internationalization strategies. internationalization risks: cage cultural distance administrative...
TRANSCRIPT
Internationalization Risks: CAGE• Cultural Distance• Administrative Distance• Geographic Distance• Economic Distance
Exporting• Creating goods in the home country and
shipping to another country• Good place to start because low-cost
way of seeing if products are appealing• Problems?
• Cost, time, Logistics• Theft/Loss• Perception/market penetration• Quality control/Image/Branding• Lose control supply chain
Licensing• Granting a foreign company the right to create or
sell your product in exchange for a fee• Common with patented technologies• Avoids absorbing a lot of costs• Key Issues?
• Lower Quality• Brand Dilution• Following Laws• Specific Contract are burdensome & costly• Determining l& tracking licensing fees
Franchising• Renting a firm’s brand name and
business process.• Common in service industries• Little financial investment from the
franchisor• Typical U.S. franchisor has 140
domestic locations before moving overseas
• When Appropriate?
Alliances & Joint Ventures• Strategic Alliance describes firms that create agreements to work
together without forming a new organization. • Equity Joint Venture is when two or more organizations each
contribute to creation of a new entity• Advantages
• Provides local knowledge• Facilitates acceptance in local markets• Clears regulatory paths
• Challenges?• Two org cultures, different end games• Trust becomes paramount• Delegating responsibilities• What will you do with your proprietary technology• Ownership issues (property rights)• Imbalances of power• Confusing to stakeholders• Who is final decision maker?
Subsidiaries• Business operation in a foreign country that a
firm fully owns.• Demonstrates strategic commitment, which is
affirming for customers, suppliers and investors
• Greenfield Operation is building a subsidiary from scratch.
• Acquisition, sometimes called a brownfield operation
Acquisitions
• Acquisition: Takes place when one company purchases another company
• The acquired company is (generally) smaller than the firm that purchases it
• Merger: Joining of two companies into one• Involves similarly sized companies
• Takeover• A special type of acquisition when the target firm did not
solicit the acquiring firm’s bid for outright ownership.
If shareholders don’t gain value from acquisitions,
then why do firms acquire other firms?• Market share• Eliminate competition• Buying IP, knowledge• Buying Revenue• Acquiring People• Resources (vertical/horizontal integration)• Diversification• Acquiring foothold (region, prod mkt)• Overcoming regulations• Prestige• Tax writeoff issues
Acquisitions
-Executive compensation-Acquire patents-Buying PP&E-Personnel synergies-Avoid lawsuits-Find hidden value
• Improving the likelihood of success• Complementary assets/resources• Friendly as opposed to hostile• Careful, long selection processes• Maintain financial slack, Low-to-moderate debt• Maintain key personnel• Sustain emphasis on innovation (continued R&D)• Flexibility (managerial experience with change)
Acquisitions