Slide 1 Professor W. Tim G. Richardson Going International: Strategic Decisions F Multidomestic Companies u their int’l subs are autonomous and self-governing

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Professor W. Tim G. Richardson

Going International: Strategic Decisions

Multidomestic Companies their int’l subs are autonomous and self-governing

Global companies operates as one single entity worldwide

in reality - most companies use a combination of both approached

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Global FirmsC

hap

ter

9

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MultidomesticMultidomesticFirmsFirms

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Reasons for going international ReactiveReactive (from reaction - to receive information,

then act) the company is responding to demand it

discovers in another location it sees it competitors going to a particular place regulations - environmental/work safety may be

“easier” overseas costs of production at home force it to cheaper

areas chance occurrence

additional reasons on page 240 - 241

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Reactive, continued

If a companies customers go international, then it may be required to follow.eg. if an auto parts supplier to Magna sees Magna beginning to make some important component in Mexico, then it may also have to go to Mexico so it can mfg. there and continue to supply Magna - it would be too expensive to ship the parts from Canada

page 242

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Reasons for going international

Proactive Proactive (to actively look for an opportunity)

strategically seeking out advantages launch and offense into a new market before

competitor does power and prestige incentives lower costs of labour, production, energy

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Proactive, continued

As costs of labour have increased in North America, many assemblers and component parts mfg. have had to move offshore

Also, another reason to go international is to gain prestige which can be applied to customers at home - if a company has overseas offices, it appears to be more impressive at home ie. law firms, CA firms

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Ways to enter the new market(choice of entry mode)

simple export of the productsimple export of the product develop a joint venture to sell through an develop a joint venture to sell through an

existing sales company in similar businessexisting sales company in similar business sell license to foreign company and collect sell license to foreign company and collect

royaltiesroyalties contract a foreign company to do the contract a foreign company to do the

business for a % of the salesbusiness for a % of the sales overseas office and subsidiary company set overseas office and subsidiary company set

upup

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The Process of decid ing to go in ternational

Then you askS hould w e be m ore in t'l

If the answ er is N O

Then you askAre we capable of being int'l

If the answer is YES

assess factors in home marketassess competition

trade policiesregulatory environment

? Must we be more International

Ch

apte

r 9

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If negative answ er If positive answer

are spec ific in t'lopportunities identified

as a resulto f th is process

Lis t a ll proac tive reasons

A ssess fac tors ofpotentia l advantage

Then you askS hould w e be m ore in t'l

If the answ er is N O

If negative answ er If positive answer

determineexpertise

technological advantagesdistribution advantages

assessmanagement

financesproducts

listassets

strengthsweaknesses

Then you askAre we capable of being int'l

If the answer is YES

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The Process of decid ing to go international

T hen concentrateon dom estic

bus iness

If negative answ er

The go to"Are we capable

of beinginternational"

If positive answer

are spec ific in t'lopportunities identified

as a resulto f th is process

ask can w eim prove our

capability

If negative answ er

ask whatspecific opportunities

we should pursue

If positive answer

determineexpertise


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Contracts

Turnkey Ops

Franchising

Licenses

exports

No Foreign Ownership

? how long to share

? with whom to share

? how much to share

? what to share

Joint Ventures

a subidiary co.wholly ownedby the parent

company

Sole Ownership

Modes of Entry

Once a choice is made you haveto develop a plan

ask whatspecific opportunities

we should pursue

If positive answer

determineexpertise


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The Process of decid ing to go international

Contracts

Turnkey Ops

Franchising

Licenses

exports


? how long to share

? with whom to share

? how much to share

? what to share

Joint Ventures


company

Sole Ownership

Modes of Entry

Once a choice is made you haveto develop a plan

Strategic Alliances is a tactic you can use with all 3 modes

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The C hoice of Entry M ode / "the w ays to do business overseas"

Contractsie. Nike using Taiwanese

firms in Vietnam

Turnkey Ops- buy an operation

already set up locals- expensive but efficient

Franchising- good way to expand without

same degree of risk- bad point, control is difficult

Licenses- gets you accesswithout same risk- neg. is knockoffs

exports- easy to do

- often the first stepof most companies


? how long to share5 years, 10 years?

? - also, what to do ifit fails, who pays

? with whom to sharethere are many potential

partners,companies, gov't etc.

? how much to sharethe degree of ownership

implies a degree ofshared profits & control

? what to share? of shared profits

?, who is in control,foreigners or locals

Joint Ventures

The original favouritemethod of most

American companies


company

Sole Ownership

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Slide 1 Professor W. Tim G. Richardson Going International: Strategic Decisions F Multidomestic Companies u their int’l subs are autonomous and self-governing