International Business Strategies: Exporting, Financing, and Entry Models

Developing Export Strategy

Companies develop this strategy when customers in other countries request their goods.

Step 1: Identify a Potential Market

A company should conduct market research and analyze the results. Example: ART BRZ

Step 2: Match Needs to Abilities

Determine whether the company can meet the needs of the market. Example: Air conditioning

Step 3: Initiate Meetings

Build trust and develop a cooperative environment among all parties. Example: Arizona Companies

Step 4: Commit Resources

Allocate the company's human, financial, and physical resources to the project.

Export/Import Financing

1. Open Account

Export/Import financing where an exporter ships merchandise and later bills the importer for its value. Example: MGT briefcase

2. Advance Payment

Export/Import financing where an importer pays an exporter for merchandise before it is shipped.

3. Documentary Collection

Export/Import financing where a bank acts as an intermediary without accepting financial risk. Example: Draft and Bill of Lading

4. Letter of Credit

Export/Import financing where the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document.

Contractual Entry Models

The products of some companies cannot be traded in open markets because they are intangible.

1. Licensing

Practice where one company owning intangible property grants another firm the right to use that property for a specified period of time.

- Cross Licensing

To exchange intangible property with one another.

Example: Fujitsu

2. Franchising

Practice where one company supplies another with intangible property and other assistance over an extended period.

Example: Macas

Advantages:

• Low cost and low risk
• Rapid expansion
• Local knowledge

Disadvantages:

• Cumbersome
• Loss of flexibility

3. MGT Contract

Practice where one company supplies another with managerial expertise for a specific period of time.

4. Turnkey Projects

One company designs, constructs, and tests a production facility for a client firm. Example: Telecom in India

Investment Entry Models

Direct investment in plant and equipment in a country coupled with ongoing involvement in the local operation.

1. Wholly Owned Subsidiary

Facility entirely owned and controlled by a single parent company.

Advantages:

• Control and coordination

Disadvantages:

• Expensive
• High risk

2. Joint Venture

Separate company that is created and jointly owned by two or more independent entities to achieve a common business objective.

Example: Suzuki with India's government

Advantages:

• Reduced risk

Disadvantages:

• Loss of control
• Conflict

3. Strategic Alliance

Relationship where two or more entities cooperate to achieve the strategic goals of each.

Advantages:

• Shared project costs

Disadvantages:

• Partner conflict