Tài chính doanh nghiệp - Chapter 12: The firm’s market - Entry strategies

EXPORTING ?FRANCHISING? DIRECT INVESTMENT ? SUB-CONTRACTING ? LICENSING ? TURNKEY?Chapter 12:The Firm’s Market-Entry StrategiesTOPIC PLANThe firm’s foreign business strategyExportingContracting (licensing, leasing etc)Joint venturesWholly-owned companyAdvantages and disadvantages of various market entriesStrategic FDI plan issuesExport-import Management Company business strategiesDomestic strategiesInvestment in product developmentExpand domestic market share Diversify into new industry.Foreign business strategiesExportingInternational contractingForeign Direct Investment/Foreign productionThe Firm’s Foreign Business Strategy Steps(Figure 12.1)1.The firm’s evaluationCompetitive advantages and disadvantages2.Selection of a target (geographic) market.3.Selection of product to make/sell in target market4.Selection of market-entry mode:Exporting/Contracting/Foreign Direct Investment5.Business plan development and execution.6.Monitoring and evaluation of results.ExportingWorld Exports of Goods (US $6,1862 billion in 2000) have declined in relative importance compared to foreign production (US$ 15,680 billion in 2000)Most likely mode for serving a foreign market for a domestic firm starting in international business.The Business Plan (Export marketing plan)Many global companies combine exports and FDI. EXPORTS : AdvantagesLeast costly and riskyL/C paymentSpecialisation, economies of scale.Open to any size or kind of firmEXPORTS : DisadvantagesProduction costs in the home country may be HIGHERTransport costs may make exporting uneconomical.Trade barriers in target markets.Divided loyalties of O/S agents.Types of International ExportersThe Casual ExporterDomestic firms that do not do international business on a regular basis( companies setting a j.v. in a third countryJOINT VENTURES(cont.)Advantages :Partner’s local knowledgeCost/risk sharingHost government legislationLow risk of nationalisation.Disadvantages :Technology control risk .Less control over subsidiaries . Management control conflictsWholly Owned subsidiariesA firm owns 100 percent of the stock.Trend in the motor-car sector(e.g.India,China)Advantages :complete management control.Optimum security for technology.“Internalisation” economies.Disadvantages :High costs and risks Long lead time to first sale(especially for" Greenfield”)China:Joint ventures versus Wholly OwnedStrategic FDI Plan IssuesInvestment location evaluationSee Matrix on next slideStrategic organisationInternational groupBusiness/product unitsFunctional unitsGlobal matrixInvestment Location EvaluationVariable12345WeightCountryACountryB1x21x3Political19494Economic3561518Auto-Motive4341216Personnel22346TOTAL1019174044Strategic FDI Plan IssuesFinancial Management and ControlInvestment decisionsFinancing decisionsGlobal money managementGlobal Sourcing StrategyOutsourcingGlobal Human Resource Strategies