Global Business - Chapter 15

• 1. exporting
• 2. licensing
• 3. joint ventures
• 4. franchising
• 5. turnkey projects
• 6. Wholly owned industries

usually the first way to enter a market and then may choose other routes later

• Avoids the substantial costs of established manufacturing operations in the host country
• may help a firm achieve experience curve and location economies: substantial scale economies can be realized from its global sales volume

• 1. may not be appropriate if lower-cost locations for manufacturing the product can be found abroad. 
• 2. High transport costs
• 3. trade barriers
• 4. problems with local marketing agents

• the contractor handles every detail of the project for a foreign client, including the training of operating personnel at completion of the contract, the foreign client is handed the "key" to a plant that is ready for full
• operation

• 1. ability to earn returns from an asset e.g. petroleum or steel
• 2. useful in countries that have limited FDI by host-government regulations

• 1. the firm that enters into turnkey projects will have no long-term interest in the foreign country
• 2. may inadvertently have created a competitor
• 3. if the firm's process technology is a source of competitive advantage, selling this technology is also selling competitive advantage to potential and/or actual clients

an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified period, and in turn, the licensor receives a royalty fee from the licensor

• 1.low development costs and risks: the licensee puts up most of the capital necessary
• 2. Can enable a firm to participate in a foreign market that it is prohibited to do by barriers to invest.
• 3. Used when a firm possesses some intangible property that they don't want to develop themselves.

• 1. Control: does not give the firm tight control over manufacturing, marketing, and strategy required for realizing experience curve and location economies. 
• 2. Inability to engage in global market coordination - coordinating strategic moves across countries by using profits earned in one country to support competitive attacks in another
• 3. loss of control of technological know-how

specialized form of licensing in which the franchiser not only sells intangible property (normally a trademark) to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business.

• 1. Franchisee usually assumes the costs and risks of opening in a foreign market
• 2. Can build a global presence quickly and at a relatively low cost and risk ie McDonald's.

• 1. Lack of control over quality - could use a aster franchisee to help monitor this
• 2. Inability to engage in global strategic coordination

entails a firm that is jointly owned by two or more otherwise independent firms.

• 1. Benefit from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems and business systems
• 2. Share costs and risks of opening in a foreign market
• 3. political considerations make joint ventures the only feasible entry mode in many countries

• 1. Lack of control over technology
• 2. Inability to engage in global strategic coordination
• 3. Conflicts and battles for control between investing firms if their goals and objectives change or if they take different views on what strategy should be used.

• The firm owns 100% of the stock
• Can be done in foreign markets two ways:
• 1. Set up a new operation in that country
• 2. acquire an established firm in that host nation and use that firm to promote its products.

• 1. Protection of technology
• 2. Ability to engage in global strategic coordination
• 3. ability to realize location and experience economies

1. high costs and risks

• refer to cooperative agreements between potential or actual competitors
• range from formal joint ventures to
• short-term contractual agreements

• facilitate entry into a foreign market
• allow firms to share the fixed costs and
• risks of developing new products or processes
• bring together complementary skills and
• assets that neither partner could easily develop on its own 
• help a firm establish technological
• standards for the industry that will benefit the firm