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Entering Foreign Markets - Coggle Diagram
Entering
Foreign Markets
Turkey product
attractive
because
earning economic returns from the know-how required to assemble and run a technologically complex process
e less risky than
conventional FDI
unattractive
because
no long-term interest
in the foreign country
e firm may create a competitor
process technology is a source of competitive advantage, then selling this technology through a turnkey project is also selling competitive advantage to potential and/or actual competitors
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
Licensing
attractive because
avoids development costs and risks associated with opening a foreign market
avoids barriers to investment
can capitalize on market opportunities without developing those applications itself
unattractive because
firm doesn’t have the tight control required for realizing experience curve and location economies
ability to coordinate strategic
moves across countries is limited
proprietary (or intangible) assets could be
lost
A licensor grants the rights to intangible property to the licensee for a specified time period, and in return, receives a royalty fee from the licensee Patents, inventions, formulas, processes, designs, copyrights, trademarks
Franchising
A specialized form of licensing in which the franchisor not only sells intangible property to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business.
unattractive because
inhibits the firm's ability to take profits out of one country to support competitive attacks in another
the geographic distance of the firm from franchisees can make it difficult to detect poor quality
attractive because
avoids the costs and risks of opening up a foreign market
firms can quickly build a global presence
Exporting
attractive because
avoids the costs of establishing local
manufacturing operations
helps the firm achieve experience
curve and location economies
unattractive because
lower-cost manufacturing
locations
• high transport costs and tariffs can make
it uneconomical
foreign country may not act in
exporter’s best interest
Joint Ventures
A firm that is jointly owned by two or more otherwise independent firms.
unattractive because
firm risks giving control of its technology to its partner
firm may not have the tight control to realize
experience curve or location economies
shared ownership can lead to conflicts and battles for
control if goals and objectives differ or change over time
attractive
because
benefit from a local partner's knowledge of local conditions, culture, language, political systems, and business systems
costs and risks of opening a foreign market are shared
they satisfy political considerations for market entry
Wholly Owned Subsidiary
attractive because
reduce the risk of losing control over core
competencies
give a firm the tight control over operations in different countries that is necessary for engaging in global strategic coordination
required in order to realize location and experience curve economies
unattractive because
firm bears the full cost and risk of setting up overseas
operations