Document

Report
Internationalization
Strategies
Internationalization Risks: CAGE
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Cultural Distance
Administrative Distance
Geographic Distance
Economic Distance
Internationalization Modes
Exporting
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Creating goods in the home country and
shipping to another country
Good place to start because
low-cost way of seeing if
products are appealing
Problems?
Licensing
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Granting a foreign company
the right to create or sell your
product in exchange for a fee
Common with patented
technologies
Avoids absorbing a lot of costs
Key Issues?
Franchising
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Renting a firm’s brand name and
business process.
Common in service industries
Little financial investment from the
franchisor
Typical U.S. franchisor has 140
domestic locations before moving
overseas
When Appropriate?
Alliances & Joint Ventures
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Strategic Alliance describes firms that create agreements to
work together without forming a new organization.
Equity Joint Venture is when two or more organizations
each contribute to creation of a new entity
Advantages
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Provides local knowledge
Facilitates acceptance in local markets
Clears regulatory paths
Challenges?
Subsidiaries
Business operation in a foreign country that a
firm fully owns.
• Demonstrates strategic commitment, which is
affirming for customers, suppliers and
investors
• Greenfield Operation is building a subsidiary
from scratch.
• Acquisition, sometimes called a brownfield
operation
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Acquisitions
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Acquisition: Takes place when one company
purchases another company
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Merger: Joining of two companies into one
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The acquired company is (generally) smaller than the firm
that purchases it
Involves similarly sized companies
Takeover
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A special type of acquisition when the target firm did not
solicit the acquiring firm’s bid for outright ownership.
Acquisitions
Acquisitions
If shareholders don’t gain value from acquisitions,
then why do firms acquire other firms?
Acquisitions
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Improving the likelihood of success
• Complementary assets/resources
• Friendly as opposed to hostile
• Careful, long selection processes
• Maintain financial slack, Low-to-moderate debt
• Maintain key personnel
• Sustain emphasis on innovation (continued R&D)
• Flexibility (managerial experience with change)

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