ОРГАНИЗАЦИОННЫЕ ФОРМЫ
МЕЖДУНАРОДНЫХ БИЗНЕСОПЕРАЦИЙ
ОСНОВЫ МЕНЕДЖМЕНТА
Vitally I. CHERENKOV,
Grand PhD, Chartered Prof.,
Marketing Department
cherenkov@gsom.spbu.ru
Classification/Applicability
of International
Operations

Entry Modes vs International Operations
Unified classification of Entry Modes
“Product” Group
“Knowledge Transfer” Group
“Foreign Direct Investments” Group
“International Rent” Group
Summary
Entry Modes vs International
Operations
Entry Modes vs International
Operations
The market strategy of the
The size of the market
firm
The growth of the market
The willingness of the firm
The potential market share to get involved
of the exporter
The type of product
The characteristics of the
country considered
The time horizon
considered
* Marketing Exchange
Marketing is the process of planning and
executing the conception, pricing, promotion,
and distribution (4 Ps) of ideas, goods and
services to create exchanges (with customers)
that satisfy individual [VALUE] and organizational
[COST] objectives.
• Satisfying customer needs (creating
utility) through the exchange process
profitable for a Seller.
• Cost for Seller
• Value for Buyer
Vitally I. Cherenkov
*
The complete form of this
process [applied to the our
case = “marketing exchange”]
is therefore.
M − C − M’, where
M’ = M + ∆M, i.e., the original
sum advanced plus an
increment.
Die vollständige Form dieses
Prozesses ist daher G−W −G‘,
wo G‘ = G+∆G,
d.h. gleich der ursprünglich
vorgeschossenen Geldsumme
plus einem Inkrement.
*Marx, C. Capital: A Critique of
Political
Economy, Volume I Vitally I. Cherenkov http://content.csbs.utah.edu/~ehrbar/cap1.pdf
Dimensions of Internationalisation &
International Operations (by Wealch)
HOW
goods, services,
systems, know-how
WHAT
(sales objects)
Structure
export department,
international division..
Finance
exporting, licensing,
franchising, foreign
direct investment..
psychic distance
WHERE
(markets)
Personnel
international skills,
experience, training..
*
Global
Strategy/
International
Management
International
Marketing
Lex
Mercatoria
[International
Trade]
International business
operations
International
Logistics
*modified by the lecturer
International
Finance
*
Renting
Contractual
Modes
Money – Product
Cost - Value
Exporting
•Franchising
•Indirect
•Licensing
•Direct
•Subcontracting agent/distribu
•Management
tor
contracts
•Own
•Project operations
sales office/
•Alliances
subsidiary
Subsidiary
Modes
•Minority share (JV?)
•50/50 (alliance?)
•Majority share
•100% owned
-part assembly/
service
full
manuf./service
*METHOD
*A means or manner of
procedure, especially
a regular and
systematic way of
accomplishing
something.
*Orderly arrangement
of parts or steps to
accomplish an end.
Vitally I. Cherenkov
*FORM
*The essential nature
of a thing as
distinguished from its
matter.
*Manner or style of
performing or
accomplishing
according to
recognized standards
of technique.
*METHOD
*Orderly arrangement
of parts or steps to
accomplish an end.
*Criterion -
a distinct
way for the marketing
exchange (cost value)
*
*FORM
*Manner or style of
performing or
accomplishing
according to
recognized standards
of technique.
*Criterion – subject of
an exchange and/or
contract terms
Vitally I. Cherenkov
INDIRECT
EXPORTING
Exports that are not handled directly by the manufacturer or
producer but through an export agent or freight forwarder or
other middleman.
Export
management
companies
[direct
exporting]
A company based in a home country that serves as the export
department for several manufacturers, soliciting and transacting
export business on behalf of its clients taking title to the goods and
assuming all the risks associated with doing business in other
countries.
Piggybacking
A foreign distribution operation where your products
are sold along with those of another manufacturer when the both
parties have related or complementary but noncompetitive
products.
COOPERATIVE
EXPORTING
Government-sanctioned co-ops of companies with similar products
who seek to export and gain greater foreign market share.
DIRECT
EXPORTING
A business activity occurring between an exporter and an importer
without the intervention of a third party
OWN OR INTRA- If the exporter has is own production/sales unit abroad there is no
Vitally I. Cherenkov “foreign” middleman – factually, a sale-purchase transaction is to
CORPORATIVE
EXPORTING
be effectuated due to crossing border purposes.
COUNTERTRADING
International trade in which goods are exchanged for other
goods, rather than for hard currency.
INSTITUTIONALCOMPETITIVE
TRADING
International trade activities based on a specific historically formed
competitive quotation and quality check arrangements and realized
through special institutions (such as commodity exchanges,
auctions, tender committees).
E-COMMERCE
WTO: The General Council defined “electronic commerce” (ecommerce) as “the production, distribution, marketing, sale or
delivery of goods and services by electronic means.”
Vitally I. Cherenkov
IMPORTING
To bring or carry in from an outside source, especially to bring in
(goods or materials) from a foreign country for trade/sale or to
be processed.
RE-IMPORTING
An international trade arrangement to import non-sold or
defected items back into the country of exportation.
EXPORTING
A function of international trade whereby goods produced in one
country are shipped to another country for future sale/ trade or to
be processed.
RE-EXPORTING
An international trade arrangement to export foreign goods in the
same state as previously imported, from the free circulation area,
premises for inward processing or industrial free zones, directly to
the rest of the world and from premises for customs warehousing or
commercial free zones, to the rest of the world.
 Non-sold items – forced re-export
 Searching for more margin – speculative re-export
 When items are installed into a more complex device to be
exported – technological re-export
BUILT-IN
Vitally I. Cherenkov As a part of overseas assembling, franchising contract, licensing,
EXPORTING
wet leasing, etc.
LICENSING
The granting of permission to use intellectual property rights,
such as trademarks, patents, or technology, under defined
conditions.
FRANCHISING
A long-term cooperative relationship between two entities that
is based on an agreement granting the franchisee the right to
use a developed concept, including trademarks and brand
names, production, service and marketing methods and the
entire business operation model, for a fee.
OVERSEAS
CONTRACT
MANUFACTURING
 This entails engaging the services of an overseas firm to
manufacture all or part of your product under contract, to
your specifications.
 Your relationship with the manufacturer is essentially
customer and supplier.
 In many cases, you might supply a mold or detailed
manufacturing specifications, but you’ll need to take care to
protect your intellectual property (IP) and rights from
exploitation.
Vitally I. Cherenkov
CONTRACTUAL
JOINT VENTURING
An agreement, possessing the legal characteristics of a
partnership, between two or more parties who join forces to
achieve some specific, short-term goal, such as the design
and construction of a project
EQUITY JOINT
VENTURING
A company created by other companies, with each owning a
proportion of the shares.
OVERSEAS
/
FOREIGN
SUBSIDIARY
 A company whose voting stock is more than 50% controlled by
another company, usually referred to as the parent company
or holding company. A subsidiary is a company that is partly or
completely owned by another company that holds a
controlling interest in the subsidiary company.
 If a parent company owns a foreign subsidiary, the company
under which the subsidiary is incorporated must follow the
laws of the country where the subsidiary operates, and the
parent company still carries the foreign subsidiary's financials
on its books (consolidated financial statements). For the
purposes of liability, taxation and regulation, subsidiaries are
distinct legal entities.
 A subsidiary company that is located in a different country
from the parent company.
Vitally I. Cherenkov
OVERSEAS
An affiliate under control abroad is an enterprise controlled
/
directly or indirectly by a parent company which is controlled
FOREIGN AFFILIATE by residents of the investor country.
OPERATING LEASE
A contract that allows for the use of an asset, but does not
convey rights of ownership of the asset. An operating lease is not
capitalized; it is accounted for as a rental expense in what is
known as "off balance sheet financing."
FINANCIAL LEASE
A long-term lease in which the lessee must record the leased
item as an asset on his/her balance sheet and record the
present value of the lease payments as debt. Additionally, the
lessor must record the lease as a sale on his/her own balance
sheet. A capital lease may last for several years and is not
callable. It is treated as a sale for tax purposes.
MANAGEMENT
CONTRACT
Agreement between investors or owners of a project, and a
management company hired for coordinating and overseeing
a contract. It spells out the conditions and duration of the
agreement, and the method of computing management fees.
Vitally I. Cherenkov
Entry Modes vs International
Operations
Socio-Cultural
Political-Law
Economic
Sections of Marketing Macro Environment
ENDOGENOUS
FACTORS
EXOGENOUS FACTORS
Subjective
management
factors
Decision
Making
Choosing
Entry
Mode
ENDOGENOUS FACTORS
Material
resources
Financial
resources
Intellectual
resources
Entry Modes vs International
Operations
ENTRY STRATEGY FACTORS – 1/3
THE SIZE OF THE MARKET
While there is no easy rule, the method of entry is different for a market in which
combined sales amount to €10,000,000 (U.S. $14,159,000 – MAY22, 2011 exchange
rate) per year and a market that exhibits sales in billions of euros.
THE GROWTH OF THE MARKET
A stable market, growing at a moderate rate, will call for a different entry strategy
than one in which there is a substantial potential for growth.
THE POTENTIAL MARKET SHARE OF THE EXPORTER
A market in which the exporter can become a major player will call for a different
strategy than one in which the exporter has no chance to be much more than a niche
player.
THE TYPE OF PRODUCT
Products with technology and a need for after-sale service and parts will require a
different entry strategy than a disposable consumer good.
Entry Modes vs International
Operations
ENTRY STRATEGY FACTORS – 2/3
THE MARKETING STRATEGY OF THE FIRM
Although self-evident, a firm whose strategy is to provide a top-of-the-line product
will have a different entry strategy than a firm that has chosen to be the lowest cost
provider.
THE CHARACTERISTICS OF THE COUNTRY CONSIDERED
The level of development, the infrastructure of the country, the business
sophistication of potential trade partners, the overall climate under which business is
conducted, the culture of the market, and the culture of customers should all be
considered in the decision of an entry strategy.
THE TIME HORIZON CONSIDERED
Products that have a short life cycle, or products that are likely to generate a lot of
“me-too” competitors, demand a different entry strategy than products that are
patent protected or are likely to have a long life cycle or engender a long line of
complementary products.
 PRODUCTS


OLD
SIMILAR
NEW
Entry Modes vs International
Operations
Strategic Alliances
[CA]
Mergers
& Acquisitions
[IDI]
[A]
Mergers &
Acquisitions
[IDI]
[A]
Importing
Strategic Alliances
[CA]
Mergers &
Acquisitions
[IDI]
[A]
Exporting
[E]
Strategic Alliances
[CA]
SIMILAR
NEW
DOMESTIC
OPERATIO
NSS
OLD

MARKETS

“Product-Market” Matrix – A Strategic Analysis Tool
Entry Modes vs International
Operations
The Control versus Risk for Entry Modes
High
FDI
Strategic
Alliances
RISK
Risk
Licensing
Direct
Export
Indirect
Low
Export
Low
Control
Vitally I. Cherenkov
CONTROL
High
Entry Modes vs International
Operations
Marketing
Presence
SL
Strategic Decisions
Level – (SL)
OL
Operative Decisions
Level – (OL)
TL
Production
Production
Finance
R&D
R&D
Finance
Tactical Decisions
Level – (TL)
Personal
Personnel
International
Marketing
Management
Information System
Decision Levels
Managerial Functions
Vitally I. Cherenkov
3D-MODEL OF MANAGEMENT IN INTERNATIONAL COMPANY
 PRODUCTS


OLD
SIMILAR
NEW
Entry Modes vs International
Operations
Strategic Alliances
[CA]
Mergers
& Acquisitions
[IDI]
[A]
Mergers &
Acquisitions
[IDI]
[A]
Importing
Strategic Alliances
[CA]
Mergers &
Acquisitions
[IDI]
[A]
Exporting
[E]
Strategic Alliances
[CA]
SIMILAR
NEW
DOMESTIC
OPERATIO
NSS
OLD

MARKETS

“Product-Market” Matrix – A Strategic Analysis Tool
Entry Modes vs International
Operations
►
◄
►
ENVIRONMENTAL CONTEXT
Mission of Organization
●Purpose
●Means
●Values
●Directives
▼
▼
Strategic
Strategic
Objectives
Plans
Operative
►
Objectives &
►
Plans
Defined by
Long-term
Long-term:
top
contractual
Organization
management
relations
Scale
INTERNATIONAL
OPERATIONS
MANAGEMENT
▼
▼
◄
►
◄
Tactical
Objectives
►
Defined by
middle
management
▼
Operational
Objectives
Defined by
bottom
management
Vitally I. Cherenkov
►
Short-term
contractual
relations
Production Management
◄
◄
►
▼
▼
Tactical
Plans
►
►
Mid-term:
Division
Scale
▼
Operational
Plans
Short-term:
Shop Scale
◄
►
►
Modes of Entering
Foreign Markets
Entry Modes vs International Operations

Unified Classification of Entry Modes
“Product Exporting/Importing” Group
“Knowledge Transfer” Group
“Foreign Direct Investments” Group
“International Rent” Group
Summary
Unified Classification of Entry Modes
STEP-BY-STEP
INTERNATIONALIZATION
haphazard ExIm
transactions
Exporting/importing on a
more systematic basis
Indirect exporting through
foreign agent or a distributor
entering a joint venture
with a foreign partner
 any sort of and depth of
involvement into FDI.
The main category of
International Logistics is the
purposeful, unrestrained, welltimed and full-scale, fast
(ASAP), and safe cross-border
movement of escalating value.
Unified Classification of Entry Modes
ENTRY MODE
REASONS TO SWITCH THE ENTRY MODE
Socio-cultural
Political-Law
Economic
EXPORTING
Problems with
local marketing
agents
Trade barriers
(tariff & nontariff)
High transport
costs
Long distance
LICENSING FRANCHISING
Lack of
recipient's
technological
culture
Intellectual
property cloning /
piracy in favor of
third parties
Cultivating
competitors
ASSEMBLING ALLIANCING
Cross-cultural
disputes
Law disagreement
Lack of control
over
technology
OWN
SUBSIDIARY
Cross-cultural
disputes
Hostile actions of
government
agencies
High costs and
risks
Local xenophobia
Unified Classification of Entry Modes
METHODS
PRODUCT EXIM
FORMS
DIRECT
OWN
COOPERATIVE
INDIRECT
A
D
C
COUNTERTRADING INSTITUTIONALLYCOMPETITIVE
IMPORTING
EXPORTING
RE-IMPORTING
RE-REXPORTING
OVERSEAS
ASSEMBLING
KNOWLEDGE
TRANSFER
LICENSING
FRANCHISING
OVERSEAS
MANUFACTURING
CONSULTING
ENGENEERING
RENT
FOREIGN DIRECT
INVESTMENTS
TURNKEY CONTRACT
CONTRACTUAL
JOINT VENTURING
EQUITY JOINT
VENTURING
SUBSIDIARY
AFFILIATE
OPERATIVE LEASING
FINANCIAL LEASING
MANAGEMENT
Entry Modes: “Form – Method” Compartibility
ELECTRONIC
Modes of Entering
Foreign Markets
Entry Modes vs International Operations
Classification of Entry Modes

“Product Exporting/Importing” Group
“Knowledge Transfer” Group
“Foreign Direct Investments” Group
“International Rent” Group
Summary
“Product Exporting/Importing” Group
HOME COUNTRY
HOST COUNTRY
IMPORTING
Importer
Exporter
DIRECT EXPORTING
Exporter
Importer
INDIRECT EXPORTING
Exporter
Importer
RE-IMPORTING
Importer
Exporter
GOODS,
SEMIPRODUCTS,
PARTS, ASSEMBLIES
INTELLECTUAL
PROPERTY
SERVICES
REVERSE LOGISTICS
RE-REXPORTING
Exporter
Importer
OVERSEAS
ASSEMBLING
Exporter
Importer
TERM
DEFINITION
Direct
Export
Manufacturing firm takes care of exporting activities and is in direct
contact with the first middleman in the target country.
Indirect
export
Selling goods to foreign buyers through intermediaries such as export
agents, export merchants or buying houses.
Re-export
Export (imported goods), typically after further processing or
manufacture
Re-import
Importation into a Customs territory of goods previously exported
from that territory
“Product Exporting/Importing” Group
Direct Export
Middleman
#1
Exporter
Consumer
Middleman
#1
DIRECT EXPORT
Vitally I. Cherenkov
Direct Export
“Product Exporting/Importing” Group
DIRECT EXPORT
• The exporting firm should possess enough knowledge about exporting routines,
techniques and practices in order to be able to start its export activities.
• In this sense indirect exporting may offer, if properly utilized, a useful learning
process for the subsequent move towards more independent exporting;
• The firm should have a workable language ability for the target country markets,
both spoken and written;
• The firm should have its own export personnel who are willing and capable of
taking care of export sales and marketing planning and implementation, both at
home and abroad;
• If the objectives set for exporting are ambitious ones the firm should have an
export manager who is also able to take care of strategic planning for exporting
and who is able to develop a workable information system for that purpose and
integrate/coordinate export planning as a part of the total planning of the firm;
• Export activities should be continuous, not just an emergency valve during overproduction, or when there is free capacity during domestic lack/depression;
• Exporting should have the full backing of the top management.
“Product Exporting/Importing” Group
transfer
affiliate
/branch
OWN EXPORT
Vitally I. Cherenkov
pricing
Own Export
“Product Exporting/Importing” Group
Manufacturer
#1
Middleman
#1
Consumer
Manufacturer
#2
Manufacturer
#3 [Exporter]
COOP EXPORT
Vitally I. Cherenkov
 INDIRECT EXPORT exists
when the manufacturing
firm is not taking direct
care of exporting activities
 Instead, another company
(Middleman #3), located
in the home market,
undertakes them for the
manufacturing firm
“Product Exporting/Importing” Group
PIGGYBACKING
The assigning of export
marketing and distribution
functions by one
manufacturer/exporter to
another (usually more expertise
and equipped in exporting).
€
%€
SME’s
offering
BIG EXPERTISED COMPANY
with many PRODUCT LINES
COOP EXPORT
Vitally I. Cherenkov
WORLD MARKET
“Product Exporting/Importing” Group
Vitally I. Cherenkov
Direct Exporting - 1
Advantages
Your potential profits are
greater because you are
eliminating intermediaries.
You have a greater degree of
control over all aspects of the
transaction.
You know who your customers
are.
Your customers know who you
are and feel more secure in
doing business with you.
Disadvantages
It takes more time, energy and
money than you may be able to
afford.
It requires more "people
power" to cultivate a customer
base.
Servicing the business will
demand more responsibility
from every level of your
organization.
You are held accountable for
whatever happens.
There is no buffer zone.
Direct Exporting - 2
Advantages
Disadvantages
Your business trips are much
more efficient and effective
because you can meet directly
with the customer responsible
for selling your product.
You may not be able to
respond to customer
communications as quickly as a
local agent can.
You know whom to contact if
something isn't working.
You have to handle all the
logistics of the transaction.
Your customers provide faster
and more direct feedback on
your product and its
performance in the
marketplace.
If you have a technological
product, you must be prepared
to respond to technical
questions, and to provide onsite start-up training and
ongoing support services.
Direct Exporting - 3
Advantages
You get slightly better
protection for your
trademarks, patents and
copyrights.
You present yourself as fully
committed and engaged in the
export process.
You develop a better
understanding of the
marketplace.
As your business develops in
the foreign market, you have
greater flexibility to improve or
redirect your marketing efforts.
Disadvantages
“Product Exporting/Importing” Group
Middleman
#1
Indirect Export
Manufacturer
Middleman
#1
INDIRECT EXPORT
Vitally I. Cherenkov
Consumer
 INDIRECT EXPORT exists
when the manufacturing
firm is not taking direct
care of exporting activities
 Instead, another company
(Middleman #1), located
in the home market,
undertakes them for the
manufacturing firm
“Product Exporting/Importing” Group
MAJOR TYPES OF TRADING COMPANIES AND THEIR COUNTRIES OF ORIGIN
Type
Rationale for Grouping
Some Examples by Country of Origin
General trading
companies
Historical involvement in generalized
imports/exports
Mitsui (Japan)
East Asiatic
(Denmark)
SCOA (France)
Jardine Matheson (Hong Kong)
Export trading
Specific mission to promote growth of exporters Daewoo (Korea)
companies
Interbras (Brazil)
Sears World Trade (US)
Federated export
Loose collaboration among exporting companies Fedec (UK)
marketing groups
supervised by a third party, usually marketSBI Group (Norway)
specific
IEB Project Group (Morocco)
Trading arms of MNCs Specific international trading
General Motors (US)
operations in parent company
Volvo (Sweden)
operations
Bank based or affiliated A bank at the center of a group
Mitsubishi (Japan),
trading groups
extends commercial activities
Cobec (Brazil)
Commodity trading
companies
Long-standing export trading in a specific market Metallgesellschaft (Germany) Louis Dreyfus
(France)
INDIRECT EXPORT
“Product Exporting/Importing” Group
– Reverse Logistics
RE-EXPORT
RE-IMPORT
Forced
Technological
Speculative
Melamine-tainted
milk powder
From Vietnam
Cooper Ribbons
From China
REVERSE LOGISTIS
Vitally I. Cherenkov
Non-sold items
Defected items
ПАЗ
+
MAN
“Product Exporting/Importing” Group
– Reverse Logistics
REVERSE LOGISTICS
studies the material
flow that goes from the
end consumer to the
original logistics
process to a new point
of consumption or
refurbishment.
Examples of REVERSE
LOGISTICS processes
are the collection of
empty bottles, the
return of merchandise
and the recovery
and/or recycling of
materials.
REVERSE or BACKWARD LOGISTIS
Vitally I. Cherenkov
“Product Exporting/Importing” Group
– International Middlemen
When the focal company
uses middlemen on the
basis of payments against
their contribution to the
company in selling its
items, this company is
following the Indirect
method of entry using
Distributor middlemen,
Consignee middlemen,
and Agent middlemen.
TRADE MIDDLEMEN IN INTERNATIONAL LOGISTICS
Vitally I. Cherenkov
“Product Exporting/Importing” Group
– International Agency
MARKET
ExporterPrincipal
PAYMENT
DELIVERY
BuyerImporter
+% Agent
+% Agent
Agency Agreement
“Product Exporting/Importing” Group
– International Agency
A legal contract creating a
fiduciary relationship whereby the
first party ("the Principal") agrees
that the actions of a second party
("the Agent") binds the principal
to later agreements made by the
agent as if the principal had
himself personally made the later
agreements.
INTERNATIONAL AGENCY AGREEMENT
Vitally I. Cherenkov
“Product Exporting/Importing” Group
– International Distributorship
MARKET
PAYMENT
ExporterVendor
M = P O - PI
Distributor Importer
DELIVERY
Distributorship Agreement
“Product Exporting/Importing” Group
– International Distributorship
A restricted right to essentially be a
wholesaler of a particular company's
products, usually in an exclusive
and/or restricted territory.
A classic example is a liquor
distributorship or a car dealership.
Distributorships always have to do
with sale of goods and may be
wholesale or retail, though there are
probably more distributorships in the
wholesale arena than retail.
INTERNATIONAL DISTRIBUTORSHIP AGREEMENT
Vitally I. Cherenkov
“Product Exporting/Importing” Group
– International Consignment
MARKET
PAYMENTS
ExporterConsignor
M = P O - PI
BuyerConsignee
DELIVERY
Non-Sold Products
Consignment Agreement
%
“Product Exporting/Importing” Group
– International Consignment
A contract where the owner of goods
turns them over to a seller (such as a
store) who will attempt to sell the goods.
If the seller sells the goods, the seller and
the owner of the goods share in the sales
price (net of taxes).
E.g., a maker of sweaters may "consign"
goods to a local clothing store. If the
clothing store sells a sweater, the seller
could receive e.g. 35% of the sales price
and the owner would be entitled to the
remaining proceeds.
It allows the store owner to avoid
inventory risk, as the store owner has not
committed funds to purchasing the goods.
INTERNATIONAL CONSIGNMENT AGREEMENT
Vitally I. Cherenkov
“Product Exporting/Importing” Group
– International Middlemen
MAIN FEATURES OF “PURE” MIDDLEMEN
Type of
Middleman
Agent
Distributor
Consignor (R)
Consignor (N-R)
I
H
O
Compensation
K%
PO - PI
K%
PO - PI
I - product information/samples
H - product handling/selling
O - product ownership
Using Middlemen - 1
Advantages
Disadvantages
It's an almost risk-free way to
begin.
It demands minimal
involvement in the export
process.
It allows you to continue to
concentrate on your domestic
business.
Your profits are lower.
You have limited liability for
product marketing problems -there's always someone else to
point the finger at!
When you visit, you are a step
removed from the actual
transaction. You feel out of the
loop.
You lose control over your
foreign sales.
You very rarely know who your
customers are, and thus lose
the opportunity to tailor your
offerings to their evolving
needs.
Using Middlemen - 2
Advantages
You learn as you go about
international marketing.
Depending on the type of
middleman with which you are
dealing, you don't have to
concern yourself with
shipment and other logistics.
You can field-test your
products for export potential.
In some instances, your local
agent can field technical
Disadvantages
The intermediary might also be
offering products similar to
yours, including directly
competitive products, to the
same customers instead of
providing exclusive
representation.
Your long-term outlook and
goals for your export program
can change rapidly, and if
you've put your product in
someone else's hands, it's hard
to redirect your efforts
“Product Exporting/Importing” Group
- Countetrading
Debt risks: Non-payment by the
buyer; an embargo on exchange
transfer; non-honoring by the
guarantor.
Trade risks: Non-delivery by the
supplier; failure to process, toll or
refine.
Government risks: Import or export
embargoes; cancellation of licenses;
termination through Force Majeure.
Unfair calling of guarantees.
Confiscation: Although this has a
different insurance market, with more
capacity available. Risks in
confiscation include transit, storage
(warehouse or quayside), and tolling.
Riots, strikes and civil commotion.
War on land
“Product Exporting/Importing” Group
- Countetrading
Does the transaction reciprocal involve commitments ? (other than cash payments)
YES
NO
COUNTERTRADE
STRAIGHT SALES (CASH OR CREDIT)
Does the transaction involve the use of money?
YES
NO
COUNTERPURCHASE, BUYBACK OR OFFSET
Reciprocal commitment limited to purchase of goods?
Does the transaction extend over long time periods and
involve a basket of goods?
YES
NO
BUY BACK AND COUNTERPURCHASE
BUYBACK
YES
NO
CLEARING ARRANGEMENTS
Are the goods taken back by the exporter the resultant output of the
equipment sold?
YES
BARTER-TYPE
НЕТ
Are third parties involved?
YES
COUNTERPURCHASE
SWITCH
OFFSETS
НЕТ
CLEARING
SIMPLE
BARTER
Countertrading
Advantages
Disadvantages
Allows entry into difficult
markets
No “in house” use of goods
offered by customers
Increases company sales
Time consuming and complex
negotiations
Overcomes currency controls & Uncertainty – multidimensional!
exchange problems
Overcomes credit difficulties
Increase transaction costs
Allows fuller use of production
capacity
Difficult to resell goods not
acceptable for “in house” use
Allows disposal of declining
products
Getting businesses in which
firm may have no knowledge
Provides new sources of
attractive inputs
Risky if low-liquid commodities
are involved
Classification/Applicability
of International
Operations
Entry Modes vs International Operations
Classification of Entry Modes
“Product Exporting/Importing” Group

“International Knowledge Transfer” Group
“Foreign Direct Investments” Group
“International Rent” Group
Sophisticated Entry Modes and Their Dynamics
“International Knowledge Transfer”
Group
GOODS,
HOME COUNTRY HOST COUNTRY SEMIPRODUCTS,
PARTS,
ASSEMBLIES
LICENSING
Licensor
Licensee
FRANCHISING
Franchisor
Franchisee
OVERSEAS
MANUFACTURING
Principal
Manufacturer
CONSULTING ENGINEERING
Engineer
Customer
TURNKEY CONTRACT
Contractee
Contractor
INTELLECTUAL
PROPERTY
BRAND
SERVICES
“International Knowledge Transfer”
Group - Licensing
LICENSING - contractual
agreement whereby the
licensor transfers to a licensee
the right to use a proprietary
asset for a fee.
ASSETS TRANSFERRED:
Process know-how or technology
Trademarks and Tradenames
 Patents
 Designs
 Intellectual property
Advantages for Licensor
Disadvantages for Licensor
 Requires min market knowledge
 Can be put in place fairly quickly
 Requires relatively little
investment
 The need for local market research
is reduced
 The licensee may support the
product strongly in the new market
Can lose control over the
core competitive advantage
of the firm.
The licensee can become a
new competitor to the firm.
“International Knowledge Transfer”
Group - Licensing
LICENSING – MINI-GLOSSARY
LICENSING
• The process of leasing a legally protected (trademarked or copyrighted)
intellectual property.
• An intellectual property can be a name, likeness, logo, graphic, design,
slogan, signature, character, or a combination of several of these
elements, in conjunction with a product or a product line.
• An intellectual property can also be licensed for many non-product
purposes, such as for a promotion or a service.
LICENSOR
• The owner of the Intellectual Property.
LICENSEE
• The company/entity who acquires the contractual rights to license the
Intellectual Property.
“International Knowledge Transfer”
Group - Licensing
LICENSING – MINI-GLOSSARY
LICENSING CONTRACT
• An agreement between the licensor and licensee granting legal permission for the
licensee to use the licensor’s Intellectual Property.
• The document includes specific terms and conditions, such as scope of rights,
territory, length of term, and financial remuneration to the licensor.
SUBJECTS OF INTELLECTUAL PROPERTY:
PATENTS, TRADEMARKS, COPYRIGHTS OR TRADE SECRETS
PATENT
a property right granted by Government/Convention to an inventor to exclude others
from making, using, offering for sale, or selling the invention throughout
“(multi)national territory” or importing the invention into the said “(multi)national
territory” for a limited time in exchange for public disclosure of the invention when
the patent is granted.
TRADEMARK
protect words, names, symbols, sounds, or colors that distinguish goods and services.
Trademarks, unlike patents, can be renewed forever as long as they are being used in
business.
“International Knowledge Transfer”
Group - Licensing
LICENSING – MINI-GLOSSARY
SUBJECTS OF INTELLECTUAL PROPERTY:
COPYRIGHTS
protect works of authorship, such as writings, music, and works of art that have been tangibly
expressed. (in USA the copyrights lasts for the life of the author plus 70 years.
TRADE SECRETS
information that companies keep secret to give them an advantage over their competitors.
INTELLECTUAL PROPERTY
 INDUSTRIAL PROPERTY includes inventions (patents), trademarks, industrial designs, and
geographic indications of source; and
 COPYRIGHT includes literary and artistic works such as novels, poems and plays, films,
musical works, artistic works such as drawings, paintings, photographs and sculptures, and
architectural designs.
 Rights related to copyright include those of performing artists in their performances,
producers of phonograms in their recordings, and those of broadcasters in their radio and
television programs
“International Knowledge Transfer”
Group - Licensing
LICENSING – MINI-GLOSSARY
GEOGRAPHICAL INDICATION OF SOURCE
A sign used on goods that has a specific geographical origin and possesses qualities or a reputation
that are due to that place of origin, e.g. "Roquefort" for cheese produced in France.
INDUSTRIAL DESIGN
• Is the field that designs physical artifacts such as consumer electronics (TVs, VCRs, stereos),
toys, computers, and appliances.
• Is focused on the physical form and interactive properties as opposed to the electronic
functioning of the system.
• In computer design, in addition to a concern for appearance and ergonomic form, industrial
designers are concerned with such things as how the computer is manufactured and
assembled, how heat is dissipated, how robust the system is during transportation, and how
much space it takes up.
ROYALTY
The basic component of financial remuneration paid by the licensee to the licensor, ranging
anywhere from 3% to 15% (depending upon the product category) of the licensee’s sales of the
licensed products. In addition, a guaranteed minimum royalty, or guarantee is typically required,
payable to the licensor irrespective of whether the license results in sales. A percentage of the
guarantee is normally paid as an advance upon execution of the contract.
“International Knowledge Transfer”
Group - Licensing
CHECK-LIST FOR LICENSING CONTRACT - 1
How many patents, processes, or trademarks will be used?
How will technical assistance be rendered?
Which products are included in the agreement, and to what extent?
What territory is to be covered by the license?
How should the licensee be compensated?
The currency in which payments will be made to the licensor
What happens if compensation cannot be paid by the licensee?
If sublicensing is permitted, how should it be carried out?
Geographical limitations on the marketing of the licensed
product or service
What are the provisions as to duration of the agreement and its
cancellation?
What rights does the licensor have in developments by the
licensee?
“International Knowledge Transfer”
Group - Licensing
CHECK-LIST FOR LICENSING CONTRACT - 2
What visitation and inspection privileges are held by the
licensor?
Can the parent company inspect accounts?
What provisions are there for satisfactory promotional/sales
performance and adequate quality control?
What home and host government approvals are required?
What tax factors are involved?
How will disputes be settled?
LUMP SUM
An amount of money that is paid in one single payment, not in several
small amounts
“International Knowledge Transfer”
Group - Licensing
Extra Market for
Licensed Items
Intellectual Property Transfer
LICENSOR
International Licensing Agreement
Cross-licensing
Payments: Royalty/Lump Sum
LICENSEE
International Licensing - 1
Advantages
Licenser ‘s
Disadvantages
A licenser could use licensing to It’s stringently restricts a
finance their global efforts
licensors future operations [licensee has to buy from its
the licensor simply cannot start
licensor equipment /
selling directly in that specified
ingredients]
market
There is less business risk
involved when wanting to
expand globally for licensors
than any of the other entry
modes
It can decrease the potential
that the licensors product or
service will be offered in the
nation’s black market.
Licensing may substantially
decreased the international
consistency of the licensors
product in terms of product
quality, in which could damage
the licensors public image ande
devaluate its brand in a foreign
nation.
International Licensing - 2
Advantages
Licenser ‘s
Disadvantages
It could lead to loosing
fundamental and crucial
knowledge of the business to
any potential future
competition and its
competitive advantage.
When the licensing
arrangement becomes expired,
the licensor may encounter
that the licensee has the ability
to produce as well market and
sell better alterations of a
product.
“International Knowledge Transfer”
Group - Franchising
Franchising - the practice of
using another firm's
successful business model.
ASSETS TRANSFERRED:
Franchisor’s trade names,
Trademarks (as brands),
Business models, and/or
Know-how
Advantages for Franchisee
brand name value
proven business system
available Franchisor’s
support system
availability of raw materials
and equipment for a much
lower price
advertising economies
Disadvantages for Franchisee
inadequate franchisee
legal representation.
strict franchisor control.
franchisee’s subordination
franchisee’s lack of
confidence
“International Knowledge Transfer”
Group - Franchising
THE MOST IMPORTANT IMPEDIMENTS TO INTERNATIONAL FRANCHISING


















Locating good and reliable franchisees overseas
Knowing how to franchise overseas
Protection of industrial property and trademarks in foreign countries
Obtaining information on market prospects overseas
Familiarity with business practices overseas
Foreign government regulations on business operations
Foreign regulations or limitations on royalty fees
Negotiation with foreign franchisees
Foreign regulations or limitations on entry of franchise business
Collection and transfer of franchise fee
Quality or quantity of product or service
Providing technical support overseas
Pricing franchise for a foreign market
Advertising franchise overseas /
Sourcing and availability of raw materials, equipment, and other products
Shipping and distribution of raw materials required to operate a foreign franchise
Financing franchise operations overseas
Shipping and handling of equipment needed to operate a foreign franchise
“International Knowledge Transfer”
Group - Franchising
Extra Market for
Franchised Offers
BRAND!!!
Intellectual Property Transfer
Franchisor’s Deliveries
FRANCHISOR
FRANCHISEE
International Franchising Agreement
Payments: Royalty/Lump Sum
“International Knowledge Transfer”
Group - Franchising
FRANCHISEE’S FEE OPTIONS
 ROYALTY - A payment made for the use of property, especially a patent,
copyrighted work, franchise, or natural resource.
 The amount is usually a percentage of revenues obtained through its use
 LUMP SUM – a fixed amount of money paid for using intellectual property in
one payment or, sometimes, by installments (bi-monthly, quarterly, annually).
 BALLOON PAYMENT - A large, lump-sum payment scheduled at the end of a
series of considerably smaller periodic payments. A balloon payment may be
included in the payment schedule for a loan, lease, or other stream of
payments.
 The INITIAL FEE is a once off lump sum, paid by the franchisee to the
franchisor, upon signing the franchise agreement.
 This payment acts as compensation for the experience, training, recruiting, and
the right to use the brand name of the franchise.
International Franchising
Advantages
Franchisor‘s
You can sometimes take
advantage of new markets that
are unfamiliar with your
business model and if you own
the first business of its kind in
an international market, you
may be able to bring in
substantial profits
You may be able to take
advantage of favorable
government regulations and
save money on taxes and the
fees it takes to get started.
Disadvantages
One of the problems is
overcoming the cultural
barriers because every country
has its own culture, and you
may not be able to accurately
predict what people in that
culture will enjoy.
Financial risks: the exchange
rates between currencies could
lead to an unfavorable return
on your investment.
Tariffs and fees to import
products in, which could make
“International Knowledge Transfer”
Group - Engineering
PRIME CONTRACTOR
TURNKEY PROJECT
BUYER
SUBCONTRACTORS
International Engineering or Project Operations
“International Knowledge Transfer”
Group - Engineering
INVESTORS
ENGINEERING CONTRACT
PRIME CONTRACTOR
TURNKEY PROJECT
BUYER
DISTRIBUTION NETWORK
SUBCONTRACTORS
MARKETS
Project + Arrangements
“International Knowledge Transfer”
Advantages vs Disadvantages
NON-EQUITY MODES: CONTRACTUAL AGREEMENTS
ADVANTAGES
DISADVANTAGES
LICENSING/FRANCHISING – LICENSOR’S/FRANCHISOR’S VIEWPOINT
 Low development costs
 Low risk in overseas expansion
 Little control over technology and
marketing
 May create competitors
CO-MARKETING
 Ability to reach more customers
 Limited coordination
ENGINEERING: R&D CONTRACTS
 Ability to tap into the best locations
for certain innovations at low costs
 Difficult to negotiate and enforce
contracts
 May nurture innovative competitors
 May lose core innovation capabilities
ENGINEERING: TURNKEY PROJECTS
 Ability to earn returns from process
technology in countries where FDI is
restricted/high-risky
 May create efficient competitors
 Lack of long-term presence
Modes of Entering
Foreign Markets
Entry Mode Factors vs International Logistics Considerations
Classification of Entry Modes
“Product Exporting/Importing” Group
“International Knowledge Transfer” Group

“Foreign Direct Investments” Group
“International Rent” Group
Summary
“Foreign Direct Investments” Group –
Joint Venture
# making sure that the goods are accompanied by the proper
documents so that they can clear Customs in the country of
destination
# defining properly who, between them and their foreign
counterparts, is responsible for which aspects of the voyage and
the documents
# determining which method is most suitable for payment between
the exporter and the importer
# following security measures designed to prevent damage to the
goods while they are in transit, and following national regulations of
exporting/importing countries and international organizations
# storing the goods in appropriate warehouses and distribution
centers when they are not in transit.
“Foreign Direct Investments” Group –
Joint Venture
Global
Brand of
Company A
Regional
Distribution
Network of
Company B
Financial
Resources
of Company
A
Unique
Technologies
of Company
B
EJV
Financial
Resources of
Company B
Unique
Technologie
s of
Company A
Cheap Work
Force of
Company B
Global
Marketing
Competency
of Company
A
EQUITY JOINT VENTURE: A new company created by other companies, with
each owning a proportion of the shares.
“Foreign Direct Investments” Group –
Joint Venture
Global
Brand of
Company A
Financial
Resources
of Company
A
Unique
Technologie
s of
Company A
Global
Marketing
Competency of
Company A
Local
Distribution
Network of
Company B
Unique
Technologie
s of
Company B
Contract
CJV
Financial
Highly
Resources Skilled Work
of Company
Force of
B
Company B
CONTRACTUAL JOINT VENTURE: An agreement, possessing the legal
characteristics of a partnership, between two or more parties who join forces to
Vitally I. Cherenkov
achieve
some specific, short-term goal, such as the design and construction of a
project.
“Foreign Direct Investments” Group –
Wholly Owned Subsidiary
 A WHOLLY-OWNED SUBSIDIARY is a company whose stock is entirely
owned by another company.
 The owner of a wholly-owned subsidiary is known as the parent
company or holding company.
 Because the parent company owns all of the stock of the wholly-owned
subsidiary, the parent company can control all of its activities.
 Under GAAP, all of the financial transactions of a wholly-owned subsidiary
are consolidated with those of the parent company.
 All of the activities of the wholly-owned subsidiary are part and parcel of
the parent company for both operating and reporting purposes.
 A wholly-owned subsidiary is a separate entity for legal purposes.
 The laws of the state or country in which the wholly-owned subsidiary is
incorporated apply to the subsidiary, but not the parent company.
“Foreign Direct Investments” Group –
Wholly Owned Subsidiary
 International Alliance represents an important foreign operation mode
option for internationalizing companies, extensively used but difficult to
operate, and coming in diverse forms:
 FROM: Joint promotion of two companies’ products and information
sharing (informal coop)
 TO: Joint venture, generating a flow of FDI (formal, legally structured
agreement)
 “inter-firm collaboration over a given economic space for the attainment of
mutually defined goals” [Buckley, P.G. Alliances, technology, and market: a
cautionary tale. 1992]
 “arrangements where two or more companies engage in collaborative
activity, while remaining as independent organizations, and result in
foreign market operations” [Welch, L. S., Benito, G. R.G. Petersen, B.
Foreign Operation Methods: Theory, Analysis, Strategy, 2007]
“Foreign Direct Investments”
Advantages vs Disadvantages
EQUITY MODES
ADVANTAGES
DISADVANTAGES
PARTIALLY OWNED SUBSIDIARIES - JOINT VENTURES
 Sharing costs, risks, and profits
 Access to partners' knowledge and
assets
 Politically acceptable
 Divergent goals and interests of
partners
 Limited equity and operational control
WHOLLY OWNED SUBSIDIARIES - GREEN-FIELD OPERATIONS
 Ability to reach more customers




Potential political problems and risks
High development costs
Add new capacity to industry
Slow entry speed (relative to
acquisitions)
ACQUISITIONS
 Same as green field
 Do not add new capacity
 Fast entry speed
 Same as green-field, except adding
new capacity and slow speed
 Post-acquisition integration problems
Classification/Applicability
of International
Operations
Entry Modes vs International Operations
Classification of Entry Modes
“Product Exporting/Importing” Group
“International Knowledge Transfer” Group
“Foreign Direct Investments” Group

“International Rent” Group
Summary
“International Rent” Group
HOME COUNTRY
HOST COUNTRY
OPERATIVE LEASING
Leaser
[Lessor]
Lease
[Lessee]
FINANCIAL LEASING
Leaser
[Lessor]
Lease
[Lessee]
EQUIPMENT
INTELLECTUAL
PROPERTY
SERVICES
Leasee (Lessee)
Subject of Lease
Leaser (Lessor)
“International Rent” GroupOperation Leasing
 Operative Leasing Is characterized
by shorter life-cycle of the leasing
object as well as the shorter
contractual term and usually by
incomplete depreciation of the
equipment within the leasing term;
when the contractual period is over,
the leasing equipment can be either
put into leasing scheme again or
purchased by the lessee or returned
to the lessor.
Insurance Company Such leasing service is as a rule
offered to equipment producers,
trading companies, their subsidiary
leasing companies as well as to the
other owners of the leasing assets.
Operative Leasing - 1
Advantages
Leasee ‘s
The agreement's usually for a
shorter and more flexible
period which reduces the
business' risk.
The maintenance costs
relating to the asset won't be
your responsibility.
You won't carry the risk of
losses due to damage (within
specific contract boundaries)
and decreases in fair value.
Disadvantages
You won't get full ownership or
control of the asset and your
use of the asset will be
restricted subject to the terms
and conditions in the lease
agreement.
You won't stand to gain if the
asset increases in value.
Operative Leasing - 2
Advantages
Leasee ‘s
Disadvantages
There'll be less stringent
credit requirements as
you're not buying the asset,
you're only paying rent.
Your monthly lease payment will
be inflated to reimburse the
lessor. They'll still bear the risks
of ownership of the asset.
The return on assets ratio is
more favorable than with a
finance lease.
The equalization of the lease
expense can be complex and
cumbersome to calculate. If you
make a mistake with this, your
financial statements will be
misstated and may result in the
auditors giving a modified audit
opinion.
“International Rent” Group–
Financial Leasing
€ Leasee (Lessee)
Leasing Co as a Leaser)
€
Lease Contract
Bank
CL
Manufacturer
Manufacturing Contract
Transportation Co
Subject of Lease =
= Truck Fleet
DELIVERY
“International Rent” GroupFinancial Leasing
FINANCE LEASING DATA
 Is characterized by mid- and long-term contractual period, as well as by the full
depreciation of the lease equipment or by depreciation of its major part within
the leasing period. At expiration of the leasing contract, the lessee can either
return the leasing object back to the lessor or extend the contract or purchase
the leasing asset at its residual value.
 Provided that the lessee performs the buy-out option of the leasing assets the
leasing contract appears to be equal to long-time crediting of the purchase; it
differs from the common sales contract by the moment of transfer of the
ownership on leased assets to the purchaser.
SOME PECULIARITIES OF THE FINANCE LEASING
 The lessor purchases the leasing assets not at his responsibility, but according to
the lessee’s order;
 Apart from the lessor and lessee, the third party – the seller/producer of the
leasing object - is involved into the deal;
 The duration of the leasing contract is approximately similar to the depreciation
period;
 The ownership can be transferred to the lessee and the contract can be closed
not earlier than the total amount of the leasing installments is paid out by the
lessee.
Financial Leasing - 1
Advantages
Leasee ‘s
CASH FLOW:
Not having to spend a lot of
money up front can help your
business manage its cash flow
more effectively, especially if
you're just starting out.
You'll most likely have a small
down payment (or none at all),
as well as a lower monthly
payment than if you took out a
loan to buy the equipment
Disadvantages
OVERALL COST:
Just as with leasing a car,
leasing equipment is almost
always more expensive in the
long run.
EARLY TERMINATION FEES:
Even if you no longer use the
equipment, you're required to
make the monthly payments. If
you no longer need the
equipment, there will be
substantial early termination
fees to end the lease.
Financial Leasing - 2
Advantages
Leasee ‘s
DEDUCTIONS:
Lease payments can be
deducted as a business
expense on your tax return.
You'll most likely have a small
down payment (or none at all),
as well as a lower monthly
payment than if you took out a
loan to buy the equipment
EASIER FINANCING:
It's usually easier to get better
financing terms with leasing
than if you were trying to buy
the equipment.
Disadvantages
COMPLICATED TERMS:
Make sure you fully understand
the terms and conditions of the
lease, such as required
insurance on the equipment,
what happens at the end of the
lease, who finances the lease (it
might be a separate company),
and who is responsible for
repairs..etc.
Financial Leasing - 3
Advantages
Leasee ‘s
SUPPORT:
Leasing agreements usually
come with some sort of
technical support from the
leasing company.
KEEPING CURRENT:
One of the best reasons to
lease is that it means you
always have access to the
latest technologies.
Make sure the lease contract
provides for upgrades as they
become available.
Disadvantages
Closed-End A rental agreement that puts no obligation
Lease
on the lessee (the person making periodic
lease payments) to purchase the leased
asset at the end of the agreement.
Also called a "true lease", "walkaway lease"
or "net lease".
Residual
value
Estimated fair market value of a leased
asset at the end of the lease term.
Open-End
Lease
A rental agreement that obliges the lessee
(the person making periodic lease
payments) to make a balloon payment at
the end of the lease agreement amounting
to the difference between the residual and
fair market value of the asset.
Balloon
Payment
Loan installment (paid usually at the end
of the loan period) that is much larger
than the other installments.
A balloon payment is required when the
previous installments did not extinguish
the loan, either intentionally or due to
an error or late payments.
Up-front
payment
Anything of value, usually money,
delivered at the time a contract is signed.
Early
A penalty assessed if you choose to end
Termination the contract earlier. Lessors justify this
Fee
because depreciation is highest in the
early portion of a vehicle's life, so a
prematurely terminated lease cuts heavily
into their earnings. The penalty is likely to
Classification/Applicability
of International
Operations
Entry Modes vs International Operations
Classification of Entry Modes
“Product Exporting/Importing” Group
“International Knowledge Transfer” Group
“Foreign Direct Investments” Group
“International Rent” Group
 Summary
Short List of Entry Modes - Summary
ADVANTAGE - ENTRY MODES- DISADVANTAGE – 1/2
EXPORTING
• Ability to realize location and
experience curve economies
• $High transport costs
• $Trade barriers
• $Problems with local marketing agents
LICENSING
• Low development costs and risks
• $Lack of control over technology
• $Inability to realize location and
experience curve economies
• $Inability to engage in global strategic
coordination
FRANCHISING
• Low development costs and risks
• $Lack of control over quality
• $Inability to engage in global strategic
coordination
Short List of Entry Modes - Summary
ADVANTAGE - ENTRY MODES- DISADVANTAGE – 2/2
OVERSEAS ASSEMBLING TO TURNKEY CONTRACTS
• Ability to earn returns from process
technology skills in countries where
FDI is restricted
• Creating efficient competitors
• Lack of long-term market presence
INTERNATIONAL ALLIANCING: JOINT VENTURES
• Access to local partner's knowledge
• Sharing development costs and risks
• Politically acceptable
• Lack of control over technology
• Inability to engage in global strategic
coordination
• Inability to realize location and
experience economies
WHOLLY OWNED SUBSIDIARIES
• $Protection of technology
• $Ability to engage in global strategic
coordination
• $Ability to realize location and
experience economies
• High costs and risks
QUESTIONS ?