International business environment and operations 13e pearson chapter 14

International Business Environments and Operations, 13/e Part Global Strategy, Structure, and Implementation 14-1 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Chapter 14 Direct Investment and Collaborative Strategies 14-2 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Chapter Objectives • • • • • • • To clarify why companies may need to use modes other than exporting to operate effectively in international business To comprehend why and how companies make foreign direct investments To understand the major motives that guide managers when choosing a collaborative arrangement for international business To define the major types of collaborative arrangements To describe what companies should consider when entering into international arrangements with other companies To grasp why collaborative arrangements succeed or fail To see how companies can manage diverse collaborative arrangements 14-3 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Exporting May Not Be Feasible • When production abroad is cheaper than at home • When transportation costs to move goods or services internationally are too expensive • When companies lack domestic capacity • When products and services need to be altered substantially to gain sufficient consumer demand abroad • When governments inhibit the import of foreign products • When buyers prefer products originating from a particular country 14-4 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Factors Affecting Operating Modes in International Business 14-5 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Foreign Expansion: Alternative Operating Modes 14-6 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Non-collaborative Foreign Equity Arrangements • Taking Control: Foreign Direct Investment – Internalization – Appropriability – Freedom to Pursue a Global Strategy • How to make FDI – Buying – Greenfield Investments 14-7 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Motives for Collaborative Arrangements • • • • • To Spread and Reduce Costs To Specialize in Competencies To Avoid/Counter Competition To Secure Vertical and Horizontal Links To Gain Knowledge 14-8 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall International Motives for Collaborative Arrangements • • • • To Gain Location Specific Assets To Overcome Governmental Constraints To Diversify Geographically To Minimize Exposure to Risky Environments 14-9 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Types of Collaborative Arrangements • Factors Influencing Choice of Arrangement Type: – Control – Prior Expansion 14-10 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Licensing Licensing agreements may be: • Exclusive or nonexclusive • Used for patents, copyrights, trademarks, and other intangible property 14-11 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Franchising • A specialized form of licensing – includes providing an intangible asset and continually infusing necessary assets • Franchise Organization • Operational Modifications 14-12 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Management Contracts Foreign management contracts are used primarily when the foreign company can manage better than the owners 14-13 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Turnkey Operations Turnkey operations are: • Most commonly performed by industrialequipment, construction, and consulting companies • Often performed for a governmental agency 14-14 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Turnkey Operations • • • • Contracting to Scale Making Contacts Marshaling Resources Arranging Payment 14-15 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Joint Ventures • More than one organization owns a company – Consortium: more than two organizations participate – May have various combinations of ownership 14-16 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Equity Alliances A collaborative arrangement in which at least one of the collaborating companies takes an ownership position 14-17 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Problems with Collaborative Arrangements • • • • Relative Importance Divergent Objectives Questions of Control Comparative Contributions and Appropriations • Culture Clashes • Differences in Corporate Cultures 14-18 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Managing International Collaborations • • • • • Dynamics of Collaborative Arrangements Finding Compatible Partners Negotiating the Arrangement Drawing Up the Contract Improving Performance 14-19 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Future: Why Innovation Breeds Collaboration Collaborative arrangements will bring both opportunities and problems as companies move simultaneously to new countries and to contractual arrangements with new companies 14-20 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher Printed in the United States of America 14-21 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall .. .Chapter 14 Direct Investment and Collaborative Strategies 14- 2 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Chapter Objectives • • • • • •... particular country 14- 4 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Factors Affecting Operating Modes in International Business 14- 5 Copyright © 2011 Pearson Education,... in international business To comprehend why and how companies make foreign direct investments To understand the major motives that guide managers when choosing a collaborative arrangement for international