1. Considering the six basic options listed below that are available for competi

Question

1. Considering the six basic options listed below that are available for competing in international markets, discuss in detail the factors that a firm must consider when selecting each of these strategic directions. (Please address each individually in a separate paragraph). (I have been using Apple, Inc for all of my discussions FYI).

•Direct Exporting,

•Indirect Exporting,

•Creating a wholly owned International Subsidiary,

•International Franchising,

•International Licensing

•Creating an International Joint Venture or Strategic Alliance.

Explanation / Answer

Exporting is a process in which products/goods are produced in one country whereas they are sell in another countries.

A>Direct Exporting

As the name suggests, it is a type of export wherein the company (manufacturer) sells directly the products to another company/person without having any other intermediator organization/person in between who would help/ make arrangements for them. This is the most basic mode of perfomring business & in simple words it avoids any middleman confusion/ cost/ tensions associated.

Advantages:-

Disadvantages:-

Direct Exporting usually works for smaller productions wherein the product line is defined & restricted.

Factors to be considered:-

B>Indirect Exporting

Indirect exporting as name suggests is not directly to customers but to an intermediary/distributor/ channel partner, who is responsible to sell your products to customers or to wholesalers. Best way out is to sell to an local distributor.

Advantages:-

Disadvantages:-

Factors:-

c> Creating a wholly owned International Subsidiary,

Now in order to start an international business sometimes company in parent country can create a local subsidiary from scratch in new country (this process is known as Greenfield Investment) or they may acquire a existing firm/company which is already in the new country (this process is acquisition).

Local Subsidiary  

Advantages

Disadvantages:-

Acquisition:-

Advantages

Disadvantages:-

Factors to be considered:-

D> International Franchising,

Franchising as term indicates, this a term used for semi-independent business owners who pays a assigned fee & royalties to their original company. This fees is paid to them as original company has provided rights to trademark, sell its products/services in defined area with a set business format & system. Here the term of agreement is for long duration & involves trademarking & operational set-ups of the company.

Advantages:-

Disadvantages:-

Factors:-

E> International Licensing

As per this market, the parental organization allowsor issues a license to produce/ manufacture a proprietor’s product for a fixed term in a specific area/region.

In this foreign marketplace a licensor in the parental country makes limited rights or resources available to the licensee in the another country/region. The legal rights or resources may include sales strategy, patents, trademarks, management, technology, etc that could make it possible for the licensee to manufacture/produce and sell in the his country, the same product as in comparison to the one the parental has already been producing and selling in the own country without having the need for parental company to open a new production house in another regions/areas.

The parental earnings usually take forms of one time payments, technical fees and royalty payments usually calculated as a percentage of sales.

Advantages:-

Disadvantages:-

F> Creating an International Joint Venture or Strategic Alliance.

Joint Venture:-

As the heading says this is a collectively taken decision by two or more parties to create a new organization. Joining hands so that both makes profit in investing in one organization so that factors are shares such as risk, rewards, ownership, and accountability.

Advantages:-

Disadvantages:-

Strategic alliance:

It is a collectively agreed agreement between different organizations upon objectives needed while remaining independent organizations. No new brand or new org is created here.

This type of agreement is in trend these days. Usually no legalities are considered here.

This is performed to maximize the reward.

Advantages:-

Disadvantage:-

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