120 in europe the company prefers wholly owned

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120 In Europe, the company prefers wholly owned subsidiaries because European markets are similar to those in the United States and can be run similarly. Subsidiaries in the United States both operate company-owned stores and license out franchises. Approximately 80 percent of McDonald’s stores around the world are franchised. In Asia, joint ventures are preferred to take advantage of partners’ contacts and local expertise and their ability to negotiate with  bureaucracies such as the Chinese government. McDonald’s has more than 1,000 stores in Japan, and it continues its expansion in China in spite of conflicts with the Chinese government. In other markets, such as in Saudi Arabia, McDonald’s prefers to limit its equity risk by licensing the name—adding strict quality standards—and keeping an option to buy later. Timing Entry and Scheduling Expansions As with McDonald’s, international strategic formulation requires a long-term perspective. Entry strategies, therefore, need to be conceived as part of a well-designed, overall plan. In the past, many companies have decided on a particular means of entry that seemed appropriate at the time, only to find later that it was shortsighted. For instance, if a company initially chooses to license a host-country company to produce a product, then later decides that the market is large enough to warrant its own production facility, this new strategy will no longer be feasible because the local host-country company already owns the rights. The Influence of Culture on Strategic Choices Certain cultures are considered attractive to other cultures. A foreign culture’s perceived at- tributes may be a major reason for the preferences expressed by potential partners and host countries. 121 Journal of International Business J ANUARY 2012 It is clear that cultural distance (CD), or at least the perception of it, affects strategic choice. Potential partners and their host counterparts tend to feel more confident about their international allies when they seem culturally attractive, in particular when new to interna- tional business. The more similar the culture, the more likely managers are to select that region for investment—for example, between the United States and England. However, often that assumption of similarity leads to problems because preparation and allowance is not made for existing subtle differences. Shenkar gives the examples that the friction between dissimilar cultures is more likely in a merger or acquisition than in an IJV—because there is more interaction among parties in the former—whereas an IJV is set up as a separate entity with less interaction from the parent firms. 122 Managers armed with such insight might then choose an IJV over other strategic options that necessitate more cross-cultural interaction.
CHAPTER 6 FORMULATING STRATEGY 273 Companies go international for many reasons, both proactive and reactive. Companies that are proactive from their outset in establishing a presence in many countries are referred to as born globals. The Internet is facilitating companies of all sizes to expand around

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