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Lecture 5

Week 5

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Department
Global Management Studies
Course
GMS 200
Professor
Shavin Malhotra
Semester
Fall

Description
Week 5 October0711 1227 PM Types of market entry strategiesyNonequity modes exporting licensing and franchisingyEquity modes or direct investment strategies joint ventures mergers and acquisition Nonequity modes to overcome fear yNew firms need to overcome fearyMinimizing international market and political risks yHelps to obtain knowledgeLicensingFranchisingyLicensing refers to offering a firms knowhow or other intangible asset to a foreign company for a fee royalty andor other type of paymentyAdvantages for the new exporter the need for local market research is reduced the license may support the product strongly in the new marketyDisadvantages can lose control over the core competitive advantage license can become a new competitor to the firm Pizza Hut Casey70 of the franchise is located in ThailandyIn 2000 minor group decided to break ties with pizza hut and run its own business Equity entry modesyJoint ventureyA corporate childa new entity given birth and owned jointly try two or more parent companiesyThree possibilities Minority owned less than 50 equity 5050 Majority owned more than 50 equityyFor eg Bombardier Sifang Transportation Ltd between Bombardier and Sifang Transportation ChinayWon US4 Billion contract to build the worlds fastest commercial train in China Mergers and AcquisitionsyAccounts for 70 of all FDIyQuick way to enter a new marketyGain market power Whollyowned subsidiaryy100 investment in productionyLocal SubsidiaryyMore control and more risk The internationalization stages yStage 1indirect exportingyStage 2direct exporter via independent distributoryStage 3establishing foreign sales subsidiary
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