MOR 492 Lecture Notes - Lecture 17: Foreign Direct Investment, Integrated Operations, Outsourcing
22 Oct 2017
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Document Summary
Mor 492 session 17: global market entry and make/buy decisions. Firm capabilities: hershey vs nestle in the candy industry. Industry factors: new vs used car industry (transnational vs domestic), consumer products (100% owned operations), produce (exporting) Cage differences - large? enter with local partnership/distributor. Weak legal institutions: third-party partnerships won"t be enforced. Weak infrastructure: must invest in developing company infrastructure. Govt policies for foreign direct investment (fdi) Enter with vertically integrated control if there are not high-quality partners. Political risk institutional voids firm transaction costs. High political/economic risk? shouldn"t put steel in the ground, even if the institutional voids might suggest that a firm should enter with vertically integrated operations. Benefits: no fdi, quick entry, flexibility to pull out and enter other markets. Challenges: difficult to find strong working relationships with distributors, no control over marketing and distribution, tariffs and shipping costs may erode margins. Challenges: losing control over products/technology, licensees can damage brand, contract may not be maintained.
