External allaences for international business
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External allaences for international business

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External allaences for international business

External allaences for international business
Presentations By Rajendran Ananda Krishnan, https://www.facebook.com/ialwaysthinkprettythings

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External allaences for international business External allaences for international business Presentation Transcript

  • EXTERNAL ALLAENCES FOR INTERNATIONAL BUSINESS Rajendran Ananda Krishnanhttps://www.facebook.com/ialwaysthinkprettythings
  • SYLLABUS Using external parties to help grow a business franchising, advantages and limitations investing in a franchise joint ventures- types Acquisitions and mergers https://www.facebook.com/ialwaysthinkprettythi ngs
  • GROWTH STRATEGIES USED BY BUSINESS Penetration strategy : focuses on firms existing product in existing market and entrepreneur attempts to penetrate this product or market by encouraging existing customers to buy more of the firms current products. Market development strategies : involves selling firms existing product to new group of customers who can be categorized in terms of geography, demography and based on new product use. https://www.facebook.com/ialwaysthinkprettythi ngs View slide
  •  Product development strategy : for the growth involves developing and selling new products to people who have already purchased firms existing products. Diversification strategies : involves selling new product to new market. Even though both knowledge bases appear to be new, some diversification strategies are related to the entrepreneurs knowledge. There are three types of diversification strategies : Backward integration : it refers to taking step back in the value added chain towards raw material. Forward integration : step forward on value added chain towards the customers. Horizontal integration : occurs at the same level of the value added chain but simply involves a different but complimentary, value added chain. https://www.facebook.com/ialwaysthinkprettythi ngs View slide
  • IMPLICATIONS OF GROWTH ON COMPANY Pressure on existing financial resources : growth involves capital investment in form of expenditure in technology, hiring new human resource for company, development of infrastructure. This poses a question mark on companies as to whether company will yield profits for the present investment or not. Pressure on human resource : when companies go in for expansion of business it increases work load on employees which may lead to employee stress, burnout due to which employees may have to leave organization leading to increased employee turnover in the company. https://www.facebook.com/ialwaysthinkprettythi ngs
  •  Pressures on the management of employees : expansion of business increases workload as well as expectation of employees towards business, in terms of decision making style, compensation plan in business which has to be managed by employees at workplace. Pressure on entrepreneurs time : in terms of expansion strategies entrepreneur if required to follow effective time management, as there should be minimum gap between product idea and bringing product in market. https://www.facebook.com/ialwaysthinkprettythi ngs
  • FRANCHISING Franchising is an arrangement where by the manufacturer or sole distributor of trade mark product or service gives excusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures. https://www.facebook.com/ialwaysthinkprettythi ngs
  • ADVANTAGES OF FRANCHISING ( franchisee ) Product acceptance : franchisee enters into a business that has an accepted name, product, service etc. Franchisee does not have to spend resources trying to establish credibility of the business. Management expertise : franchisee enjoys managerial assistance from management expertise of franchisor. As new franchisee often require training on all aspects of operating franchise. https://www.facebook.com/ialwaysthinkprettythi ngs
  •  Capital requirement : franchisor finances the initial investment to start franchisee operations. The initial capital requirement to purchase a franchise generally reflects fee for the franchise construction cost, and the purchase of equipment. Knowledge of market : established franchise business offers entrepreneurs experience in business and knowledge of market. This knowledge is usually reflected in plan offered to franchisee that details profile of the target customers and strategies that should be implemented during beginning of company operations. https://www.facebook.com/ialwaysthinkprettythi ngs
  •  Operating and structural controls : refers to specification in terms of maintaining quality, service and establishing effective managerial controls. Franchisor will guide franchisee in all these dimension for effective establishment of business. ADVANTAGES TO FRANCHISOR Expansion risk : franchising helps entrepreneur to quickly expand business with minimum capital and at later time some extent of responsibility is borne by franchisee so level of risk is reduced on part of entrepreneur. Cost advantage : franchising helps in gaining as if company units are operating on large scale than materials have to be ordered in bulk quantity which https://www.facebook.com/ialwaysthinkprettythi will help entrepreneur on cost cutting. ngs
  • DISADVANTAGES OF FRANCHISING Disadvantages from a Franchisor’s point of view: Considerable capital allocation is required to build the franchise infrastructure and pilot operation. At the beginning of the franchise program, the franchisor is required to have the appropriate resources to recruit, train, and support franchisees. At the beginning of the franchise program there is a broader risk that the trade name can be spoiled by misfits until such time the franchisor is capable of selecting the right candidate for the business. There is a risk that franchisees exercise undue pressure over the franchisor in order to implement new policies and procedures. The franchisor has to disclose confidential information to franchisees and this may constitute a risk to the business https://www.facebook.com/ialwaysthinkprettythi ngs
  •  Disadvantages from a Franchisee’s point of view: The requirement to pay the franchise fees and royalty to the franchisor, which in some cases can be exaggerated. The transfer of all goodwill built in the local market to the franchisor upon expiration or termination of the franchise contract. The necessity of abiding by the franchisor’s operating systems, standards, policies and procedures. Reduced corporate profit margin due to payment of royalties and levies https://www.facebook.com/ialwaysthinkprettythi ngs
  • TYPES OF FRANCHISES Dealership franchising : it is found in automobile sector. In this manufacturers use franchises to distribute their product lines. These dealership act as retail stores for manufacturers E.g. Hedrick Honda Daytona second type of franchising involves using of name , image , way of doing business example subway, Mc Donalds, Dukin Donuts etc. Third type of franchising involves offering of service which comprises of personal agencies such as income tax preparation companies, real estate agencies etc. https://www.facebook.com/ialwaysthinkprettythi ngs
  • JOINT VENTURES A joint venture (JV) is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and asset. E.g. Virgin Mobile India Limited is a cellular telephone service provider company which is a joint venture between Tata Tele service and Richard Bransons Service Group. https://www.facebook.com/ialwaysthinkprettythi ngs
  • TYPES OF JOINT VENTURES Traditional equity joint-venture :Two parents from two different countries. A company created by other companies, with each owning a proportion of the shares Trinational :Two parents from two different countries, set up a venture in a third country Intra firm : Two foreign subsidiaries of the same MNE Cross-national : Two parents of same nationality, venture located in a different country https://www.facebook.com/ialwaysthinkprettythi ngs
  • ADVANTAGES OF JOINT VENTURE Provide companies with the opportunity to gain new capacity and expertise Allow companies to enter related businesses or new geographic markets or gain new technological knowledge Access to greater resources, including specialised staff and technology, sharing of risks with a venture partner Joint ventures can be flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting both your commitment and the business exposure. https://www.facebook.com/ialwaysthinkprettythi ngs
  •  In the era of divestiture and consolidation, JV’s offer a creative way for companies to exit from non-core businesses. Companies can gradually separate a business from the rest of the organisation, and eventually, sell it to the other parent company. Roughly 80% of all joint ventures end in a sale by one partner to the other. https://www.facebook.com/ialwaysthinkprettythi ngs
  • DISADVANTAGES OF JOINT VENTURE It takes time and effort to build the right relationship and partnering with another business can be challenging. Problems are likely to arise if: The objectives of the venture are not 100 per cent clear and communicated to everyone involved. There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners. https://www.facebook.com/ialwaysthinkprettythi ngs
  •  Different cultures and management styles result in poor integration and co-operation. The partners dont provide enough leadership and support in the early stages. Success in a joint venture depends on thorough research and analysis of the objectives. https://www.facebook.com/ialwaysthinkprettythi ngs
  • ACQUISITION Acquiring control of a corporation, called a target, by stock purchase or exchange, either hostile or friendly. also called takeover. Acquisition is entire purchase of company or part of company is completely absorbed . Acquisition can take many forms depending on the goals and position of parties involved in transaction. https://www.facebook.com/ialwaysthinkprettythi ngs
  • ADVANTAGES OF ACQUISITION Established business : the most significant advantage is that the acquired firm has an established image and track record. Location : new customers are already familiar with location. Established marketing structure : an acquired firm has its existing channel and sales structure. Known suppliers , whole sellers, retailers, and manufacturers are important assets to an entrepreneur. Cost : the actual cost of acquiring a business can be lower than other methods of expansion. https://www.facebook.com/ialwaysthinkprettythi ngs
  •  Existing employees : employees of existing business can be an important assets to acquisition process. They know how to run the business and can help ensure that the business will continue in successful mode. https://www.facebook.com/ialwaysthinkprettythi ngs
  • DISADVANTAGES OF ACQUISITION Marginal success record : success of acquisition may prove to be a question if status of acquired company in market is not good. Overconfidence in ability : some entrepreneurs may be overconfident that acquiring of poor market company is challenging and may lead to success. Key employee loss : employees may not be comfortable with change in management of company due to which they may quit organization resulting in key loss of employees. Over valuated : purchase price of company may get inflated due to established image, customer base etc. If entrepreneur has to pay high price for a business , return on investment may not be up to expectation. https://www.facebook.com/ialwaysthinkprettythi ngs
  • MERGER The combining of two or more entities into one, through a purchase acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created from a merger. It is one of the method of expanding venture or business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • ADVANTAGES OF MERGER A merger lets the target (in effect, the seller) realize the appreciation potential of the merged entity, instead of being limited to sales proceeds. A merger allows the shareholders of smaller entities to own a smaller piece of a larger pie, increasing their overall net worth. A merger of a privately held company into a publicly held company allows the target company shareholders to receive a public companys stock, despite the liquidity restrictions of SEC Rule 144a https://www.facebook.com/ialwaysthinkprettythi ngs
  •  A merger allows the acquirer to avoid many of the costly and time-consuming aspects of asset purchases, such as the assignment of leases and bulk-sales notifications. Of considerable importance when there are minority stockholders is the fact that upon obtaining the required number of votes in support of the merger, the transaction becomes effective and dissenting shareholders are obliged to go along https://www.facebook.com/ialwaysthinkprettythi ngs
  • DISADVANTAGES OF MERGER Diseconomies of scale if business becomes too large, which leads to higher unit costs. Clashes of culture between different types of businesses can occur, reducing the effectiveness of the integration. May need to make some workers redundant, especially at management levels - this may have an effect on motivation. May be a conflict of objectives between different businesses, meaning decisions are more difficult to make and causing disruption in the running of the company. https://www.facebook.com/ialwaysthinkprettythi ngs
  • THANK YOUhttps://www.facebook.com/ialwaysthinkprettythings