Going International: Strategic Decisions

slide 1

Multidomestic Companies

their intl subs are autonomous and self-governing

Global companies

operates as one single entity worldwide

in reality - most companies use a combination of both approached

Professor

W. Tim G. Richardson

slide 2

Global Firms

Professor

Chapter 9
W. Tim G. Richardson

slide 3

Multidomestic Firms

Professor

W. Tim G. Richardson

Reasons for going international

slide 4

Reactive (from reaction - to receive information, then act) the company is responding to demand it discovers in another location it sees it competitors going to a particular place regulations - environmental/work safety may be easier overseas costs of production at home force it to cheaper areas chance occurrence
additional reasons on page 240 - 241
W. Tim G. Richardson

Professor

slide 5

Reactive, continued

If a companies customers go international, then it may be required to follow.

eg. if an auto parts supplier to Magna sees Magna beginning to make some important component in Mexico, then it may also have to go to Mexico so it can mfg. there and continue to supply Magna - it would be too expensive to ship the parts from Canada

page 242

Professor

W. Tim G. Richardson

Reasons for going international

slide 6

Proactive (to actively look for an opportunity)

strategically

seeking out advantages launch and offense into a new market before competitor does power and prestige incentives lower costs of labour, production, energy

Professor

W. Tim G. Richardson

slide 7

Proactive, continued

As costs of labour have increased in North America, many assemblers and component parts mfg. have had to move offshore Also, another reason to go international is to gain prestige which can be applied to customers at home if a company has overseas offices, it appears to be more impressive at home ie. law firms, CA firms

Professor

W. Tim G. Richardson

slide 8

Ways to enter the new market

(choice of entry mode)

simple export of the product develop a joint venture to sell through an existing sales company in similar business sell license to foreign company and collect royalties contract a foreign company to do the business for a % of the sales overseas office and subsidiary company set up

Professor W. Tim G. Richardson

slide 9

The Process of deciding to go international

? Must we be more International

Chapter 9

assess factors in home market assess competition trade policies regulatory environment

If the answer is NO

If the answer is YES

Then you ask Should we be more int'l

Professor W. Tim G. Richardson

Then you ask Are we capable of being int'l

slide 10

The Process of deciding to go international

If the answer is NO If the answer is YES

Then you ask Should we be more int'l

Then you ask Are we capable of being int'l

Assess factors of potential advantage

list assets strengths weaknesses

List all proactive reasons

assess management finances products

are specific int'l opportunities identified as a result of this process

determine expertise technological advantages distribution advantages

If negative answer

If positive answer

If negative answer

If positive answer

Professor

W. Tim G. Richardson

slide 11

The Process of deciding to go international

are specific int'l opportunities identified as a result of this process determine expertise technological advantages distribution advantages

If negative answer

If positive answer

If negative answer

If positive answer

Then concentrate on domestic business

The go to "Are we capable of being international"

ask can we improve our capability

ask what specific opportunities we should pursue

Professor

W. Tim G. Richardson

The Process of deciding to go international

determine expertise technological advantages distribution advantages

slide 12

If positive answer

ask what specific opportunities we should pursue

Once a choice is made you have to develop a plan

Modes of Entry

No Foreign Ownership

Joint Ventures

Sole Ownership

exports

? what to share

a subidiary co. wholly owned by the parent company

Licenses

? how much to share

Franchising

? with whom to share

Turnkey Ops

? how long to share

Contracts

Professor

W. Tim G. Richardson

The Process of deciding to go international

Once a choice is made you have to develop a plan

slide 13

Modes of Entry

No Foreign Ownership

Joint Ventures

Sole Ownership

exports

? what to share

a subidiary co. wholly owned by the parent company

Licenses

? how much to share

Franchising

? with whom to share

Turnkey Ops

? how long to share

Contracts

Strategic Alliances is a tactic you can use with all 3 modes

Professor

W. Tim G. Richardson

The Choice of Entry Mode / "the ways to do business overseas"

No Foreign Ownership Joint Ventures Sole Ownership

slide 14

exports - easy to do - often the first step of most companies

? what to share ? of shared profits ?, who is in control, foreigners or locals

a subidiary co. wholly owned by the parent company

Licenses - gets you access without same risk - neg. is knockoffs

? how much to share the degree of ownership implies a degree of shared profits & control

The original favourite method of most American companies

Franchising - good way to expand without same degree of risk - bad point, control is difficult

? with whom to share there are many potential partners, companies, gov't etc.

Turnkey Ops - buy an operation already set up locals - expensive but efficient

? how long to share 5 years, 10 years? ? - also, what to do if it fails, who pays

Contracts ie. Nike using Taiwanese firms in Vietnam

Professor

W. Tim G. Richardson