Method of Doing Business Abroad (Global Sourcing (Type of Global Sourcing,…
Method of Doing Business Abroad
Contractual relationship between the buyer and the foreign supplier
Drivers of Global Sourcing
-Technological advances in
-Falling costs of international business.
-Entrepreneurship and rapid economic
-Transformation in emerging market countries.
Type of Global Sourcing
Business Process Outsourcing (BPO)
Benefits of Global Sourcing
-Ability to Achieve Strategic Goals
An arrangement in which the owner of intellectual property grants another firm the right to use that property for a specified period of time in exchange for royalties or other compensation
Type of Licensing
Trade mark licensing
Advantages for licensor
Low effort, once established -
Low-cost initial entry strategy-
Disadvantages for licensor
Performance depends on the foreign licensee-
Licensor has limited control over its asset(s) abroad-
Runs the risk of creating a future competitor-
Arrangement in which the firm allows another the right to use an entire business system in exchange for fees, royalties or other compensation.
Advantages for franchiser
Can internationalize quickly to many markets
Can leverage franchisees’ local knowledge.
Disadvantages for franchiser
Maintaining control over franchisees may be difficult
Franchiser has limited control over its assets abroad
Risks creating a future competitor
Type of franchise
business format franchise
Foreign Direct Investment
Strategy in which the firm establishes a physical presence abroad by acquiring productive assets such as capital, technology, labor, land, plant, and equipment
Factors Relevant to Selecting Locations for FDI
Political and Government
Legal and regulatory
Type of FDI
Advantages of Exporting
-Increase sales volume; improve market share.
-Generate better profit margins.
-Increase economies of scale.
-Diversify customer base.
-Stabilize sales fluctuations.
-Minimize the cost of foreign market entry.
Disadvantages of Exporting
exporting offers fewer opportunities to learn about customers
Firm must acquire and dedicate new capabilities in international sales contracts and transactions, international financing methods, and logistics and documentation
Exposes the firm to tariffs and other trade barriers as well as fluctuating exchange rates
Export Intermediation Options
Company-owned foreign subsidiary