METHODS OF ENTRY INTO INTERNATIONAL BUSINESS Ref :International Business…. P. Subba RaoInternational Business…. Francis Cherunilam (Pg. 497 -516)
Foreign Market Analysis
Analyze alternative foreign markets
Assessing costs, benefits and risks
--Market potential..Population, ..GDP, ..Urban/rural, ..Purchasing power--Level of competition..No. & size of existing firms, ..Their relative strengths & weaknesses ..Their product, price & distribution strategies, ..Actual market conditions--Legal political environment..Companies should assess legal & political environment carefully--Socio-cultural influencesCompanies must consider socio-cultural carefully while deciding to go abroad
-- Costs..Direct costs involved in setting up operations in the global market..Opportunity cost loss of earning from alternative market--Benefits..High sales, profits..Low acquisition, manufacturing costs..Foreclosing of markets to competitors..Competitive advantage..Access to new technology..Cheap labor/resources in host country--RisksExchange rate fluctuations, Operating complexity, financial losses, Government action
Ownership advantages
Decision Factors in selecting the mode of entry
Location advantages
The following factors must be considered while deciding on the mode of entry
--- Derived by the company by owning resources.. e.g. TISCO owned its iron ore mines and coal mines. This grants the advantage of low cost producer to the company
--- Locational advantages in the host country motivates the Company to enter foreign markets through Direct Investment.
--- If locational advantages are more in the home country, them the Company enters foreign markets through exporting
Factors that provide locational advantage :
-- Customer needs, -- Logistic requirements preferences & tastes -- Cheap land acquisition cost-- Cheap labour -- Political stability -- Low cost raw materials -- Climatic conditionse.g.Siam Cement locating its factory in Thailand and exporting to Vietnam, Cambodia and Laotia
Internationalization advantages
--- Are those benefits that a company gets by manufacturing goods or rendering service in the host country by itself rather than contract arrangements with companies in the host country . --- Sometimes the cost of negotiating, monitoring, and enforcing an agreement with the host country would be difficult and costly . In such case the Company enters the host country through Direct Investment
--- If the company thinks that the transaction costs are low, and local companies in the host country can produce efficiently, without jeopardizing its interests, the company can enter the foreign market through contract Manufacturing, Franchising or Licensing e.g.Toyota enters foreign markets through direct investment and joint-ventures as the local companies in foreign countries cannot produce as efficiently as Toyota
Other factorsNeed for controlResource availabilityGlobal strategy
Exporting
InternationalLicensing
InternationalFranchising
Specialized Modes
Foreign Direct Investment
Decision Factors:Ownership advantagesLocation advantagesInternalization advantagesOther factors
Need for controlResource availabilityGlobal strategy
Choosing a Mode of Entry
Exporting
EXPORT INVOLVEMENT
DIRECT EXPORTERS INDIRECT EXPORTERS
Own name and beneficiary Not on their own name, but supply direct to exporters
Exports
12-8
Forms of Exporting
Indirect exporting
Intracorporatetransfers
Direct exporting
Indirect Exporting
… Exporting the products either in their original form or in the modified form to a foreign country through another domestic company
E.g.--- Various publishers in India including Himalaya Publishing House sell their products, i.e., books to various exporter in India, who in turn export these books to various foreign countries
Direct Exporting
… Selling the products in a foreign country directly through its distribution arrangements or through a host country’s company
E.g.--- Baskin Robins initially exported its ice-cream to Russia in 1990 and later opened 74 outlets with Russian partners. Finally it established its ice-cream factory in Russia
Intracorporate Transfers
… Selling of products by a company to its affiliated company in the host country (another country)E.g.--- Selling products by Hindustan Lever in India to Unilever in USA--- This transaction is treated as exports in India and imports in USA
CLASSIFICATIONS OF EXPORTERS
SIZE PRODUCT LINE
LEGAL STATUS
DESTINATION FREQUENCY
SMALL LARGE
PROPRIETY
PARTNERSHIP
PVT. LTD
PUB. LTD OCCASIONAL BRISK
SINGLE PRODUCT
MULTIPLE PRODUCTS
SINGLE MULTIPLE
Considerations for Exporting
Governmental policies
Marketing concerns
Logistical considerations
Distribution issues
--- export policies--- import policies--- export financing--- foreign exchange
--- image--- distribution network--- responsiveness to the customer--- customer awareness--- customer preferences
--- physical distribution costs--- warehousing costs--- packaging costs--- transporting costs--- inventory carrying costs
--- own distribution network--- network of host country’s companies
An export management company (EMC) is a firm that acts as its client's export department by managing the legal, financial, and logistical details of exporting, and providing advice about consumer needs and available distribution channels in the foreign markets the exporter wants to penetrate.
Export Management Company
Co-operative Society
The domestic companies desire to export the goods from a cooperative society, which undertakes exporting operation of its members
International trading company
This company is engaged in directly exporting and importing. It buys goods from domestic companies and exports
Manufacturers’ Agents
They work on commission basis. They solicit domestic orders for foreign companies
Types of Export Intermediaries
Manufacturers’ export agents
Work on a commission basis. They sell domestic manufacturers’ products in foreign markets and act as their foreign sales department
Export and Import Brokers
These brokers bridge the gap between exporters and importers and bring these parties together
Freight Forwarders
Freight Forwarders help the domestic manufacturer in exporting their goods by performing various functions like physical transportation of goods , arranging customs documents and arranging transportation services
Types of Export Intermediaries
Advantages• Relatively low financial exposure• Permit gradual market entry• Acquire knowledge about local market• Avoid restrictions on foreign investment
Disadvantages• Vulnerability to tariffs and NTBs• Logistical complexities• Potential conflicts with distributors
Advantages/Disadvantages of Exporting
International Licensing
Foreign companies who have entered the Indian
market by licensing
--- The IFB washing machine was manufactured in India under license from Bosch of Germany
--- The US multinational General Electric (GE) has licensed it patented technology to a small scale unit in India, established for the manufacture of high density discharge (HID) fittings
--- Nike International Ltd. , the worlds largest sports shoe and apparel company entered the Indian market in mid-1990s by licensing. Sierra Industrial Enterprises Ltd. The licensee was to invest in setting up the complete quality control, marketing and distribution operations and will pay Nike 5 per cent royalty on ex-factory price of footwear and apparel for the use of brand name
--- Arvind brands (Arvind Mills)owns the marketing rights for the leading US brands like Arrow, Lee and Wrangler
12-19
Licensing
Licensing is when a firm, called the licensor, leases the right to use its intellectual property—technology, work methods, patents, copyrights, brand names, or trademarks—to another firm, called the licensee, in return for a fee.
Xerox, inventor of the photocopier , licensed its xerographic know-how to Fuji-Xerox. In return, Fuji-Xerox paid Xerox, a royalty fee equal to 5% of net sales revenue that Fuji-Xerox earned from the sale photocopiers based on Xerox’s patented know-how
Trademark licensing
--- names or logo of designers--- literary characters--- sports teams --- movies & stars
Appear on clothing, games, food & beverages gifts & novelties, toys & home furnishings
Licensor
License Fee
Licensee
Manufacturer and Markets
One or more countries as per agreement
Country A
Country B
Licensing : Concept and practice
LICENSOR
Licensing Process
PROVIDES THE RIGHT TO USE INTELLECTUAL PROPERTY AND
BRAND NAME
USES THE INTELLECTUAL PROPERTY TO PRODUCE PRODUCTS FOR SALE
IN HIS COUNTRY AND BRAND NAME
PAYS ROYALTIES TO THE LICENSOR FOR USING THE INTELLECTUAL PROPERTY AND BRAND NAME
RECEIVES ROYALTY MONEY
LICENSEE
12-22
Basic Issues in International Licensing
• Specifying the boundaries of the agreement• Determining compensation• Establishing rights, privileges, and constraints• Specifying the duration of the contract
Boundaries of the Agreement
Should be clearly defined. They determine which rights and privileges are being conveyed in the agreement
E.g.-- Pepsi-Cola granted license Heineken of Netherlands with exclusive right of producing and selling Pepsi-Cola in Netherlands
-- Pepsi-Cola supplies concentrated Cola syrup and Heineken adds carbonated water to produce beverage
-- Pepsi-cola can grant license to other companies in Netherlands to produce other products of Pepsi, like Potato chips
Basic Issues in International Licensing
Determination of Royalty
The most important factor in deciding the license is the payment of royalty by the licensee to the licensor.
Basic Issues in International Licensing
Determining Rights, Privileges and Constraints
Another important factor, in granting license is determining clearly and specifically the Rights, privileges and constraints to reduce hurdles in the implementation of the agreement.
E.g.-- Indian licensee of Aiwa TV uses interior inputs in order to reduce price to boost sales and profits would be damaging the image of the Japanese Licensor
Dispute settlement mechanism
The licensor and licensee should clearly mention the mechanism to settle disputes.
E.g.-- Settlement of disputes in courts is costly time consuming and hinders business interests
Agreement Duration
The two parties of the agreement specify the duration of the agreement. .
E.g.-- Tokyo Disneyland demanded a 100 year licensing agreement with The Walt Disney Company
Basic Issues in International Licensing
Advantages• Low financial risks• Low-cost way to assess market potential • Avoid tariffs, NTBs, restrictions on foreign investment• Licensee provides knowledge of local markets• Reduces risk of exposure to government intervention
Disadvantages• Limited market opportunities/profits• Dependence on licensee• Potential conflicts with licensee• Possibility of creating future competitor
Advantages/ Disadvantages of Licensing
FRANCHISING
FRANCHISOR
SELECT
FRANCHISEE
FRANCHISEE FEE
Well known creator with brand command can become strong franchisor
Encashes on past and present effort
Invests in all the resources
Franchising
A franchising agreement allows an independent entrepreneur or organization, called the franchisee, to operate a business under the name of another, called the franchisor, in return for a fee.
The franchisor provides the following service to the franchisee
--- trade mark
--- operating systems
--- continuous support systems like,
… advertising
… employee training
… reservation services
… quality assurance programmes
Franchising
Franchising is a form of “ in which a parent company (the franchisor) grants another independent identity (the franchisee) the right to do business in a prescribed manner . This can take the form of selling the franchisor’s products, using its name, production and marketing techniques, or general business approach.
One of the common forms of franchising involves the franchisor supplying an important ingredient ( part, material, etc.) for the finished product.
E.g.
--- Coca Cola supplying the syrup to the bottlers.
Major forms of franchising
Manufacturer -retailer systems
Manufacturer -wholesaler systems
Service- retailer systems
Automobile dealership
Soft drink companies
Lodging services and fast food outlets
Reverse franchise agreements
ITC hotels franchised two of its hotels in Bangkok and Hongkong, to ITT Sheraton Holding, in exchange the franchise for Sheraton in India
Basic Issues in International Franchising
• The franchisor has been successful in his home country --- McDonald was successful in USA due to popular menu and fast and efficient services
• Are these success factors transferable to foreign locations?
--- The factors for success of McDonald are later transferred to other countries
• Has franchising been a successful domestic strategy?
--- The franchisor may have been successful in home country before going for international franchising
. Foreign investors should come forward for introducing the product on franchising basis
Yum! Brands Franchise Opportunities
Franchising
Advantages
• Low financial risks• Low-cost way to assess market potential• Avoid tariffs, NTBs, restrictions on foreign
investment• Maintain more control than with licensing• Franchisee provides knowledge of local market
Disadvantages
• Limited market opportunities/profits• Dependence on franchisee• Potential conflicts with franchisee• Possibility of creating future competitor
Specialized Entry Modes
Contract manufacturing
Turnkeyproject
Managementcontract
CONTRACT MANUFACTURING
Under contract manufacturing, a company doing international marketing contracts with firms in foreign companies to manufacture or assemble the products while retaining the responsibility of marketing the product.
There are a number of multinationals and affiliates of multinationals which employ this strategy in India in respect of some of the products they market, like, Park Davis, Hindustan Unilever, Ponds, etc.
Godrej Soaps
..DETTOL for Reckitt and Coleman
..CLEARTON for Nicholas Laboratories
..JHONSON’S BABY SOAP for Johnson & Johnson
..PONDS DREANFLOWER, COLD CREAN, AND SANDLEWOOD FOR Ponds
CONTRACT MANUFACTURING
Some companies outsource their part or entire production and concentrate on marketing
--- Nike has contracted with a number of factories in South East Asia to produce its athletic footwear and it concentrates on marketing.
--- Bata Shoe also contracted with a number of cobblers to produce its footwear and it concentrated on marketing
--- Mega Toys --- a Los Angeles Company contracts with Chinese plants to produce toys and mega Toys concentrates on marketing
CONTRACT MANUFACTURING
Supply
A well-known marketing company
Manufacturers – China/India/ASEAN
Selects
Advantages of Contract Manufacturing
--- The company does not have to commit resources for set up production
facilities
--- It frees the company from risk of investing in foreign countries
--- If idle production capacity is readily available in the foreign country, it enables the marketer to get started immediately
--- The cost of production by contract manufacturing is lower than if it were manufacture by the international firm on account of low wages, lower overheads, tax concessions
--- It is a less risky way to start business ; if the business does not pick up sufficiently, dropping it is easy; but if the company had established its own production facilities, , the exit would be difficult
Disadvantages of Contract Manufacturing
--- In some cases, there will be loss of potential profits from manufacturing
--- Reduced control over manufacturing process (may affect quality, delivery schedules, etc.)
--- Contract manufacturing also has the risk of developing potential competitors.
--- It would not be suitable in cases of high tech products and cases which involve technical secrets
--- Reduce learning potential
--- Potential public relations problems
Conclusion
Contract manufacturing is an opportunity for developing country firms to increase their business by manufacturing products for sale in foreign markets , by the contracting firm.
India has enormous potential to benefit from the global outsourcing trend. More and more foreign firms are entering into contract manufacturing agreements with Indian Firms, particularly for marketing products abroad.
MANAGEMENT CONTRACTS
--- A Management Contract is an agreement between two companies, whereby one company provides … managerial assistance … technical expertise … specialized services
--- To the second company of the agreement for a certain period in return for monetary compensation in the form of : … A flat fees … Percentage over sales … Performance bonus based on based on profitability, sales growth, production or quality measures
--- Management contracts are mostly due to government intervention
e.g.… Saudi Arabian Govt. requesting former owners to manage Armco… Delta (USA) , Air France and KLM (Dutch) often provide technical and managerial assistance to small airlines companies owned by Governments
12-42
Advantages/Disadvantages Management Contracts
Advantages• Focus firm’s resources on its area of contracts• Minimal financial exposure
Disadvantages• Potential returns limited by contract expertise• May unintentionally transfer proprietary knowledge and techniques to
contractee
TURNKEY PROJECTS
--- A turnkey project is a contract under which a firm agrees to fully design, construct and equip a manufacturing/business/service facility and turn the project over to the purchaser when it is ready for operation, … for a remuneration --- The forms of remuneration includes : … a fixed price … payment on cost plus basis
e.g.Indonesian turnkey project for construction of a sugar factory to a Japanese firm
Advantages/Disadvantages of Turnkey Projects
Advantages• Focus firm’s resources on its area of expertise• Avoid all long-term operational risks
Disadvantages• Financial risks
– Cost overruns• Construction risks
– Delays– Problems with suppliers
FOREIGN DIRECT INVESTMENT
Investor
Any country
Money
ROI
Project/Technology/Trade
Short term/ Long term
Foreign Direct Investment
• Building new facilities (the greenfield strategy)• Buying existing assets in a foreign country (acquisition strategy)• Participating in a joint venture
FDI without alliance
Companies enter the international markets through FDI , invest money, establish manufacturing and marketing facilities rough ownership and control
Greenfield Strategy
Starting the operations of the company from scratch in foreign country
--- market survey--- selection the location---buys or lease land--- creates new facilities--- erects the machinery--- remits or transfers human resources--- starts the operations and marketing activities e.g. Fuji in South Carolina, Mercedes-Benz in Alabama, Nissan in England
Greenfield VentureGreenfield VentureNew Wholly-Owned Subsidiary –
Most costly & complex of entry alternatives. Achieves greatest degree of control. Potentially most profitable, if successful. Maintain control over technology, marketing and
distribution.May need to acquire expertise & knowledge that is relevant to host country.
Could require hiring host country nationals or consultants at high cost.
STRATEGIC ALLIANCES
Ranbaxy &
Glaxo SmithKline
Have a strategic alliance for R & D
PHARMACEUTICALS INDUSTRY
Syneron Medical (Israel)
& Suchita Numed
For marketing the formers aesthetic products in India
Strategic Alliances
SEMICONDUCTOR INDUSTRY
Samsung Electronics Company &
IBM Korea
Have a strategic alliance for R & D
Apple Computer &
IBM
Have formed an alliance for development of software and hardware technology for a new generation of desktop computers
COMPUTER INDUSTRY
IBM &
STET (Italy)&
Nippon Telegraph & Telephone
(Japan)
To develop computer communication services
Strategic Alliances
IBM &
Ericson (Sweden)
To explore the linking of data-management technology with digital switching technology
Isuzu Motors Ltd &
Fuji Heavy Industries Ltd.
Have set up a joint plant in the US which can build cars for Fuji and trucks for Isuzu in the same line
AUTOMOBILE INDUSTRY
Strategic Alliances
-- Some Japanese automakers have joined forces with foreign big names like General Motors and Chrysler-- The European car manufacturers are also teaming up to enhance their competitiveness , often in one-off projects to produce, say, an engine of transmission.
Tatas &
TFR
Tatas & TFR , a leading French leather finisher and European marketer for Tatas to integrate with the exact colour, texture, and other requirements of large European buyers, while TFR will provide the existing marketing network, links to key buyers, its name and reputation and knowledge of the latest fashion trends.
Strategic Alliances
Tata Tea &
Tetley
To take advantage of the expertise of Tetley to market tea abroad
LEATHER GOODS INDUSTRY
BEVERAGE INDUSTRY
International Strategic Alliances
• Strategic Alliance– refers to any type of cooperative agreements between
two or more firms who are potential or actual competitors.
– Can take multiple forms including: JVs, R&D collaborations, piggy backing, sourcing relationships, etc.
• In general, any relationship that involves mutual dependence and shared decision making between two or more firms can be characterized as a strategic alliance.
• It differs from traditional JVs in that:– strategic alliances are increasingly between firms in
the industrialized nations– the focus is on creation of new products and
technologies rather than the distribution of existing ones
International Strategic Alliances
Why Strategic Alliances?
• Rising R&D Costs
• Shortening Product Life Cycles
• Growing Barriers to Market Entry
• Increasing Need for Global Scale Economies
• Expanding Importance of Global Standards
• Forms the basis of Building and Sustaining Competitive Advantage in Industries undergoing major Transitions
Managing International Alliances
• The Logic of Collaboration
– Identifying when, where, and why to collaborate– An alliance is usually one of several options for
pursuing a strategic goal; it is never an end in itself– Strategic Goals: Product Exchange; Corporate Learning
& Market Positioning– Cost-Benefit Tradeoffs– Alternatives to Collaboration: Self-Sufficiency; Buying
the Inputs or Skills; Full Acquisition.
Key Issues in Managing International Alliances
• Selecting Partners– Knowing how to maximize benefits and minimize risks
of partnerships– Complementary needs and assets
• Structuring Alliances– Choosing organizational forms that provide incentives
for success– Contracts vs. Equity Relationships
• Building Alliance Networks– Creating a system of reinforcing alliances, and
avoiding chaos– Network Design: Is the whole greater than the sum
of the parts?
Who controls the network? & Where is competitive advantage created?
• Alliance Dynamics– Managing with an eye to the forces for change in a
relationship
Key Issues in Managing International Alliances
• Limits to Alliances– Recognizing the constraints on collaborative
strategies– Organizational Constraints; Strategic Gridlock;
Dependence
• The Role of Governments– Antitrust laws– Host government intervention
Key Issues in Managing International Alliances
CONCLUSION
It has been pointed out that as the business environment both locally and internationally, becomes increasingly competitive, companies will have more reasons and will find more ways to form strategic alliances . As that happens, strategic alliances will not only be a logical alternative but a key to survival in business. Management experts predict that in the not too distant future, alliances will be a necessity not only of individual companies but also for orderly development of entire industries and that companies in mature slow growth industries will increasingly look for strategic alliances for survival
Advantages• High profit potential• Maintain control over operations• Acquire knowledge of local market• Avoid tariffs and NTBs
Disadvantages• High financial and managerial investments• Higher exposure to political risk• Vulnerability to restrictions on foreign investment• Greater managerial complexity
Foreign Direct Investment
JOINT VENTURE
Partner one from Country A Partner two from Country B
New Venture
Joint commitment
MERGERS & ACQUISITIONS
9-64 © 2006 by Nelson, a division of Thomson Canada Limited.
Choice of International Entry Mode
Can be very costly.
Legal and regulatory requirements may present barriers to foreign ownership.
Usually require complex and costly negotiations.
Potentially disparate corporate culture.
Enable firms to make most rapid international expansion.
Acquisitions
TAKE-OVERS
COUNTER TRADE
Counter Trade
Pure Barter Buy Back Counter Purchase
Product-to-product exchange
Buy the end product from the
host partner
Exchange of goods in various countries
until foreign exchange is found
Why Use Countertrade?
• Lack of money• Lack of value of money• Nonconvertibility of currency• Offset financial risk
• Other factors that make it more efficient to exchange goods directly than to use money as an intermediary
• As a competitive strategy• Excellent mechanism to get a foothold into foreign
markets
Major Drawbacks
“Instead of there being a double coincidence of wants, there is likely to be a want of coincidence; so that, unless a hungry tailor happens to find an undraped farmer, who has both food and a desire for a pair of pants, neither can make a trade.” Paul Samuelson
• Transactions purely bilateral in nature and thus are not competitive
• Trade is formulated on the basis of the willingness to countertrade and not on economic considerations
• Creates economic inefficiencies
Types of Countertrade
• Counter purchase or parallel barter (46%)– Involves both cash & kind transactions– Parallel reciprocity (a special case)
• Buyback (11%)– Technology in return for finished goods– Levi Strauss in Hungary
• Offset (27.5%)– Cost offsets through investments– Can be in multiple forms– Common in high cost deals (defense)
• Swaps (11%)– Debt for debt swaps– Debt for equity swaps– Debt for product swaps– Debt for education swaps
• Clearing Arrangements– Extend over long period– Involve basket of goods– Held as deposits representing purchasing power
(credit - debit account)
• Switch Trading (4.5%)– A type of clearing arrangement where credit can
be sold or transferred to a third party
Advantages and Disadvantages of Entry Modes
Entry Mode Advantage Disadvantage
Exporting Ability to realize location andexperience curve economies
High transport costsTrade barriersProblems with local marketing agents
Turnkeycontracts
Ability to earn returns fromprocess technology skills incountries where FDI isrestricted
Creating efficient competitorsLack of long-term market presence
Licensing Low development costs andrisks
Lack of control over technologyInability to realize location and
experience curve economiesInability to engage in global strategic
coordination
Advantages and Disadvantages of Entry Modes
Entry Mode Advantage Disadvantage
Franchising Low development costs andrisks
Lack of control over qualityInability to engage in global strategic
coordination
Jointventures
Access to local partner’sknowledge
Sharing development costs andrisks
Politically acceptable
Lack of control over technologyInability to engage in global strategic
coordinationInability to realize location and
experience economies
Whollyownedsubsidiaries
Protection of technologyAbility to engage in global
strategic coordinationAbility to realize location and
experience economies
High costs and risks
12-73
Chapter Objectives 1
• Discuss how firms analyze foreign markets• Outline the process by which firms choose their
mode of entry into a foreign market• Describe forms of exporting and the types of
intermediaries available to assist firms in exporting their goods
12-74
Chapter Objectives 2
• Identify the basic issues in international licensing and discuss the advantages and disadvantages of licensing
• Identify the basic issues in international franchising and discuss the advantages and disadvantages of franchising
12-75
Chapter Objectives 3
• Analyze contract manufacturing, management contracts, and turnkey projects as specialized entry modes for international business
• Characterize the greenfield and acquisition forms of FDI
12-76
Foreign Market Analysis
• Assess alternative markets• Evaluate the respective costs, benefits, and
risks of entering each• Select those that hold the most potential for
entry or expansion
12-77
Table 12.1 Factors in Assessing New Market Opportunities
• Product-market dimensions• Major product-market
differences• Structural characteristics of
national market• Competitor analysis
• Potential target markets• Relevant trends• Explanation of change• Success factors• Strategic options
Choice of Entry Modes• Exporting
– Direct vs Indirect
• Contractual Agreements– Licensing, Franchising, etc.
• Equity Based– Joint Ventures– Wholly Owned Subsidiary
• Strategic Alliance
Choosing the Mode of Entry
• Decision Criteria for Mode of Entry– Market Size and Growth– Risk– Government Regulations– Competitive Environment– Local Infrastructure
Choosing the Mode of Entry (cont)
• Company Objectives• Need for Control• Internal Resources, Assets, and Capabilities• Flexibility• Mode of Entry Choice : A Transaction Cost
Explanation
Market Entry Decisions
• Foreign Market Selection
• Timing & Order of Entry
• Market Expansion Strategies
• Mode of Entry Decisions
9-82
Identify International
Opportunities
ExploreResources & Capabilities
Use Core Competence
StrategicCompetitiveness
Outcomes
International Strategies
Modes of Entry
IncreasedMarket Size
Return on Investment
Economies of Scale and Learning
Location Advantage
InternationalBus.-LevelStrategy
Multidomestic Strategy
GlobalStrategy
Transnational Strategy
Exporting
Establishment of New Sub.
Licensing
StrategicAlliances
Acquisition
Higher Performance
Returns
Innovation
International Strategy Opportunities & Outcomes
Management Problems, Risk,
and First Steps
Management Problems, Risk,
and First Steps
CONTRACT MANUFACTURING