What can be reasons for companies to prefer franchising when entering foreign markets?
- tax rates
- more affordable
What problems might be associated with franchising for companies?
- quality control
- cultural differences
- working conditions are different
- less control
What are entry strategies for controls in relation to capital demand?
From least control to most:
- licensing
- franchising
- export
- FDI
How does licensing work?
- products made in host country (licensee) using primary company’s (licensor) patents, trademarks and copyrights
- up-front payments and royalty payments
- defined commitment of license partners
- license agreement has limited time
How does franchising work?
- domestic franchisor sells a whole business to a foreign franchisee
- business includes: supply, sales, processes, mgmt concept
- franchisor is head of franchise network
- franchisee has to adopt regulations
- franchise fees with entry fee and running fees
What is Indirect Export?
Diagram, pg67
Products produced in home country and exported via a domestic export company or an importer located in the home country
Employed company bears exchange rate risk, but charges a fee
What is Direct Export?
Diagram, pg67
Products produced in home country and exported directly to the customer, an import agent, or a wholesaler in the host country
What are the types of governmental support in Germany?
- Information Services
- Financial Services
- Support in export marketing
- Political Framework
What is Foreign Direct Investment?
Long-term resource allocation to foreign market
What are Copied corporate functions of FDI?
Supply (raw materials) Assembly Production Sales Research & Development Services
What are factors of Foreign Subsidiaries of FDI?
Legally independent, but economically dependent company
Located abroad
Control and profit transfer agreement with headquarters
What are the Subsidiary networks of MNCs?
Joint investments
Exchange of goods
Standardization of products for different country markets Coordination of internationally dispersed value chains
What does coordination of internationally dispersed value chains entail?
Coordination of production activities of different subsidiaries
R&;D for local subsidiary and other parts of the company
Cross-national marketing programs
What are the role typologies of FDI?
Diagram, pg 73
(high competence, low strategy) - Contributor
(low competence, low strategy) - Implementer
(high competence, high strategy) - Strategic Leader
(low competence, high strategy) - Black Hole
What is the Eclectic Paradigm?
- Combines different approaches, especially theory of monopolistic advantages, location theory, and internalization theory
- Defines the Prerequisites of international production
What are pre-requisites of international production in the Eclectic Program?
Diagram, pg74
- Ownership-specific advantages (e.g. firm-specific knowledge advantages; management, marketing, financial skills; brand names; size)
- Internalization advantages (high costs of entering and enforcing contracts; advantages in using price discrimination or cross-subsidization)
- Location-specific advantages (consumer preferences; low-cost labour force; similar culture,)
What evidence does Agarwal/Ramaswami (1992) sho for choice of foreign market entry mode?
Interactions of OLI advantages mostly predict entry mode
What does the Uppsala model show?
Internationalization emerges from incremental decisions
Restrictions: Shortage of knowledge and resources
Internationalization along ‘establishment chain
What are the 4 steps to resource commitment and market knowledge rise in the Uppsala model?
No regular export
Export via independent representative (agent)
Sales subsidiary
Production subsidiary
What are the dynamics of internationalization in the Uppsala model?
Internationalization decisions depend on:
- Current internationalization step
- State aspects
- Change aspects
- Learning effects lead to positive interplay between the two aspects
What are the key factors to consider in the Uppsala model?
- dynamics of internationalization
- market commitment
- market knowledge
- current activities
- commitment decisions
What are market commitments of Uppsala model?
Amount of committed resources
Exclusiveness of resource use
What market knowledges of Uppsala model do?
Influences commitment decisions
Enhances value of committed resources
What do current activities do according to the Uppsala model?
Influence market knowledge and commitment
