International Business Chapter 15

1.Size of market 2.Current wealth of consumers in the market 3.Future wealth of consumers

Advantage related to entering the market early

Preempt rivals and capture demand by establishing strong brandname;Create economies of scale before rivals;Create switching costs

Pioneering costs-a lot of time,effort,risks(need to educate customers,promote product);Higher liability of foreigners for earlt entrant

Long-term impact(hard to reverse);More confidence of customers;keep competitors from the market;sign of strategic inflexibility

Export;licensing;franchasing(longer than license);joint venture/strategic alliance;wholly owned subsidiaries(merge,acquire or Greenfield)

1.Avoid costs of establishing operations 2.Allow to achieve experience curve,location economies and keep Ownership advantage

Not for global or transnational str(there are lower costs in other country);high transport costs;tariff barriers;local agents dependence

Agreement where licensor grants intangible property rights to licensee,and licensor gets royalty fee from licensee

Costs,risks-on licensee;avoid entering unstable markets;good if intangible property has value in other business firm has no interest get in

Limited control over manufacture,production,strategies(NO Ownership adv);Inability to use profits from this country;technological leakage

Contractor handle project details for foreign client(entered a turnkey for plant ready tofunction).Way to export process technologies

Similar to licensing,but longer-term commitment,intangible properties+stricter rules for conducting business;franchiser assistance at first

Costs/risks of franchisee;quickly building global presence at low costs;low technological leakage(power in brand)

Unables firm to use profit from 1 country to support operation in another;lack of direct control over operations(quality issues)

establishing a firm that is jointly owned by 2 or more independent firms

Benefit from partner knowledges of host-country;shared costs/risks with partner;forpolitical restrictions sometimes it is only possibility

Techno leakage;lack of direct control;conflicts for control when differences raise

When firm owns 100% stocks.Set up new operation(Greenfield venture) or acquire established firm

No techno leakage risk;tight control over operations;required for location and experience curve economies-keep Ownership advantage

Costly;full costs and risks on you;additional problems for acquisition:higher costs,cultural differences

Technological or Management Know-How

avoid licensing and JVs or as an exception, reach agreement where intangible property isprotected

favor franchising.Common for service firms where intangibles(brands) are well protected

1-faster,less risky,preempt competitors;2-more opportunites to set everything the way you want

Agreement between potential or actual competitors

Shared costs/risks;facilitates new market entry;bring together complementary skills and assets;helps establish technological standards

Give competitors low-cost route to new technology and market

1.Build trust and informal communication networks 2.Take proactive steps to learn from alliance partner