Copyright © 2011 Pearson Education 14-1 International Business Environments and Operations, 13/e Global Edition Part 5 Global Strategy, Structure, and Implementation
Copyright © 2011 Pearson Education 14-2 Chapter 14 Direct Investment and Collaborative Strategies
Copyright © 2011 Pearson Education 14-3 Chapter Objectives To clarify why companies may need to use modes other than exporting to operate effectively in international business To comprehend why and how companies make foreign direct investments To understand the major motives that guide managers when choosing a collaborative arrangement for international business To define the major types of collaborative arrangements To describe what companies should consider when entering into international arrangements with other companies To grasp why collaborative arrangements succeed or fail To see how companies can manage diverse collaborative arrangements
Copyright © 2011 Pearson Education 14-4 Exporting May Not Be Feasible When production abroad is cheaper than at home When transportation costs to move goods or services internationally are too expensive When companies lack domestic capacity When products and services need to be altered substantially to gain sufficient consumer demand abroad When governments inhibit the import of foreign products When buyers prefer products originating from a particular country
Copyright © 2011 Pearson Education 14-5 Factors Affecting Operating Modes in International Business
Copyright © 2011 Pearson Education 14-6 Foreign Expansion: Alternative Operating Modes
Copyright © 2011 Pearson Education 14-7 Non-collaborative Foreign Equity Arrangements Taking Control: Foreign Direct Investment –Internalization –Appropriability –Freedom to Pursue a Global Strategy How to make FDI –Buying –Greenfield Investments
Copyright © 2011 Pearson Education 14-8 Motives for Collaborative Arrangements To Spread and Reduce Costs To Specialize in Competencies To Avoid/Counter Competition To Secure Vertical and Horizontal Links To Gain Knowledge
Copyright © 2011 Pearson Education 14-9 International Motives for Collaborative Arrangements To Gain Location Specific Assets To Overcome Governmental Constraints To Diversify Geographically To Minimize Exposure to Risky Environments
Copyright © 2011 Pearson Education Types of Collaborative Arrangements Factors Influencing Choice of Arrangement Type: –Control –Prior Expansion
Copyright © 2011 Pearson Education Licensing Licensing agreements may be: Exclusive or nonexclusive Used for patents, copyrights, trademarks, and other intangible property
Copyright © 2011 Pearson Education Franchising A specialized form of licensing –includes providing an intangible asset and continually infusing necessary assets Franchise Organization Operational Modifications
Copyright © 2011 Pearson Education Management Contracts Foreign management contracts are used primarily when the foreign company can manage better than the owners.
Copyright © 2011 Pearson Education Turnkey Operations Turnkey operations are: Most commonly performed by industrial- equipment, construction, and consulting companies Often performed for a governmental agency
Copyright © 2011 Pearson Education Turnkey Operations Contracting to Scale Making Contacts Marshaling Resources Arranging Payment
Copyright © 2011 Pearson Education Joint Ventures More than one organization owns a company –Consortium: more than two organizations participate –May have various combinations of ownership
Copyright © 2011 Pearson Education Equity Alliances A collaborative arrangement in which at least one of the collaborating companies takes an ownership position
Copyright © 2011 Pearson Education Problems with Collaborative Arrangements Relative Importance Divergent Objectives Questions of Control Comparative Contributions and Appropriations Culture Clashes Differences in Corporate Cultures
Copyright © 2011 Pearson Education Managing International Collaborations Dynamics of Collaborative Arrangements Finding Compatible Partners Negotiating the Arrangement Drawing Up the Contract Improving Performance
Copyright © 2011 Pearson Education Future: Why Innovation Breeds Collaboration Collaborative arrangements will bring both opportunities and problems as companies move simultaneously to new countries and to contractual arrangements with new companies.
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