strategies for analyzing and entering foreign markets
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Strategies for Analyzing and Entering Foreign MarketsTRANSCRIPT
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Chapter 12 - 1
Chapter 12
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Strategies for Analyzing and
Entering Foreign Markets
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Chapter 12 - 2
Learning Objectives
• Learn how firms analyze foreign markets• Explore how firms choose a mode for
entering a foreign market• Investigate exporting and types of
intermediaries that help export goods• Identify international licensing issues and
pros and cons of licensing
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Chapter 12 - 3
Learning Objectives
• Identify basic international franchising issues and pros and cons of franchising
• Analyze contract manufacturing, turnkey projects, and management contracts as entry modes for international business
• Describe the greenfield and acquisition forms of FDI
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
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Chapter 12 - 4
Foreign Market Analysis
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Chapter 12 - 5
Assessing Alternative Foreign Markets
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Market Potential
Levels of Competition
Legal and Political Environment
Sociocultural Influences
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Chapter 12 - 6
Evaluating Costs, Benefits, and Risks
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Chapter 12 - 7
Potential Costs
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Start-Up Costs
Operating Costs
Forfeit Profits
Delay Profits
Direct
Opportunity
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Chapter 12 - 8
Potential Benefits
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Sales and Profits
Foreclosing of Markets
New Technology
Lower Costs
Competitive Advantage
Synergy
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Chapter 12 - 9
Potential Risks
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Exchange-Rate Fluctuations
Operating Complexities
Political InstabilityDirect Financial Losses
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Chapter 12 - 10
Summary of Discussion
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Chapter 12 - 11
Choosing an Entry Mode
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Chapter 12 - 12
Modes of Entry
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Decision Factors•Ownership•Location•Internalization•Other Factors
1. Need for Control2. Available Resources3. Global Strategy Foreign Direct Investment
Specialized Modes
International Franchising
International Licensing
Exporting
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Chapter 12 - 13
Decision Factors
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Ownership Advantages
Location Advantages
Internalization Advantages
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Chapter 12 - 14
Other Factors
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Need for Control
Availability of Resources
Overall Global Strategy
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Chapter 12 - 15
Summary of Discussion
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Chapter 12 - 16
Exporting to Foreign Markets
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Chapter 12 - 17Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Control Financial Exposure
Enter Markets Gradually
MotivationsProactive(Pull)
Reactive(Push)
Advantages of Exporting
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Chapter 12 - 18
Forms of Exporting
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• Indirect Exporting
• Direct Exporting
• Intracorporate Transfers
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Chapter 12 - 19
Additional Considerations
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Government Policies
Marketing Concerns
Distribution Issues
Logistical Considerations
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Chapter 12 - 20
Export Intermediaries
Export Management Company
Webb-Pomerene Association
International Trading Company
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Chapter 12 - 21
Export Management Company
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Perform Export Department Functions
Act as Commission Agents
Take Title to Goods
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Chapter 12 - 22
• Includes firms from same industry
• Coordinates export activities
• Performs promotional activities
• Oversees freight consolidation
• Engages in contract negotiations
• Exports goods for members
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Webb-Pomerene Association
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Chapter 12 - 23
International Trading Company
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Research
Transportation
Marketing
Documentation
Distribution
Financing
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Chapter 12 - 24
Other Intermediaries
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Manufacturers’Agents
Manufacturers’Export Agents
Export and Import Brokers
Freight Forwarders
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Chapter 12 - 25
Summary of Discussion
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Chapter 12 - 26
International Licensing
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Chapter 12 - 27
Basic Issues in International Licensing
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Boundaries of the Agreement
Methods of Compensation
Rights, Privileges, and Constraints
Duration of the Agreement
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Chapter 12 - 28
Advantages of International Licensing
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•Low Financial Risk•Market Assessment•Sales Opportunities
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Chapter 12 - 29Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
•Limited Opportunities•Potential Litigation•Competitive Issues
Disadvantages of International Licensing
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Chapter 12 - 30
Summary of Discussion
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Chapter 12 - 31
International Franchising
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Chapter 12 - 32
Franchising Issues
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•Franchise Elements•Transferability•Franchise Success•Foreign Investors
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Chapter 12 - 33
International Franchises
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Opportunities Challenges
Product and System Shared Revenues
Low-Cost Expansion Increased Complexity
Learning Opportunities Quality Control
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Chapter 12 - 34
Summary of Discussion
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Chapter 12 - 35
Specialized Entry Modes for International
Business
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Chapter 12 - 36
Contract Manufacturing
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Advantages Disadvantages
Reduced Costs
Distinctive Competence
Location Advantages
Loss of Control
Quality Issues
Unexpected Problems
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Chapter 12 - 37Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Management Contracts
• Managerial Assistance• Technical Expertise• Other Services
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Chapter 12 - 38
Specialized Strategy
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Turnkey Project B-O-T Project
Design
Construct
Equip
Build
Operate
Transfer
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Chapter 12 - 39
Summary of Discussion
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Chapter 12 - 40
Foreign Direct Investment
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Chapter 12 - 41
Foreign Direct Investment (FDI)
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Opportunities Challenges
Increased Control
Profit Potential
Local Production
Complex Operations
Exchange Rates
Government Instability
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Chapter 12 - 42Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
• Greenfield
• Acquisitions
• Joint Ventures
Three FDI Methods
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Chapter 12 - 43
Strategic Advantages• Select the most useful site
• Construct modern facilities
• Reap economic development incentives
• Start with a clean slate
• Get acclimated to new business culture
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Greenfield Strategy
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Chapter 12 - 44
Strategic Disadvantages• Implementation takes time and patience
• Location may be costly or unavailable
• Must deal with government regulations
• Must recruit and train a local workforce
• May be stigmatized as a “foreign firm”
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Greenfield Strategy
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Chapter 12 - 45
Acquisition Strategy
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Strategic Advantages
Control Over the Firm’s Resources
Generates Immediate Revenues
Adds No New Capacity to the Industry
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Chapter 12 - 46
Acquisition Strategy
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Strategic Disadvantages
Assumes the Firm’s Liabilities
Inherits Unresolved Problems
Requires Substantial Up-Front Spending
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Chapter 12 - 47
Joint Ventures
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Joint Ownership
MutualInterests
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Chapter 12 - 48
Summary of Discussion
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Chapter 12 - 49
Chapter 12
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Strategies for Analyzing and
Entering Foreign Markets
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Chapter 12 - 50Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.