Going~International

7/31/2019 Going~International

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Professor W. Tim G. Richardson

Going International: StrategicDecisions

Multidomestic Companiestheir intl subs are autonomous and self -governing

Global companiesoperates as one single entity worldwide

in reality - most companies use a combination

of both approached


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Global Firms

C h a p t e r

9


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MultidomesticFirms


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Reasons for going internationalReactive (from reaction - to receive information,

then act)the company is responding to demand itdiscovers in another location

it sees it competitors going to a particular placeregulations - environmental/work safety maybe easier overseas costs of production at home force it to cheaper areaschance occurrence

additional reasons on page 240 - 241


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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 inMexico, then it may also have to go to Mexico so itcan mfg. there and continue to supply Magna - itwould be too expensive to ship the parts fromCanada

page 242


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Reasons for going international

Proactive (to actively look for an opportunity)

strategically seeking out advantages

launch and offense into a new market beforecompetitor doespower and prestigeincentiveslower costs of labour, production, energy


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Proactive, continued

As costs of labour have increased in North America,many assemblers and component parts mfg. havehad to move offshore

Also, another reason to go international is to gainprestige which can be applied to customers at home -if a company has overseas offices, it appears to bemore impressive at home ie. law firms, CA firms


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Ways to enter the new market(choice of entry mode)

simple export of the productdevelop a joint venture to sell through anexisting sales company in similar businesssell license to foreign company and collectroyaltiescontract a foreign company to do the

business for a % of the salesoverseas office and subsidiary company setup


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The Process of deciding to go international

Then you askShould we be more int'l

If the answer is NO

Then you askAre we capable of being int'l

If the answer is YES

assess factors in home market

assess competitiontrade policiesregulatory environment

? Must we be more International

C h a p

t e r

9


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If negative answer If positive answer

are specific int'lopportunities identified

as a resultof this process

List all proactive reasons

Assess factors of potential advantage

Then you askShould we be more int'l

If the answer is NO

If negative answer If positive answer

determineexpertise

technological advantagesdistribution advantages

assessmanagement

financesproducts

listassets

strengths

weaknesses

Then you askAre we capable of being int'l

If the answer is YES


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Then concentrateon domestic

business

If negative answer

The go to"Are we capable

of beinginternational"

If positive answer

are specific int'lopportunities identified

as a resultof this process

ask can weimprove our

capability

If negative answer

ask whatspecific opportunities

we should pursue

If positive answer

determineexpertise



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Contracts

Turnkey Ops

Franchising

Licenses

exports

No Foreign Ownership

? how long to share

? with whom to share

? how much to share

? what to share

Joint Ventures

a subidiary co.wholly ownedby the parent

company

Sole Ownership

Modes of Entry

Once a choice is made you haveto develop a plan

ask whatspecific opportunities

we should pursue

If positive answer

determineexpertise



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Contracts

Turnkey Ops

Franchising

Licenses

exports


? how long to share

? with whom to share

? how much to share

? what to share

Joint Ventures

a subidiary co.

wholly ownedby the parent

company

Sole Ownership

Modes of Entry

Once a choice is made you haveto develop a plan

Strategic Alliancesis a tactic you canuse with all 3modes


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The Choice of Entry Mode / "the ways to do business overseas"

Contractsie. Nike using Taiwanese

firms in Vietnam

Turnkey Ops- buy an operation

already set up locals- expensive but efficient

Franchising- good way to expand without

same degree of risk- bad point, control is difficult

Licenses- gets you accesswithout same risk- neg. is knockoffs

exports- easy to do

- often the first stepof most companies


? how long to share5 years, 10 years?

? - also, what to do ifit fails, who pays

? with whom to sharethere are many potential

partners,companies, gov't etc.

? how much to sharethe degree of ownership

implies a degree ofshared profits & control

? what to share? of shared profits

?, who is in control,foreigners or locals

Joint Ventures

The original favouritemethod of most

American companies

a subidiary co.wholly ownedby the parent

company

Sole Ownership

Going~International

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