Professional Documents
Culture Documents
A. EXPORTING
- Exporting is frequently employed mode of internationalization. It is
one of the simplest and most common approaches adopted by firms
in their endeavor to enter foreign markets.
- Exporting is marketing and sale of domestically produced goods in
another country.
1. Direct export
- Producer sells directly to the importer. This mode gives the
company a greater degree of control over its distribution
channels.
2. Indirect export
- Indirect exporting is the process of exporting through
domestically based export intermediaries.
B. LICENSING
- is when a firm, called the licensor, leases the right to use its
intellectual property-technology, work methods, patents, copyrights,
brand names, or trademarks—to another firm, called the licensee, in
return for a fee.
- The property licensed may include:
1. Patents
1. Copyrights
2. Technology
3. Technical know-how
4. Specific business skills
- Example: using the design of a popular logo or character
C. FRANCHISING
- Under franchising, an independent organization called the
franchisee operates the business under the name of another
company called the franchisor. In such an arrangement the
franchisee pays a fee to the franchisor. Franchising is a form of
Licensing but the Franchisor can exercise more control over the
Franchisee as compared to that in Licensing.
- Examples:
D. SPECIAL MODES
1. Management Contract
- A management contract is an agreement between two
companies whereby one company provides managerial
assistance, technical expertise and specialized services to the
second company for a certain period of time in return for
monetary compensation.
- Some examples of a first-tier management company include
Accor, Hilton, Hyatt, IHG, Marriott, Rezidor, and Starwood.
2. Turnkey Projects
- A turnkey project is a contract under which a firm agrees to fully
design, construct and equip a manufacturing/business/service
facility and turn the project over to the purchaser when its ready
for operation, for a remuneration.
- Example: Toyota’s car plant in Adapazari, Turkery
3. Contract Manufacturing
- Contract manufacturing is outsourcing entire or part of
manufacturing operations.
- Example: Foxconn, who manufactures parts or even whole
products for giants like Apple, Amazon, and Microsoft.
MERGER
- The combining of two or more companies, generally by offering
the stockholders of one company securities in the acquiring
company in exchange for the surrender of their stock.
- Example: the infamous Daimler Benz and Chrysler merger (car
developing, manufacturing and retailing).
ACQUISITION
- When one company takes over another and clearly established
itself as the new owner, the purchase is called an acquisition.
- Example: Disney acquire Pixar
2. Joint ventures
- A joint venture is an entity formed between two or more parties
to undertake economic activity together. The parties agree to
create a new entity by both contributing equity, and then they
share in the revenues, expenses, and control of the enterprise.
- Example: Sony-Ericsson is a joint venture by the Japanese
consumer electronics company Sony Corporation and the
Swedish telecommunications company Ericsson to make mobile
phones.
A. Ethnocentric Approach
Example:
B. Polycentric Approach
- The domestic companies which are exporting to foreign countries
using the ethnocentric approach find at the later stage that the
foreign markets need an altogether different approach.
- Then, the company establishes a foreign subsidiary company and
decentralizes all the operations and delegates decision-making and
policy-making authority to its executives. In fact, the company
appoints executives and personnel including a chief executive who
reports directly to the Managing Director of the company. Company
appoints the key personnel from the home country and all other
vacancies are filled by the people of the host country.
- Lack of coordination between the host and the parent company, due
to the absence of a link that gets created when expatriates from the
parent country hold the managerial positions at the subsidiary.
- The lack of effective communication between the staff members of
both the host and the parent company, due to the language barrier.
- Difficult to exercise control over the subsidiary.
- Lack of knowledge about the market conditions of the host country.
- The conflict may arise between the managers of both the host and
the parent company due to the different thinking processes.
Example:
- The polycentric approach to recruitment means that we hire locals
to fill our positions in a host country. For example, we could
advertise on local job boards or create a contract with a local
recruitment agency. We use the polycentric approach when [we
need the skills of locals to conduct our business.
C. Regiocentric Approach
- In other words, the managers are selected from within the region of
the world that closely resembles the host country.
- Culture fit, i.e. the managers from the same region as that of the
host country may not encounter any problem with respect to the
culture and the language followed there.
- Less cost is incurred in hiring the natives of the host country.
- The managers work well in all the neighboring countries within the
geographic region of the business.
- The nationals of host country can better influence the decision of
managers at headquarters with respect to the entire region.
Disadvantages of Regiocentric Approach
Example:
- For example, companies such as Coca Cola have been using this
kind of regiocentric orientation approach. For marketing purposes,
countries such as India, Pakistan and Bangladesh have been
grouped together due to their similarities, and a similar
marketing strategy is used across these countries.
D. Geocentric Approach
- Under this approach, the entire world is just like a single country
for the company. They select the employees from the entire globe
and operate with a number of subsidiaries. The headquarters
coordinate the activities of the subsidiaries. Each subsidiary
functions like an independent and autonomous company in
formulating policies, strategies, product design, human resource
policies, operations, etc.
- The Geocentric Approach is a method of international recruitment
where the MNC’s hire the most suitable person for the job
irrespective of their Nationality.
Example:
CONCLUSION
The process of location of foreign operation in a new country must
be carried out carefully. When an organization is choosing to
internationalize their operations, they will first need to decide what
its optimal levels of: commitment, flexibility, control, presence and
risk are in order to select the most appropriate entry mode. Entry
modes in international business can be successful if implemented in
the right circumstances.