in emerging.
Capabilities in unstable business environments
Multinationals from developed countries: generally weak.
From emerging markets, generally strong
Competitive advantages
MNE from developed countries generally strong and weak for emerging markets
Path of expansion
Generally simple for MNE’s in developed countries and complex for those in emerging markets
Typical foreign market entry mode
Developed country MNE: Internal, with wholly owned foreign subsidiaries.
Emerging markets: External, relying on acquisitions and alliances
Speed of internationalization
Gradual (for developed countries mne) Accelerated (for emerging markets)
Foreign market entry options: Exporting
The Costs and Challenges of Exporting
Selecting products that will sell well overseas.
Understanding import/export rules and being prepared to deal with voluminous paperwork.
Finding overseas customers and adapting marketing and advertising to reach them.
Dealing with currency fluctuations, language issues, tariffs, and transport delays.
Foreign market entry options: Licensing
Licensing
Is selling the rights to a firm’s brand names, patents, technology, or intellectual property to a foreign firm.
Provides a quick access to and testing of foreign markets with an immediate payoff.
Overcomes the lack of resources needed for ownership entry options.
Can preempt or block rivals in foreign markets.
May “educate” a potential competitor.
Foreign market entry options: Franchising
Is the contractual right to operate a business using the methods, procedures, products, trademarks, and marketing strategies created by another firm.
Allows franchisor control over franchisee through the terms of the franchise agreement.
Benefits from local market knowledge of franchisees.
Master Franchisee
A firm or group of investors willing to coordinate all franchising operations in a specific foreign market for a franchisor.
Other foreign market entry options
Management Contract
Providing a foreign organization with specific services, technical help, or managerial expertise for either a flat fee or a percentage of sales/profits.
Turnkey Contract
Typically includes all steps needed to design, build, and operate large, complex facilities in foreign locations.
Contract Manufacturing
Occurs when firms outsource their manufacturing operations to other firms, either in whole or in part.
Entry options involving ownership
Greenfield Approach
Is entry into a foreign market by establishing a wholly owned subsidiary from scratch.
Provides for maximum control and protection of intellectual property.
Can maximize location economies in site selection.
Wholly Owned Foreign Subsidiary
Is ownership of an overseas facility by a foreign firm.
Why Firms Pursue Ownership Options in Foreign-Market Entry: Three Key Motivations
Market, efficiency, and resource - based
Entry Options Involving Ownership (cont’d)
Acquisition Approach
Is the establishment of a wholly owned subsidiary through complicated negotiations about existing plants or facilities.
Can provide benefits and challenges in integrating both firms’ cultures, products, and operations.
Can be accomplished more quickly than using the greenfield approach.
Has the risk of overpayment for the acquired firm.
Privatization
Is the government selling of state-owned enterprises or assets to private parties
Entry Options Involving Ownership (cont’d)
Joint Ventures
Represent shared ownership of foreign facilities by two or more separate firms.
Allow for sharing of costs, technology, knowledge, and business risk by the venture’s owner partners.
Require trust between the parties, a clear set of shared objectives, and a visionary management style to be successful.
Delegated Arrangement
Allows joint-venture partners to reduce conflicts by agreeing to step back from active management of operations by hiring new executives/managers
