1. Unit 6
Reaching Global Markets – Means of International Expansion and Restrictions to Trade

2. Ways to grow and enter foreign markets

3. Entry strategies Licensing Franchising
Contract manufacturing (outsourcing)
Invest directly (FDI)
Enter a joint venture (JV) or strategic alliance
Merge or acquire

4. Totally owned facilities
Licensing
Totally owned facilities

5. Franchising FRANCHISOR Fast and controlled distribution (expansion)
No/low cost of operations (construction, rent, overheads, etc.)
More capital for production and marketing
Standards ensured by franchise agreement
% sales, fees and royalties = cash income
BUT
Hassle of franchisees
Checking standards, quality, and ethics
Cannibalization or competition
Lawsuits
FRANCHISEE
Easy entry with limited capital
Business experience available
Market awareness and advertising
Guidance (?)
Lower cost of some expenses through group buying within franchise organization
Competition (unfair)
Lack of control – strict agreements
Ongoing fees, royalties and share of gross sales = pressure on operating margins
Not uniform contracts

6. Contract manufacturing

7. Foreign direct investment

8. Joint venture (JV) / strategic alliance
Feud between Takara (no. 2) and Bandai (no.1). Takara had sold barbie dolls, altered for Japanese tastes, under license from Mattel since Barbies sold directly by Mattel had been unpopular. But Mattel terminated the agreement abruptly because it felt Takara wasn’t trying hard enough to sell OTHER Mattel toys, and also was leaking Mattel secrets to another American toymaker with which it had a relationship.
Takara claims Mattel/Bandai JV copied the barbie that Takara developed under license from Mattel, which cost them 19 months and $590,00 in development costs.
Ma Ba = Mattel-Bandai JV. Takara Barbie had round face, big eyes, small lips. Different from American versio. Takara sold 6 million dolls, selling $33million worth of Barbie dolls. They paid Mattel 1.8million in license royalties. But Takara cut a deal to work with Hasbro to manufacture and market Transformer toys in 1984 (contract manufacture). Problem was Mattel toys did not sell well in Japan (Masters of the univese, verti-bird helicopters, pop up pictures). Mattel blamed Takara for not getting the programs on TV that would have helped sell the toys.
Mattel approached Takara many times bewteen 1983 to 1985 to launch a JV, but Takara refused (probably due to non-compete with Hasbro) Barbie sales: $26 million. Tansformer sales: $165 million.

9. Mergers
Popco
Popco

10. Restricting trade and growth

11. Ways to restrict trade Tariff: a tax, also called an import duty
Dumping
Import quota
Embargo
Foreign exchange control
Currency devaluation

12. Give 3 reasons why a government would want to restrict trade
In your groups…
Give 3 reasons why a government would want to restrict trade

13. Protect growing industries Protect health
Why restrict trade?
Protect growing industries
Protect health
Stabilize credit rating of country

14. Meet domestic demand Protect jobs Raise prices Retaliation
Why restrict trade?
Meet domestic demand
Protect jobs
Raise prices
Retaliation

15. Tariff
Import duty: tax levied on a particular foreign product entering a country to discourage competition
Revenue: imposed to generate income
Protective: imposed to protect domestic industry from competition

16. Dumping High volume below market rates Anti-dumping duty
Fair trade practice claim
Where do you lodge the complaint?

17. Import Quota
Keeps the domestic price of sugar higher than the world market price. For instance the world market price is about half that of the domestic US price, which protects US sugar producers.

18. Embargo

19. Foreign Exchange (forex) control

20. Currency devaluation

21. Remaining questions

23. Does chasing low labor costs = exploitation?

24. Value in network coordination

25. Value in cooperation

26. Will services industries save developed economies?

27. Business and politics

28. Business and politics

29. Business and politics