FDI and Collaborative Ventures

Question 1

Three types of entry strategies

Answer 1

Trade, FDI, licensing and franchising

Question 2

Variables to consider when selecting a entry strategy

Answer 2

Goals and objectives, control, resources, risks, product characteristics, infrastructure and laws/regulations, culture, competition, potential parters, insourcing/outsourcing

Question 3

FDI

Answer 3

internationalisation strategy where firm established physical presence abroad, through acquisition of capital, technology, labour, plant, equipment (setting up facilities abroad)
- most advanced and complex, riskier, substantial resources invested, smart when you want high degree of control, direct ownership

Question 4

Export

Answer 4

least risky, little to lose, cost effective, can always find demand somewhere, as first entry, manufacturing in home market, not physical presence abroad, abroad agent

Question 5

Motives for FDI

Answer 5

• market seeking motives (access to markets, compete with rivals in their markets, follow key costumers)
• resource or asset seeking motives (raw materials, knowledge/assets, tech + knowhow
• efficiency seeking motives (reduce sourcing and production cost, locate prod. near customers, avoid trade barriers, low cost labour)
  (provides economies of scale)

Question 6

Forms of FDI

Answer 6

• greenfield investment = building new factures, want their own “culture”
• acquisition= buy into a country, direct investment in existing company/facility
• merger= buy in and merge , two firms join and form a new, larger company (can be challenging)

Question 7

Ownership and integration of FDI

Answer 7

• Wholly owned: 100% ownership and secured control
• Equity joint ventures: create new firms from two separate firms assets, joint ownership
• Vertical integration: owns/seek to own multiple stages in value chain
• Horizontal integration: owns/seek to own a single stage in value chain

Question 8

Risks of mergers and acquisitions

Answer 8

integration difficulties, are companies compatible and organisational (culture match?), management difficulties, top heavy structures, different negotiating

Question 9

Success factors in collaborative ventures

Answer 9

be aware of cultural differences, pursue common goals, interact regularly and communicate, focus on planning and management (who decide what), safeguard core competencies, and adjust to environmental changes (eg. downturn in economy)

Question 10

Barriers for retailers

Answer 10

culture and language (service, store hours, layout, relationship between management and labour)
loyalty to indigenous retailers
legal and regulatory barriers, laws (recycling, advertising etc)
must often develop local sources of supply
require intensive customer, and adaptation to local needs, understand market

Question 11

Success factors for retailers

Answer 11

advance research and planning
logistics and purchasing networks (well organised sourcing and logistics ensure inventory is always maintained)
entrepreneurial, creative approach
adjust business model to suit local conditions

Question 12

Types of collaborative ventures

Answer 12

• International collaborative venture= cross border business partnership, pool resources, share costs and risks
• Equity joint venture
  no possess of all assets
• Project-based joint venture=
  narrow scope, limited timetable, remain independent but common goal, end date
• Joint Venture= two or more firms create a new jointly owned enterprise, invest money, challenges