Chapter 2 - Entering Foreign Market.ppt

Chapter 2 - Entering Foreign Market.ppt - International...

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International Business International Business Chapter 2 ENTERING FOREIGN MARKET
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Microsoft Microsoft
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TOYOTA TOYOTA
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Learning Objectives Learning Objectives By the end of this chapter, you should be able to: Explain the pressure for internationalisation and why firms move production facilities abroad. Outline the various method available to firms seeking to enter foreign markets Assess the advantages and disadvantages of each method Discuss some of the principles that may contribute to successful international alliances Evaluate the different theoretical approaches to internationalisation
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Reasons to internationalise Reasons to internationalise
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To reduce production costs To reduce distribution costs To be close to natural resources For access to key technology For tax advantages To take advantage of incentive schemes Reasons – Supply Facvtors Reasons – Supply Facvtors
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Saturation of home market Increasing demand from customers overseas Market-oriented MNE seeking new markets To avoid trade barriers To match / prevent competitors The opportunity arises Reasons – Demand Facvtors Reasons – Demand Facvtors
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Internationalisation methods Internationalisation methods Export based Direct exporting Indirect exporting Non-equity based Licensing Franchising Equity based Joint ventures Foreign direct investment (FDI) Consortia, Keiretsus and Chaebols.
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Internationalisation method (con t’)
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Selecting an Entry Mode Selecting an Entry Mode Question: How should a firm choose a specific entry mode? Answer: All entry modes have advantages and disadvantages The optimal choice of entry mode involves trade-offs
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Export-based internationalisation Firm operates through intermediaries 1. Export house (simplest, but no contact with market, no real international learning /experience) 2. Confirming house (acts for buyers and guarantees payment to seller - direct contact of buyers and sellers) 3. Buying house (as confirming house but also finds sellers for the buyer)
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Export-based internationalisation (cont’) ‘piggybacking’ Different companies share resources in order to access foreign market more efficiently. A firm with compatible product (called as rider) pays to get on board the distribution system operated by a firm active in overseas markets (known as carrier)
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Export-based internationalisation (cont’) INDIRECT EXPORTING Advantages 1. Lower cost in the short term 2. Quicker to start Disadvantages 1. Less control of costs long term 2. No direct experience of overseas market
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Direct exporting : firm engages directly with overseas markets. Advantages 1. Direct experience of overseas market 2. More control of costs longer term Disadvantages 1. MUCH higher risk 2. Slower and higher cost to start Export-based internationalisation (cont’)
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Export Processing Zones (EPZs) Provide incentives for direct exporting activities: e.g. Lower or zero taxes on profits and/or imported components, government subsidies, better infrastructures, less restrictive regulations, etc.
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  • Spring '17
  • mr rauf
  • Subsidiary, Firm, joint venture

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