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Selecting international modes of entry and expansion (Japan (Licensing: …
Selecting international modes of entry and expansion
Four major alternatives
Licensing
:patents, trademarks, company name, technology,and/or business methods
Joint ventures
Exporting
Indirect:Using intermediaries
Direct:Do not use home country middlemen
Wholly-owned subsidiaries:
offer firms the highest levels of control and the lowest technology risk
Three characteristics of entry mode decision
Amount of control
Level of technology risk[The potential that a firm's applied knowledge will be unintentionally transferred to a local firm]
Quantity of resource commitment required
Japan
Licensing:
Had no viable modal alternative[lack the capital and resources]
Low political risk
Joint ventures:
Members of the same business group often exchange information and personnel [keiretsu]
Important factor:host government policies and preferences
Exporting
:
Company strategy plays a major role[prevent competitors from gaining first-mover advantage in new markets]
Important factor:whether require locally-produced content in goods sold in the nation,or make other restrictions on exporting
Wholly-owned subsidiaries
Important factor:Target market factors
Investment risk: When the risks of investing in a particular foreign market are low [stable economies;risk averse]
Host government have open trade and investment polices
The number of qualified partners available
Their commitment to respond quickly to competitors in foreign markets
Use direct investment as a means to maintain a market psoition initially developed through trade
Target market factors
Political risk;
Investment risk;
Host government local content requirements;
Qualifications of local partners
Company factors
Need to respond to competitors
US
Licensing:
Host government can easily find alternative companies to do business with
Joint ventures
Important factor:international experience and strategy- commit the high levels of resources required to initiate and manage a JV or a wholly-owned subsidiary
Exporting:
Their target market is very competitive and that their competitors' products are viewed as similar and easily substitutable by customers➡️sensitive to price
Wholly-owned subsidiaries
Host government have open trade and investment polices
They possessed the capital and local market knowledge to be able to "go it alone"
Target market factors
Host government alternatives;host government expectations for local managers
Company factors
International experience
Need for local knowledge
Synergies among global operations
Competitive position
Need to protect technology