Chapter 9 TRANSFER-RELATED ENTRY MODE STRATEGIES Global Business Strategy

International Leasing Where firm known as lessor leases its equipment or machines to foreign firm known as leases for a specific period of time. Benefits Lessor Revenue through leasing fees Fully utilisation of equipment or machines Business expansion Lessee Reduce financial burden Less hassle and no maintenance cost Easier way to access to foreign technologies and facilities. Example : Mitsubishi

International Licensing An agreement between foreign firm (licensor) and local firm (licensee). Licensor grants specified intangible property right to licensee for a specified period of time. In return licensor will receive royalty payment Advantages Firm able to minimize the costs and risks. No substantial investment Good for the firm lacking of capital Disadvantages Firm less control on manufacturing and marketing. Potential loss of intangible property Licensee may gain knowledge of the products and may become competitor. Example : Coca Cola – Pepsi (Malaysia)

International Franchising Involved 2 parties franchisor (royalty fees) and franchisee (gets property rights). Advantages Low political risks. Low cost of doing business. Is an easy way to create revenue by leveraging in assets. The disadvantages Franchisee could jeopardize and damage image of firm. Limited on profit avenue of franchisor. Example : Coffee Bean, Starbucks, 7-Eleven

Build –Operate-Transfer (BOT) Knows as turnkey projects, foreign investors are paid by client to design & construct new facilities and train locals. This entry is large-scale, long-term infrastructure. Arise because of the restriction to FDI imposed by many developing countries. Advantages Generate revenue. Disadvantages Client may later become competitor. BOT does not allow long term presence in international market. Example : Petronas Twin Tower, Kuala Lumpur International Airport.