Access to distribution network Contact with local suppliers and government officials Lack of control Lack of trust Conflicts arising over matters such as strategies, resource allocation, transfer pricing, 8. WHOLLY OWNED SUBSIDIARIES Greater control and higher profits Strong commitment to the local market on the part of companies Allows the investor to manage and control marketing, production, and sourcing decisions Risks of full ownership Developing a foreign presence without the support of a third part Risk of nationalization
Issues of cultural and economic sovereignty of the host country 9. Strategic Alliances Greenfield Operations Offer the company more flexibility than acquisitions in the areas of human resources, suppliers, logistics, plant layout, and manufacturing technology. Types of Strategic Alliances Simple licensing agreements between two partners Market-based alliances Operations and logistics alliances Operations-based alliances The Logic Behind Strategic Alliances Defend Catch-up Remain Restructure Cross-Border Alliances that Succeed:
Alliances between strong and weak partners seldom work. Autonomy and flexibility Other factors: Commitment and support of the top of the partners’ organizations Strong alliance managers are the key Alliances between partners that are related in terms of products, technologies, and markets Similar cultures, assets sizes and venturing experience A shared vision on goals and mutual benefits 10. Timing of Entry International market entry decisions should also cover the following timing-of-entry issues: When should the firm enter a foreign market?
Other important factors include: level of international experience, firm size Mode of entry issues, market knowledge, various economic attractiveness variables, etc. Reasons for exit: Sustained losses Volatility Premature entry Ethical reasons Intense competition Resource reallocation 1 1 . Exit Strategies Risks of exit: Fixed costs of exit Disposition of assets Signal to other markets Long-term opportunities Guidelines: Contemplate and assess all options to salvage the foreign business Incremental exit Migrate customers
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