The document discusses strategies for analyzing and entering foreign markets. It covers analyzing foreign market opportunities, choosing an entry mode, and various options for entering markets including exporting, licensing, franchising, contract manufacturing, management contracts, turnkey projects, and foreign direct investment. Exporting options include indirect exporting, direct exporting, and intracorporate transfers. Licensing and franchising provide low financial risk ways to enter markets but have disadvantages like limited control and potential future competition.

1. Course Title: INTERNATIONAL
BUSINESS
Instructor
Fuad Hasan
MBA & Ph.D. (USA)
Professor of Marketing
University of Chittagong

2. Chapter 6
Strategies for Analyzing and Entering
Foreign Markets

3. 12-3
chapter 12
Strategies for Analyzing and Entering
Foreign Markets
International
Business,
6th
Edition
Griffin & Pustay
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

4. 12-4
Chapter Objectives
• Discuss how firms analyze foreign
markets
• Outline the process by which firms
choose their mode of entry into a foreign
market
• Describe forms of exporting and the
types of intermediaries available to assist
firms in exporting their goods
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

5. 12-5
Chapter Objectives (continued)
• Identify the basic issues in international
licensing and discuss the advantages
and disadvantages of licensing
• Identify the basic issues in international
franchising and discuss the advantages
and disadvantages of franchising
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

6. 12-6
Chapter Objectives (concluded)
• Analyze contract manufacturing,
management contracts, and turnkey
projects as specialized entry modes for
international business
• Characterize the greenfield and
acquisition forms of FDI
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

7. 12-7
FOREIGN MARKET ANALYSIS
• Assess alternative markets
• Evaluate the respective costs,
benefits, and risks of entering each
• Select those that hold the most
potential for entry or expansion
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

8. 12-8
Table 12.1 Critical Factors in Assessing
New Market Opportunities
• Product-market
dimensions
• Major product-market
differences
• Structural
characteristics of
national market
• Competitor analysis
• Potential target
markets
• Relevant trends
• Explanation of
change
• Success factors
• Strategic options
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9. 12-9
Map 12.1 A Tale of Two Chinas
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10. 12-10
CHOOSING A MODE OF ENTRY
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11. 12-11
EXPORTING TO FOREIGN
MARKETS
Advantages
• Relatively low
financial exposure
• Permit gradual
market entry
• Acquire knowledge
about local market
• Avoid restrictions on
foreign investment
Disadvantages
• Vulnerability to tariffs
and NTBs
• Logistical
complexities
• Potential conflicts
with distributors
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12. 12-12
Motivations for Exporting
Proactive Reactive
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13. 12-13
Forms of Exporting
Indirect
exporting
Intracorporate
transfers
Direct
exporting
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14. 12-14
Figure 12.2a Indirect Exporting
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15. 12-15
Figure 12.2b Direct Exporting
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16. 12-16
Figure 12.2c Intracorporate Transfers
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17. 12-17
Additional Considerations for Exporting
Governmental policies
Marketing concerns
Logistical considerations
Distribution issues
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18. 12-18
Types of Export Intermediaries
Export Management Company
International trading company
Other intermediaries
Webb-Pomerene association
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19. 12-19
Export Management Company
An export management company (EMC)
is a firm that acts as its client's export
department by managing the legal,
financial, and logistical details of exporting,
and providing advice about consumer
needs and available distribution channels in
the foreign markets the exporter wants to
penetrate.
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

20. 12-20
Webb-Pomerene Association
A Webb-Pomerene Association is a
group of U.S. firms that operate within
the same industry and that are
allowed by law to coordinate their
export activities without fear of
violating U.S. antitrust laws.
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

21. 12-21
Five Largest Soga Soshas
• Mitsubishi Corporation
• Mitsui & Company
• Marubeni
• Sumitomo Group
• Itochu Corporation
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22. 12-22
Other Intermediaries
Manufacturers’ agents
Manufacturers’ export agents
Export and import brokers
Freight forwarders
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23. 12-23
INTERNATIONAL LICENSING
Licensing is when a firm, called the
licensor, leases the right to use its
intellectual property—technology,
work methods, patents, copyrights,
brand names, or trademarks—to
another firm, called the licensee, in
return for a fee.
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

24. 12-24
Figure 12.3 The Licensing Process
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

25. 12-25
Basic Issues in
International Licensing
• Set the boundaries of the agreement
• Establish compensation rates
• Agree on the rights, privileges, and
constraints conveyed in the agreement
• Specify the duration of the agreement
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

26. 12-26
Licensing
Advantages
• Low financial risks
• Low-cost way to
assess market
potential
• Avoid tariffs, NTBs,
restrictions on foreign
investment
• Licensee provides
knowledge of local
markets
Disadvantages
• Limited market
opportunities/profits
• Dependence on
licensee
• Potential conflicts
with licensee
• Possibility of creating
future competitor
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

27. 12-27
INTERNATIONAL
FRANCHISING
A franchising agreement allows an
independent entrepreneur or
organization, called the franchisee, to
operate a business under the name of
another, called the franchisor, in
return for a fee.
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

28. 12-28
Basic Issues in
International Franchising
• Does a differential advantage exist
in the domestic market?
• Are these success factors
transferable to foreign locations?
• Has franchising been a successful
domestic strategy?
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29. 12-29
Yum! Brands Franchise
Opportunities
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30. 12-30
Franchising
Advantages
• Low financial risks
• Low-cost way to
assess market
potential
• Avoid tariffs, NTBs,
restrictions on foreign
investment
• Maintain more control
than with licensing
• Franchisee provides
knowledge of local
market
Disadvantages
• Limited market
opportunities/profits
• Dependence on
franchisee
• Potential conflicts
with franchisee
• Possibility of creating
future competitor
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

31. 12-31
SPECIALIZED ENTRY MODES
FOR INTERNATIONAL BUSINESS
Contract
Manufacturing
Turnkey
Project
Management
Contract
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32. 12-32
Contract Manufacturing
Advantages
• Low financial risks
• Minimize resources
devoted to
manufacturing
• Focus firm’s
resources on other
elements of the value
chain
Disadvantages
• Reduced control
(may affect quality,
delivery schedules,
etc.)
• Reduce learning
potential
• Potential public
relations problems
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

33. 12-33
Management Contracts
Advantages
• Focus firm’s
resources on its area
of expertise
• Minimal financial
exposure
Disadvantages
• Potential returns
limited by contract
expertise
• May unintentionally
transfer proprietary
knowledge and
techniques to
contractee
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

34. 12-34
Turnkey Projects
Advantages
• Focus firm’s
resources on its
area of expertise
• Avoid all long-
term operational
risks
Disadvantages
• Financial risks
– Cost overruns
• Construction risks
– Delays
– Problems with
suppliers
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

35. 12-35
FOREIGN DIRECT
INVESTMENT
Advantages
• High profit potential
• Maintain control over
operations
• Acquire knowledge of
local market
• Avoid tariffs and
NTBs
Disadvantages
• High financial and
managerial
investments
• Higher exposure to
political risk
• Vulnerability to
restrictions on foreign
investment
• Greater managerial
complexity
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

36. 12-36
Foreign Direct Investment
(continued)
• Building new facilities (the
greenfield strategy)
• Buying existing assets in a foreign
country (acquisition strategy)
• Participating in a joint venture
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37. 12-37
Greenfield Strategy
• Best site
• Modern facilities
• Economic development incentives
• Clean slate
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38. 12-38
Acquisition Strategy
A second FDI Strategy is the
acquisition of an existing firm
conducting business in the host
country.
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

39. Joint Ventures
• Two or more firms agree to work
together and create a jointly owned
separate firm to promote their
mutual interests.
12-39

40. 13-40
chapter 13
International Strategic Alliances
International
Business,
6th
Edition
Griffin & Pustay
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

41. 13-41
Chapter Objectives
• Compare joint ventures and other
forms of strategic alliances
• Characterize the benefits of
strategic alliances
• Describe the scope of strategic
alliances
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

42. 13-42
Chapter Objectives (continued)
• Discuss the forms of management
used for strategic alliances
• Identify the limitations of strategic
alliances
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43. 13-43
Strategic Alliances
A strategic alliance is a business
arrangement whereby two or more
firms choose to cooperate for their
mutual benefit.
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44. 13-44
Joint Venture
A joint venture (JV) is a special type
of strategic alliance in which two or
more firms join together to create a
new business entity that is legally
separate and distinct from its parents.
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

45. 13-45
BENEFITS OF STRATEGIC
ALLIANCES
Potential Benefits
of Strategic Alliances
Ease of
Market
Entry
Shared
Risk
Shared
Knowledge
and
Expertise
Synergy
and
Competitive
Advantage
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

46. 13-46
Map 13.1 Namibia
and Joint Ventures
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47. 13-47
SCOPE OF STRATEGIC
ALLIANCES
• Significant variation
– Comprehensive alliance
– Narrowly defined alliance
• Degree of collaboration depends
upon basic goals of each partner
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48. 13-48
Figure 13.2 The Scope of
Strategic Alliances
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49. 13-49
Types of
Functional Alliances
Production Alliances
Marketing Alliances
Financial Alliances
Research & Development Alliances
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50. 13-50
ISSUES IN THE IMPLEMENTATION
OF STRATEGIC ALLIANCES
Partner
Selection
Joint
Management
Form of
Ownership
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51. 13-51
Factors Affecting
Partner Selection
Compatibility
Nature of Partner’s
Products or Services
Relative Safeness Learning Potential
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52. 13-52
Approaches to
Joint Management
Shared
Management
Agreements
Delegated
Arrangements
Assigned
Arrangements
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53. 13-53
Figure 13.3a Shared
Management Agreement
Partner
1
Partner
2
Alliance
Both parties are active
participants
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54. 13-54
Figure 13.3b Assigned
Arrangement
Partner
1
Partner
2
Alliance
One partner takes primary
responsibility
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55. 13-55
Figure 13.3c Delegated
Arrangement
Partner
1
Partner
2
Joint venture
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56. 13-56
PITFALLS OF STRATEGIC
ALLIANCES
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57. All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in
any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior
written permission of the publisher. Printed in the United
States of America.
Copyright © 2010 Pearson Education, Inc.
publishing as Prentice Hall