Week 6 Flashcards
Exporting
Licensing and Franchising
Partnering and Strategic Alliance
Acquisition
Greenfield Venture/ Wholly owned subsidiary
International Expansion Entry Modes
the sale of products and services in foreign countries that are sourced from the home country
Exporting
Fast entry, low risk
Exporting advantages
Low control, low local knowledge, potential negative environmental impact of transportation
Exporting disadvantages
Franchising involves finding franchisees with the skills necessary to operate branches of the same business.
Licensing of intellectual property (IP) is at the heart of a franchise contract
Licensing and franchising
Fast entry, low cost, low risk
Licensing and franchising advantages
Less control, licensee may become a competitor, legal and regulatory environment (IP and contract law) must be sound
Licensing and franchising disadvantages
Agreement between two or more enterprises stating they will cooperate in a certain way for a certain time to achieve a common purpose.
Partnering and Strategic Alliance
Shared costs reduce investment needed, reduced risk, seen as local entity
Partnering and Strategic Alliance advantages
Higher cost than exporting, licensing, or franchising; integration problems between two corporate cultures
Partnering and Strategic Alliance disadvantages
firm gains control of another firm by purchasing its stock, exchanging the stock for its own, or, in the case of a private firm, paying the owners a purchase price.
Acquisition
Fast entry; known, established operations
Acquisition advantages
High cost, integration issues with home office
Acquisition disadvantages
The firm may have to acquire the knowledge and expertise of the existing market by hiring either host-country nationals—possibly from competitive firms—or costly consultants.
Greenfield Venture/ Wholly owned subsidiary
Gain local market knowledge; can be seen as insider who employs locals; maximum control
Greenfield Venture/ Wholly owned subsidiary advantages
