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Administrative Studies
ADMS 3930

ENTRY MODES OF INTERNATIONAL EXPANSION - Exporting  Producing goods in one country to sell in another  Enables a firm to invest the least amount of resources in terms of its product, organization and corporate strategy  Disliked by host countries because it provides less local employment than other modes  Partner with local firms while minimizing their own risk  Firm gives control of strategic marketing decisions to local partners  Relatively inexpensive way of entering foreign markets  May be bought out by local multinationals  Successful distributors: 1. Carried product lines that complimented, rather than competed with, the multinational’s products 2. Behaved as if they were business partners with the multinationals  Important to develop collaborative, win-win relationships - Licensing  Enables a company to receive a royalty fee in exchange for the right to use its trademark, patent, trade secret, or other valuable item of intellectual property  Firm generating the license incurs little risk; the country also benefit from the product being manufactured locally  Disadvantages:  Licensor gives up control of its product and forgoes potential revenues and profits  Licensee may become so familiar with the patent and trade secrets that it may become a competitor; the licensee may make some modifications to the product and sell it independently  If the licensee selected by the multinational firm turns out to be a poor choice, the brand name and reputation of the product may be tarnished - Franchising  Includes a broader range of factors in an operation and involves a longer period  Limit risk exposure that a firm has in overseas markets while expanding revenue base  Multinational firm receives only a portion of the revenues (franchise fees) - Strategic Alliances and Joint Ventures  Strategic alliances can take many forms, including joint research and development, joint exploration initiatives, joint production, or co- distribution of two partners’ products  To produce a product for the local market, using the multinational’s technology and brand name but the local firm’s management and market knowledge  Multinational retains substantially more control over the strategic and operational decisions  Joint ventures—unique form of strategic alliance that entail the creation of a third legal entity, owned by the partners, with a clear mandate and separate organizational structure  Enable
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