1. Entry Strategy and Strategic Alliances

2. Basic foreign expansion entry decisions
A firm contemplating foreign expansion must make three decisions
Which markets to enter
When to enter these markets
What is the scale of entry

3. Which foreign markets Favorable Unfavorable
Politically stable developed and developing nations
Free market systems
Unfavorable
Politically unstable developing nations

4. Timing of entry Advantages in early market entry: Disadvantages:
First-mover advantage.
Build sales volume.
Move down experience curve and achieve cost advantage.
Disadvantages:
First mover disadvantage
Changes in government policy.

5. Scale of entry Large scale entry Small scale entry:
Strategic Commitments - a decision that has a long-term impact and is difficult to reverse.
May cause rivals to rethink market entry.
Small scale entry:
Time to learn about market.

6. Entry modes
Exporting
Licensing
Franchising
Joint Ventures

7. Exporting Advantages: Disadvantages:
Avoids cost of establishing manufacturing operations
Disadvantages:
May compete with low-cost location manufacturers
Possible high transportation costs
Tariff barriers

8. Turnkey projects Advantages: Disadvantages:
Less risky than conventional FDI
Disadvantages:
No long-term interest in the foreign country
May create a competitor

9. Franchising Advantages: Disadvantages:
Reduces costs and risk of establishing enterprise
Disadvantages:
Quality control

10. Joint Ventures Advantages: Disadvantages:
Benefit from local partner’s knowledge.
Shared costs/risks with partner.
Disadvantages:
Shared ownership can lead to conflict

11. Wholly owned subsidiary
Subsidiaries could be Greenfield investments or acquisitions
Advantages:
No risk of losing technical competence to a competitor
Tight control of operations.
Disadvantage:
Bear full cost and risk

12. Advantages and disadvantages of entry modes

13. Partner selection
Get as much information as possible on the potential partner
Collect data from informed third parties
Former partners
Investment bankers
Former employees
Get to know the potential partner before committing

14. Managing the alliance
Build trust
Learning from partners