Global Market Entry Strategies: Licensing, FDI, and Alliances

Global Market Entry Strategies and Alliances

Market Entry Modes: Definitions and Characteristics

• Licensing: Represents a market entry strategy whereby a company grants rights to a foreign partner.
• Franchising: A variation of licensing.
  • Fact Check: Franchising is another variation of licensing. (T)
  • Fact Check: Franchising in a global context. (T)
  • Fact Check: Franchising is a variation of [X]. (F)
• Foreign Direct Investment (FDI): Honda's investment of $550 million in building a plant is an example of FDI. (T)
• Contract Manufacturing: Companies that use contract manufacturing may require a considerable commitment of management resources.

Licensing Strategy and Advantages

• Licensing is a contractual agreement. (T)
• Licensing as a market entry mode has several advantages, including adaptations by the licensee to fit local tastes.
• To prevent a licensor from becoming a competitor, companies can utilize cross licensing.
• McDonald's success in global franchising is linked to cross licensing. (T)
• Fact Check: One of the advantages of a license arrangement [is X]. (F)

Joint Ventures and Strategic Alliances

Joint Venture Characteristics

• A joint venture with a local partner represents a more extensive commitment. (F)
• Companies may move from licensing or joint venture [to full ownership/FDI]. (T)
• Licensing, joint ventures, and minority stakes are common entry modes. (T)

Global Strategic Partnerships (GSPs)

• GSPs (Global Strategic Partnerships) do not necessarily focus on a single national market or a specific problem.
• An attribute which does not represent true global integration is a relationship organized in vertical lines.
• Governance requires that discussion and consensus must be the norms.
• Having partners from another country can have advantages, but also risks, such as increased competition.
• Another perspective on the future of cooperative relationships is the rise of virtual corporations.

Challenges in Partnerships

• "Corporate amnesia" in global partnerships results from short-term goals with no memory on how to compete.
• The competitive business environment now punishes inadaptability.
• According to a 1991 report by McKinsey & Co., GSPs should focus on objective levels of performance.

Geographic and Regulatory Considerations

• As a general rule, the Chinese government allows foreign companies to enter via joint venture.
• In China, regulations require foreign franchisers to meet certain criteria. (T)
• Factors making Russia an excellent market include an abundance of supplies.

Company Case Facts and Examples

• Avon Products: Uses both acquisition and joint ventures as entry modes. (T)
• Anheuser-Busch: A lesson can be learned from Anheuser-Busch's strategy. (T)
• Boeing 777: Developed the wide-bodied aircraft, the 777, with partners contributing 20% of the work/risk.
• Ford and Mazda: Utilize a joint venture for market entry.
• Ford Motor Company (US): Has a 50-50 joint venture with Mahindra & Mahindra (India).
• Starbucks: For Starbucks and other companies whose business model relies on specific products, exporting may be the initial mode.
• GM: Executives are looking for a joint venture partner in Russia.
• GM/Daewoo: GM and South Korea's Daewoo Group formed a partnership. (F)
• GM/AvtoVAZ (Russia): In a joint venture with Russian manufacturer AvtoVAZ, the resulting product sported a very low sticker price.
• Fuji Photo Film Company (Japan): Invested hundreds of millions [in a specific market/technology]. (T)
• Organizations as diverse as Disney and Caterpillar use licensing/GSPs. (T)
• Keiretsu relationships are significant in global business. (T)
• Despite commanding a 37 percent share of the market, [a specific company is successful/facing challenges]. (T)
• Eventually, an affiliate-based strategy [is superior/necessary]. (F)
• In 2008, the largest merger and acquisition event occurred. (F)
• In a country and market concentration strategy. (F)