IntStr - (From Strategy in Three Dimensions Dorothy Brawley...

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(From: Strategy in Three Dimensions , Dorothy Brawley, Bob Desman and Tim Mescon, SouthWestern Publishing Company: Expected release late 1996, Chapter 6) International Strategies When geographical expansion includes foreign countries, some new strategic considerations are added to the mix. At the very least, transcending national borders introduces sociocultural, political/legal, economic, and technological complexity to the planning process because each new country adds an additional dimension to each of the institutional variables. Further complexity is introduced from interaction effects among the institutions of multiple countries (e.g. compatibility among financial reporting requirements, product standards, advertising messages, etc.). Add to this infrastructure differences, distance, the level of sophistication of foreign customers, and the presence or absence of support industries (e.g. suppliers, market communications media, repair services, etc.) and new concerns are spawned. And then, of course, there is the issue of risk . . . political risk, economic risk, social risk, ecosystem risk, and infrastructure risk. Potential risks compel consider- ation of the depth of the commitment a firm might make in some locales and how the new risks might best be managed. Although risk is an on-going issue for all enterprises, the risks associated with cross-border enterprises will, from the outset, determine whether new locations are approached boldly or with caution. The point here is that movement into the global marketplace is somewhat more complicated than adding new time zones, longer distances, and other languages to a strategy that was conceived for domestic purposes. Entry. Entry strategies dictate how the firm will create its initial presence in a foreign location. Here, consideration is given to the degree of risk to which assets will be exposed; what assets will have the greatest exposure and their criticality; the degree to which the expanding firm understands local business conditions and markets; legal and regulatory constraints imposed by both the home country and the host country that will affect the enterprise; the security of proprietary processes, products, and trade secrets; and, the amount of ownership control the expanding firm requires or desires. The ultimate entry decision will take one of the following forms. Licensing and Franchising — A license or franchise is simply a legal agreement that permits one firm to use the intellectual property of another in exchange for a royalty and/or share of the profits that might accrue to that use. Intellectual property would include such things as product and process designs, formulae and recipes, trademarks and brand names, and copyrighted materials. Exporting — An export is a product or service that is created in one country and sold to a customer from another country, but not necessarily delivered or consumed in the buyers’ country. From a foreign trade perspective, a physical product is generally not considered an
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