MKT 360 Lecture Notes - Lecture 29: Joint Venture, Franchising, Overseas Private Investment Corporation
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WED, SEPT 5.
POLITICAL ENVIRONMENT
Why important?
If you’e ot o the ight side of politis you o’t e ale to sell you podut
Political risks when going international
o Expropriation
o Terrorism
o Etc.
How to set up not to lessen the political risks?
o Joint ventures
Direct foreign investment: physical presence in that country – you have a
plant, employees.
If you hae physial stuff you’e at isk
Joit etue: it’s he you joi a foeig aket ith a aket –
between you and the partner you build a third entity which is the
company.
How does this lessen it?
If you hae a ifluetial loal pate they’e goa potet you
You hae less iestet, so it’s ot as isky as oig %
o Investment base expansion
Do’t put you oey, oo oey fo a local bank or local investors
If the gov. is thinking about taking that property, then that local bank or
local investors are going to protect you
o Control of marketing and distribution
If your company is the only buyer of the products that are made by that
subsidiary, then the local government is gonna think twice before taking
it over.
If you hae a loal plat that akes this podut ad you’e the oly
buyer, then it would be silly for the government to take over that plant.
If they take over the plant, then who are they gonna sell the products to?
o Licensing
When you have a contract when you give somebody permission to
actually manufacture or market your product under your name.
Use your patents of copyright, whatever
If the gov. takes over that plat, it’s ot yous so
You oly get a oyalty so you do’t eally get a lot of oey
Franchising: a special type of licensing
In franchising you give them a whole system, KLA – they give them
everything like the whole system
o Planned Domestication
Domestication: the government tells you your local business now has to
be owned by locals.
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