1321551530_501__Week%252B10%252BSlides

1321551530_501__Week%252B10%252BSlides - Week 10: FDI &...

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Week 10: FDI & International operations 12/05/11 1 330G
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Cost (Capital at Risk) Control Exporting Licensing Franchising Joint Venture Greenfield Investment Low High High Acquisition Modes of operations: the Cost – Control Tradeoff --- Incremental international commitment 2 12/05/11 330G
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Why exporting may not be feasible? -- when production aboard is cheaper than at home 12/05/11 330G 3
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Why exporting may not be feasible? -- when production aboard is cheaper than at home -- When international transportation costs are too high 12/05/11 330G 4
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Why exporting may not be feasible? -- when production aboard is cheaper than at home -- When international transportation costs are too high -- when companies lack domestic capacity 12/05/11 330G 5
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Why exporting may not be feasible? -- when production aboard is cheaper than at home -- When international transportation costs are too high -- when companies lack domestic capacity -- when products and services need to be altered to meet foreign customer demands 12/05/11 330G 6
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Why exporting may not be feasible? -- when production aboard is cheaper than at home -- When international transportation costs are too high -- when companies lack domestic capacity -- when products and services need to be altered to meet foreign customer demands -- when government regulation inhibits imports 12/05/11 330G 7
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Why exporting may not be feasible? -- when production aboard is cheaper than at home -- When international transportation costs are too high -- when companies lack domestic capacity -- when products and services need to be altered to meet foreign customer demands -- when government regulation inhibits imports -- when buyers prefer products of particular origin 12/05/11 330G 8
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Why exporting may not be feasible? -- when production aboard is cheaper than at home -- When international transportation costs are too high -- when companies lack domestic capacity -- when products and services need to be altered to meet foreign customer demands -- when government regulation inhibits imports -- when buyers prefer products of particular origin -- and more… (e.g., foreign exchange rate) 12/05/11 330G 9
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Alternative operation modes 12/05/11 330G 10 Production ownership Production location Home country foreign country Equity arrangements exporting a. Wholly-owned operations b. Partially owned c. Joint venture d. Equity alliance Non-equity arrangements a. Licensing b. Franchising c. Management contracts d. Turnkey operations Red colored are collaborative arrangements
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Non-collaborative foreign equity arrangements -- Taking control through FDI: rationales: internalization based on the TCE theory -- better communications -- employee commitment -- save the trouble of contract negotiations -- avoid problems in implementation -- save costs of possible cheating 12/05/11 330G 11
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International FDI through mergers and acquisitions (M&A) -- motives -- increase stock value -- enter a new market -- diversification -- fill gaps in a product line -- create synergies -- resource seeking -- economies of scale and scope 12/05/11 330G 12
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This note was uploaded on 12/05/2011 for the course MGMT 330G taught by Professor Francissun during the Fall '11 term at Utah Valley University.

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1321551530_501__Week%252B10%252BSlides - Week 10: FDI &...

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