International Management Chapter 6 Compare the merits of the

(International Management) Chapter 6

Compare the merits of the entry strategies discussed in this chapter. What is their role in an integrative global strategy?

Solution

Answer:

The various types of strategies to enter international markets and their advantages are described below:

Exporting:-

Exporting can be resorted when domestic supply is greater than demand. It is a low risk strategy and help small companies to enter into international market.

Licensing:-

Licensing is another low risk strategy adopted by companies to enter into international markets. It is helpful to sustain in market where competition is very intense.

Franchising:-

This strategy is mostly used in fast food industry. It reduces operating cost for a firm entering into global markets. In addition, it also help in gaining wider presence.

Turnkey operations:-

This is another form strategy used by companies to enter into international markets. In this strategy local people are given rights to run and operate business in exchange of fee. It reduces operating cost for the company.

Contract manufacturing:-

This kind of short term arrangement is resorted to taking advantage of low costs of a manufacturer in the host country.

Joint ventures:-

Companies also use joint venture to enter into new markets and gain market share.

Wholly owned subsidiary:-

This kind of structure, though has the maximum risk, ensures full control over processes and intellectual property. MNCs depending on the risk/reward assessment in various geographies may have a mix of all the above variants in their integrated global strategy.