INBS 250 INBS 250
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This 4 page Class Notes was uploaded by Maria Notetaker on Thursday September 15, 2016. The Class Notes belongs to INBS 250 at Montclair State University taught by Nahra in Spring 2015. Since its upload, it has received 7 views. For similar materials see Introduction to International Business in International Business at Montclair State University.
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Date Created: 09/15/16
Ch. 15 - Entry Markets Friday, March 27, 2015 10:03 AM Entry Modes: FDI (previously talked about ch 8) Acquisition: buy an existing company; capital requirement = out of pocket $$; high risk Greenfield venture approach: build a company from scratch; bottom up; (Honda); high risk & expensive Collaborative arrangements: legally binding agreements that 2 or more companies will enter in; partner with an existing company in their industry and use their distributors; Motives: o To spread and reduce costs o To specialize in core competencies (focus on what you do best and improving the process/system you have; allow other companies to invest and make revenues as a result) o To avoid or counter competition (being the first to enter in the business and prevent competitors from coming in later and taking it away from you) o To gain knowledge (learn from them on how to do business) o To secure vertical and horizontal links (to have alliances with manufacturers or duplicate your presence domestically and globally) International motives: o To gain locationspecific assets o To overcome legal constraints (tariffs, trade barriers, requirement by specific industries that forces you to make the product) o To diversify geographically (when economy slows down in your home country, you will have a presence in other countries) o To minimize exposure in risky environments (risk becomes less) Problems: o Partners view importance of collaborative arrangements differently o Partners have different objectives for a collaborative venture o Partners disagree on control issues or provide insufficient direction to a venture o Ways of functioning are different ; cultural differences Licensing: giving rights to use intangible property to use in a specified area for a specified period of time in exchange for a fee (Intangible property = patents, inventions, formulas, designs, patters ; copyrights ; trademarks, trade names, brand names ; franchises, licenses, contracts ; methods programs, procedures, or systems) Franchising: franchisor allows franchisee to use their brand name, etc. in a specific geographical area for a specific period of time. (ex: mcdonalds) Franchisor has to teach franchisee: Product standardization (how to standardize the product) Effective cost control High recognition (promote brand) Management contracts: contractor provides management personnel to perform general or specific functions; used a lot by consulting companies, engineering companies, etc. (train officers in different markets they are entering) Turnkey operation: between a government and a company only . Mainly for infrastructure projects; in billions of dollars; only a handful of companies globally that can manage such projects (because of capital requirements and human resources needed) Joint venture: between 2 entities; two companies create a new company and ownership will be decided on what they like; (Starbucks is partnered with Tata in India) ; very common o Dissolution: (how they will separate): Equity alliance: opens up the door for joint venture; one of the collaborating partners takes an ownership position IMPORTS/EXPORTS Distribution channel (chart on ppt) *all distribution channels sell B to B (business to business) *If a company chooses to bypass (an importer, for example), the company has to provide the (importer's) services. Wholesaler: buys in bulk from the manufacturer (they generalize) ; large volumes ; variety of products ; have warehouses to put merchandise in Distributor: specialize; (comes to wholesaler: "I only specialize in soft drink") ; buy in smaller quantities ; sell to retailers; also have warehouses Indirect selling/exporting: EMC acts as a manufacturer's agent ; selling to wholesalers ; don't know where merchandise will end up being Direct selling/exporting: manufacturer sells products directly in the market ; will have own sales force that will travel to the foreign market ; know exactly where merchandise will end up being COCA COLA VIDEO *Not only introducing to Japan, but also introducing a new distribution network: selling directly to retailers and eliminated wholesalers/distributors (they provided those services themselves) How they became successful in Japan: Establishment of a powerful presence Adopted local business and social practices Tailored products to Japanese products (HiC orange juice) maria gori at 3/27/2015 11:51 AM
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