Exporting importing 2 licensing 3 franchising 4

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Exporting / Importing 2. Licensing 3. Franchising 4. Strategic Alliances 5. JV (joint ventures) 6. WOS Increasing Risk, Return ($), Control and Need for Commitment and Expertise
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Modes of Entry 6. WOS 5. JV (joint ventures) 4. Strategic Alliances 3. Franchising 2. Licensing 1. Exporting/Importing Risk Return ($) Control Need for Commitment and Expertise or
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Copyright    Dr. Tomasz Lenartowicz Exporting Goods transferred from one country to another. Direct / Indirect ADV Least complex Enables incremental growth Experience curve & Economy of Scale DISADV Political/Legal barriers Costs (transportation, tariffs) Limited local control
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Copyright    Dr. Tomasz Lenartowicz Licensing Transfer of rights of manufacturing for fee ADV Low risk Low cost High speed to market DISADV Limited local control Loss of IP Diminishes global coordination Create competitor
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Copyright    Dr. Tomasz Lenartowicz Franchising: A special form of licensing Franchisee operates business under name of franchisor Pays fee, and receives supplies, training, & technical support Includes brand name, operating system, advertising, reputation, quality control, etc.
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Copyright    Dr. Tomasz Lenartowicz Franchising ADV Low risk Fairly high speed to market Improved “control” over licensing Some global coordination DISADV Dependence on partner Long-term commitment Higher start-up costs and maintenance expense
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Copyright    Dr. Tomasz Lenartowicz Foreign Direct Investment Ownership of foreign facilities Enables greater control, coordination Greenfield, Buy-Out (Acquisition), Joint Venture
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Copyright    Dr. Tomasz Lenartowicz FDI: More Control and Coordination Ownership of foreign facilities: WOS, JV ADV Strategic coordination/ location economies Local control Protects technology/ competitive advantage DISADV Highest cost/risk Requires greater expertise/ knowledge Slower development
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Copyright    Dr. Tomasz Lenartowicz Ownership JV Partner w/ another firm -- form new entity ADV Knowledge synergies Shares risks and costs Surmount political and/or trade barriers DISADV Loss of control Limited global coordination Share profits Coordination challenge
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Copyright    Dr. Tomasz Lenartowicz Greenfield Strategy Start operation from scratch: Obtains land, constructs facilities, hires workers/managers, etc. Acquisition Strategy Buy existing company in the foreign country Integrate into operations WOS: Greenfield or Buy-out ? Which one do you prefer?
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Copyright    Dr. Tomasz Lenartowicz Trade-offs between Greenfield & Acquisition (Buy-out) Greenfield: less ‘baggage’ acclimate at own pace customize to firm’s needs Acquisition: time to begin operations country expertise new technology
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Copyright    Dr. Tomasz Lenartowicz CASE FOR GROUP DISCUSSION Downey Food’s – Philadelphia
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Downey Food’s – Philadelphia, Owner: Jack Downey Product: Lobster soup (bisque). At the JETRO Show (1991) they served his soup and the Japanese loved the soup. They formed a company and Michael Fisher went to Japan for a 10 days trip (free).
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