Transcript International Business

Going International: Strategic
Decisions

Multidomestic Companies


their int’l subs are autonomous and self-governing
Global companies


slide 1
operates as one single entity worldwide
in reality - most companies use a combination
of both approached
Professor
W. Tim G. Richardson
slide 2
Chapter 9
Global Firms
Professor
W. Tim G. Richardson
slide 3
Multidomestic
Firms
Professor
W. Tim G. Richardson
Reasons for going international

slide 4
Reactive (from reaction - to receive information,
then act)
the company is responding to demand it
discovers in another location
it sees it competitors going to a particular
place
regulations - environmental/work safety may
be “easier” overseas
costs of production at home force it to cheaper
areas
chance occurrence
additional reasons on page 240 - 241
Professor
W. Tim G. Richardson
slide 5
Reactive, continued

If a companies customers go international,
then it may be required to follow.
eg. if an auto parts supplier to Magna sees Magna
beginning to make some important component in
Mexico, then it may also have to go to Mexico so it
can mfg. there and continue to supply Magna - it
would be too expensive to ship the parts from
Canada
page 242
Professor
W. Tim G. Richardson
Reasons for going international

slide 6
Proactive (to actively look for an opportunity)
strategically
seeking out advantages
launch and offense into a new market before
competitor does
power and prestige
incentives
lower costs of labour, production, energy
Professor
W. Tim G. Richardson
slide 7
Proactive, continued

As costs of labour have increased in North America,
many assemblers and component parts mfg. have
had to move offshore
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Also, another reason to go international is to gain
prestige which can be applied to customers at home if a company has overseas offices, it appears to be
more impressive at home ie. law firms, CA firms
Professor
W. Tim G. Richardson
slide 8
Ways to enter the new market
(choice of entry mode)
simple export of the product
 develop a joint venture to sell through an
existing sales company in similar business
 sell license to foreign company and collect
royalties
 contract a foreign company to do the
business for a % of the sales
 overseas office and subsidiary company set
up

Professor
W. Tim G. Richardson
slide 9
The Process of deciding to go international
Chapter 9
? Must we be more International
Professor
assess factors in home market
assess competition
trade policies
regulatory environment
If the answer is NO
If the answer is YES
Then you ask
Should we be more int'l
Then you ask
Are we capable of being int'l
W. Tim G. Richardson
slide 10
The Process of deciding to go international
If the answer is NO
If the answer is YES
Then you ask
Should we be more int'l
Then you ask
Are we capable of being int'l
Assess factors of
potential advantage
list
assets
strengths
weaknesses
List all proactive reasons
assess
management
finances
products
are specific int'l
opportunities identified
as a result
of this process
determine
expertise
technological advantages
distribution advantages
If negative answer
Professor
If positive answer
W. Tim G. Richardson
If negative answer
If positive answer
slide 11
The Process of deciding to go international
are specific int'l
opportunities identified
as a result
of this process
determine
expertise
technological advantages
distribution advantages
If negative answer
If positive answer
If negative answer
If positive answer
Then concentrate
on domestic
business
The go to
"Are we capable
of being
international"
ask can we
improve our
capability
ask what
specific opportunities
we should pursue
Professor
W. Tim G. Richardson
The Process of deciding to go international
determine
expertise
technological advantages
distribution advantages
If positive answer
ask what
specific opportunities
we should pursue
Once a choice is made you have
to develop a plan
Modes of Entry
No Foreign Ownership
Joint Ventures
Sole Ownership
exports
? what to share
a subidiary co.
wholly owned
by the parent
company
Licenses
? how much to share
Franchising
? with whom to share
Turnkey Ops
? how long to share
Contracts
Professor
W. Tim G. Richardson
slide 12
The Process of deciding to go international
slide 13
Once a choice is made you have
to develop a plan
Modes of Entry
No Foreign Ownership
Joint Ventures
Sole Ownership
exports
? what to share
a subidiary co.
wholly owned
by the parent
company
Licenses
? how much to share
Franchising
? with whom to share
Turnkey Ops
? how long to share
Contracts
Professor
W. Tim G. Richardson
Strategic Alliances
is a tactic you can
use with all 3
modes
The Choice of Entry Mode / "the ways to do business overseas"
No Foreign Ownership
Joint Ventures
Sole Ownership
exports
- easy to do
- often the first step
of most companies
? what to share
? of shared profits
?, who is in control,
foreigners or locals
a subidiary co.
wholly owned
by the parent
company
Licenses
- gets you access
without same risk
- neg. is knockoffs
? how much to share
the degree of ownership
implies a degree of
shared profits & control
The original favourite
method of most
American companies
Franchising
- good way to expand without
same degree of risk
- bad point, control is difficult
? with whom to share
there are many potential
partners,
companies, gov't etc.
Turnkey Ops
- buy an operation
already set up locals
- expensive but efficient
? how long to share
5 years, 10 years?
? - also, what to do if
it fails, who pays
Contracts
ie. Nike using Taiwanese
firms in Vietnam
Professor
W. Tim G. Richardson
slide 14