BIBM

Advantages: does not require substantial capital investment, does not need a physical presence in the market

Disadvantages: licensing is a relatively passive entry strategy, profits tend to be lower than those from exporting or FDI

What does the franchisor provide?

Trademark-protected business concept, everything needed for its implementation (patents, know how etc.)

What does the franchisee do to compensate the franchisor?

Lump-sum payment, down-payment and royalty, other mark-ups and contributions

1. Turnkey contracting
2. Build-Operate-Transfer arrangements (BOT)
3. Management contracts
4. Leasing
5. Internationalization by professional service firms

The focal firm plans, finances, organizes, manages and implements all phases of a project abroad and then hands it over to a foreign customer after training local workers.

A firm contracts to build a major facility abroad, operates it for a specified period and then transfers ownership to the project sponsor.

A contractor supplies managerial know-how to operate a hotel, hospital,airport etc. in exchange for compensation.

Mercantilism argues that national prosperity results from a positive balance of trade achieved by maximizing exports and minimizing or even impeding imports.

It states that a country benefits by producing primarily those products in which it has an absolute advantage, those that it can produce using fewer resources than any other country.

it states that it will be beneficial for two countries to trade with each other as long as one is relatively more efficient at producing goods or services needed by the other.

it suggests that each country should export products that intensively use relatively abundant factors of production and import goods that intensively use relatively scarce factors of production.

yes. but its nature and intensity vary over time and from country to country.

• Political stability
• legal environment
• economic indicators
• tax policy

1. Theocratic (religion-based)
2. Secular (non-religion-based)

each product and its manufacturing technologes go through three stages of evolution: introduction, maturity and standardization.

indirect exporting = the firm is contracting with intermediaries located in their home market

direct exporting = the firm is contracting with intermediaries located in the foreign market

There are six major dimensions:

1. Globalization of markets

2. International trade

3. Foreign market entry strategies

4. Participants (FIrms, intermediaries, facilitators, governments)

5. International business risk

6. International investment

1. International trade
2. Exporting
3. Importing or global sourcing
4. International investment
5. International portfolio investment
6. Foreign direct investment (FDI)

it describes the exchange of products (merchandise) and services (intangibles) across national borders.

The transfer of assets to another country or the acquisition of assets in that country.

Passive ownership of foreign securities such as stocks and bonds to generate financial returns.

Foreign direct investment. An internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labor, land, plant, and equipment.

1. Cross-cultural risk
2. Country risk
3. Currency risk
4. Commercial risk

A situation or event in which a cultural misunderstanding puts some human value at stake.

Example: Cultural differences, differences in language, lifestyles, etc.

Potentially adverse effects on company operations and profitability caused by developments in the political, legal, and economic environment in a foreign country.

It includes the possibility of foreign government intervention in firms' business activities.

Risks of adverse fluctuations in exchange rates.

FIrms' potential loss or failure from poorly conceived or executed business strategies, tactics, or procedures.

1. Focal firm
2. distribution channel intermediary
3. facilitator or freight forwarder
4. State-owned enterprises
5. individual consumers and households
6. Retailers
7. Organizational buyers

it chooses exporting as a main strategy for entering foreign markets, because their limited resources prevent them from undertaking FDI.

an example of a reactive motive is the need to serve a key customer that has expanded abroad.