direct investment and collaborative strategies -...

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

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Chapter 14

Direct Investment and Collaborative

Strategies


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Introduction

Factors Affecting Operating Modes in International Business


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Why Exporting May Not Be Feasible

� Production abroad is cheaper than at home

(e.g. Bangladesh or Vietnam or Indonesia)

� Transportation costs to move goods or services internationally are too expensive

(e.g. Coca-Cola exporting from Turkey to Kyrgyzstan)

� Companies lack domestic capacity

� Governments inhibit the import of foreign products

(import barriers; tariffs, quatos etc. )

� Buyers prefer products originating from a particular country

(e.g. Fashion from Italia or France)


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IntroductionForeign Expansion: Alternative Operating Modes


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Non-Collaborative Foreign Equity Arrangements

� There are two ways to invest in a foreign country

� Acquisition of existing facilities

� Building new facilities – known as greenfield investment

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Methods for Making FDI Buy versus build

� The advantages of acquiring include:

� adding no further capacity to the market

� avoiding start-up problems and costs

� Gain goodwill and brand identification

� Companies may choose to build (greenfield investment) if:

� no desired company is available for acquisition

� local government prevent

� inefficient plants or location

� acquisition will lead to carry-over problems


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Why Companies CollaborateCollaborative Arrangements and International Objectives


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TGN (Taisei-Gama-Nurol) Ortak Girişimi - MARMARAY

The Microsoft Partner Network

Coca-Cola/Danino vs. PepsiCo/Nestle


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Wal-Mart, Japanese partner Seiyu

India changed laws in September 2012 to allow foreign retailers to own majority stakes in stores selling multiple brands,


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Types of Collaborative Arrangements

Collaborative Strategy and Complexity of Control


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� Licensing

� a company grants intangible property rights to another company to use in a specified geographic area for a specified period in exchange for royalties

�Can be

� exclusive or nonexclusive

� used for patents, copyrights, trademarks, and other intangible property


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� Franchising

� a specialized form of licensing

� includes providing an intangible asset and continually infusing necessary assets

�Franchise organization

� Master franchise

�Operational modifications


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� Management contract

� a company is paid a fee to transfer management personnel and administrative know-how abroad to assist a company

� Foreign management contracts are used primarily when the foreign company can manage better than the owners


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� Turnkey operation

� one company contracts with another to build complete, ready-to-operate facilities

� Most commonly performed by industrial-equipment, construction, and consulting companies

� Often performed for a governmental agency


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� Joint ventures

� involve more than two companies, one of which may own more than 50 percent

�may have various combinations of ownership

� A consortium involves more than two organizations


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� Equity alliances

� an arrangement in which at least one of the companies takes an ownership position in the other


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Problems with Collaborative Arrangements

� Problems with collaborative arrangements include

� Relative importance

� Divergent objectives

� Questions of control

� Comparative contributions and appropriations

� Culture clashes

� Differences in corporate cultures

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