This document discusses and compares foreign direct investment and collaborative alliances as two modes for market entry. Foreign direct investment involves establishing foreign-based manufacturing facilities, which companies pursue to take advantage of cheaper labor costs, access new markets, and local government incentives. Collaborative alliances form relationships between organizations to link processes and increase performance, such as joint ventures that create new identities through partnerships. The document provides examples of each type of market entry like car companies using foreign direct investment and Sony partnering with Ericsson in a joint venture.

1. Market entry modesFDI vs Collaborative AlliancesBy:C. BettendrofferD. DimitrovC. KleinI.TahiyatO. Vadillo

2. Definition: “Entering a foreign market by developing foreign-based assembly or manufacturing facilities” (Kotler, 2005)

3. Examples: opening a new factory, acquisition & mergers, opening subsidiaries.Foreign Direct Investment 10/11/20102

4. Companies like Mercedes, BMW, Renault looking for delocalization or opening new factories, use FDI because of:Cheaper labour conditionsAccess to new marketsTake advantage of the incentives that local governments offer for localizing their factories there.Examples – Car Manufacturing Industry10/11/20103

5. relationship formed by more than one organization

6. develop linked and common processes

7. to increase the performance of both companiesCollaborative Alliances10/11/20104

8. Joint-VenturePartnership/ Cooperation between 2 or more companies

9. Create a new identity- Approach different segments10/11/20105

10. Ericsson has the technology (focused in b2b) while Sony has a wider marketing expertise. Therefore, the benefits of this joint-venture:Ericsson gain access to a new marketSony gain access to a new technology.Examples – Sony-Ericsson 10/11/20106

11. Franchising: “A contractual association between a manufacturer, wholesaler or service organisation (a franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system in a new market.” (Kotler, “Principles of Marketing”, 2005)IndividualsCharge “Fee” or “management fees”Business PackageUsually GoodwillTake-it-or-leave-itMarketing provided by LicensorShort Terms Licensing/ FranchisingLicensing: “A method of entering a foreign market in which the company enters into an agreement with a licensee in the foreign market, offering the right to use a manufacturing process, trademark, patent, trade secret or other item of value for a fee or royalty” (Kotler, “Principles of Marketing”, 2005) Licensees larger

12. Charge “Royalties”

13. Products/Technology

14. No Goodwill

15. Contract negotiable

16. Marketing in partnership with Licensor

17. Long terms10/11/20107

18. Licensing/ Franchising10/11/20108

19. In the retail food sector companies like McDonalds, BurgerKing, … , use franchising because:Gives opportunity for fast growth without compromising a notable expenditureMotivated management: their earnings rely on their activityThrough agreements they can maintain companies standards.Examples – Retailfood sector10/11/20109

20. Patents are a practical example of licensing strategy.:Helps companies to increase profit through licensing in non-competitive markets (foreign markets, related industries)Licensing helps spreading the technology and creating a bigger market (Sony’s Betamaxvs JVC’s VHS)Main income source for R&D institutes (Fraunhofer German institute and MP3)Examples – Patents10/11/201010

21. THANK YOU FOR YOUR ATTENTION !10/11/201011