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1、Chapter 11Entry and Expansion1Learning ObjectivesTo learn how firms gradually progress through an internationalization process.To understand the strategic effects of internationalization.To study the various modes of entering international markets.To understand the role and functions of internationa
2、l intermediaries.To learn about the opportunities and challenges of cooperative market development. 2International ManagementSuccessful international managers tend to:Be activeBe aggressiveDisplay a high degree of international orientationManagerial commitment is critical because foreign market pene
3、tration requires a vast amount of market development activity, sensitivity toward foreign environments, research, and innovation. 3The Steps to Developing International CommitmentBecome aware of international business opportunities.Determine the degree of the firms internationalization.Decide the ti
4、ming of when to start the internationalization process and how quickly it should progress.4Motivations for Going InternationalProactive MotivationsProfit advantageUnique productsTechnological advantageExclusive informationTax benefitEconomies of scaleReactive MotivationsCompetitive pressuresOverprod
5、uctionDeclining domestic salesExcess capacitySaturated domestic marketsProximity to customers and ports5Psychological DistanceSometimes cultural variables, legal factors, and other societal norms make a foreign market that is geographically close seem psychologically distant.The two major issues of
6、psychological distance are:Some of the distance seen by firms is based on perception rather than reality.Closer psychological proximity makes it easier for firms to enter markets.6Profit Risk During Early InternationalizationIn the short term, firms may experience increased risk and decreasing profi
7、ts when going international.ProfitRiskMarketGapInternational ExperienceBeforeGoingInternational7The Keys to Successful International PerformanceEfficiencyCompetitive StrengthEffectiveness8International Entry StrategiesLicensingFranchisingInterfirm CooperationForeign Direct InvestmentImportingExporti
8、ng9Exporting and Importing Firms can export and import using two methods:Indirect involvement means that the firm participates in international business through an intermediary and does not deal with foreign customers or markets.Direct involvement means that the firm works with foreign customers or
9、markets with the opportunity to develop a relationship.Firms decide on the desired method by implementing transaction cost theory.10International IntermediariesImporters and exporters often use international intermediaries who provide assistance in: DocumentationFinancingTransportationIdentification
10、 of foreign suppliers and trading companies Providing business contacts11Export Management CompaniesFirms that specialize in performing international business services for other companies are known as export management companies (EMCs)The two primary roles of EMCs are:AgentsDistributors12Trading Com
11、paniesTrading companies help firms by importing, exporting, countertrading, investing, and manufacturing.The sogashosha of Japan are the most powerful trading companies in the world for four reasons:They efficiently gather, evaluate, and translate market information into business opportunities.Econo
12、mies of scale give them preferential treatment.They operate around the world, not just Japan.They have vast quantities of capital.In the U.S., export trading company legislation is designed to improve the export performance of small and medium-sized firms.13FacilitatorsFacilitators are entities outs
13、ide the firm that assist in the process of going international by supplying knowledge and information.Private sector facilitators include: BanksAccounting firmsConsulting firmsPublic sector facilitators include:Departments of commerceExport-Import BanksEducational Institutions 14LicensingUnder a lic
14、ensing agreement, one firm permits another to use its intellectual property for compensation designated as royalty. The property licensed may include: PatentsTrademarksCopyrightsTechnologyTechnical know-howSpecific business skills15Benefits and Costs of LicensingBenefitsIt requires neither capital i
15、nvestment nor detailed involvement with foreign customers.It capitalizes on research and development already conducted.It helps avoid host country regulations applicable to equity ventures.CostsIt is a very limited form of foreign market participation.It does not guarantee a basis for future expansi
16、on.The licensor may create its own competitor.16FranchisingFranchising is the granting of the right by a parent company to another independent entity to do business in a prescribed manner.The major forms of franchising are:Manufacturer-retailer systems such as car dealerships,Manufacturer-wholesaler
17、 systems such as soft drink, companiesService-firm retailer systems such as fast-food outlets.To be successful, the firm must offer unique products or propositions, and a high degree of standardization.17Key Reasons for FranchisingMarket PotentialFinancial GainSaturated DomesticMarkets18Interfirm Co
18、operationA strategic alliance is an arrangement between two or more companies with a common business objective.To better compete, many companies form strategic alliances with suppliers, customers, competitors, and companies in other industries to achieve goals. Reasons for interfirm cooperation incl
19、ude:Market developmentTo share risk or resourcesTo block and co-opt competitors 19Types of Interfirm CompetitionNumber of Partners2More than 2EquityNoneNoneNewSomeInformal Cooperation(no binding agreement)Contractual AgreementJoint VentureConsortiaEquityParticipation20Contractual AgreementsStrategic
20、 alliance partners may join forces for R&D, marketing, production, licensing, cross-licensing, cross-market activities, or outsourcing.Contract manufacturing allows the corporation to separate the physical production of goods from the R&D and marketing stages.Management contracts involve selling one
21、s expertise in running a company while avoiding the risk or benefit of ownership.A turnkey operation is a contractual agreement that permits a client to acquire a complete system following its completion. 21Equity ParticipationSome companies have acquired minority ownerships in companies that have s
22、trategic importance for them. Reasons for engaging in equity participation include:It ensures supplier abilityIt builds working relationshipsIt creates market entry and support of global operations22Joint VenturesA joint venture involves the participation of two or more companies in an enterprise in
23、 which each party contributes assets, has some equity, and shares risk.The 3 reasons for establishing a joint venture are:Government policy or legislation.One partners needs for another partners skills.One partners needs for another partners attributes or assets.The key to a joint venture is the sha
24、ring of a common business objective.23ConsortiaTo combat the high costs and risks of research and development, research consortia have emerged in the United States, Japan, and Europe. The Joint Research and Development Act of 1984 allows domestic and foreign firms to participate in joint basic resea
25、rch efforts without the fear of antitrust action. Since this act passed, over 100 consortia have been registered in the United States.24Managerial ConsiderationsIssues to address before the formation of a venture include:1. clear definition of the venture 7. government assistance, and its duration,
26、8. transfer of technology,2. ownership, control, and 9. marketing arrangements, management, 10. environmental protection, 3. financial structure and policies, 11. record keeping and4. taxation and fiscal obligation, inspection, and5. employment and training, 12. settlement of disputes.6. production,
27、 25Full OwnershipFor some firms, foreign direct investment requires full ownership. Reasons include:An ethnocentric approachFinancial concernsIn order to make a rational decision about the extent of ownership, management must evaluate the extent to which total control is important to the success of
28、its international marketing activities.Increasingly, the international environment is hostile to full ownership by multinational firms.26International Market Entry and Development ModelDomesticFocusMultinationalFocus Alternative StrategiesTrading Export/ImportLicensing/ FranchisingLocal presence alliances full ownership Level ofManagementCommitmentAwareInterestedTrialEvaluationAdaptationMotivationsProactiveReactive Inter- mediariesEMCTrading Co.FacilitatorsConcernsInformationMechanicsCommunicationSales EffortServiceRegulations27
