International Business Entry Strategies

The entry and growth strategies of multinational companies in foreign markets. This process involves gradual movement across various modes of entry, from export to local production and investment.

A wholly-owned subsidiary is a company entirely owned and controlled by a parent company in a foreign country. It provides complete control but requires significant investment and operational expertise

A joint venture involves partnering with a local company in a foreign market, sharing resources, risks, and profits. This can provide local knowledge and reduce risks, but requires collaboration and potential conflict.

Exporting involves selling goods produced in the home country directly to customers in foreign markets. It's a low-cost entry strategy but offers limited control over the foreign market.

Licensing agreements allow a foreign company to use a company's intellectual property (patents, trademarks, etc.) in their market. This requires low investment but also limits control over how the brand is managed.

Franchising is a form of licensing where a foreign company is granted the right to operate under a company's brand, using its established business systems and practices. This offers higher control than licensing but requires close monitoring and local adaptability.

Long-term contracts involve agreements to supply products or services to foreign customers for a specified duration. This provides stability for both parties, but may limit flexibility and potentially lead to dependence.

Different factors influencing a multinational's choice of entry mode include: Characteristics of its own company, the industry it's in, the specific country's situation, and the timing of entry. These factors are dynamic and can change over time.

Establishing a wholly owned subsidiary by starting a new company in a foreign market.

Establishing a wholly owned subsidiary by buying an existing company in a foreign market.

Companies with new technologies prefer greenfield investments over acquisitions due to limited options for buying suitable target companies.

Companies entering established markets with few competitors might prefer acquisitions to speed up their entry process.

The rate of acquisitions might be higher in rapidly growing markets as it's faster to enter.

Companies might choose acquisitions as a suitable entry strategy for markets that are stagnating or shrinking.

Large, established companies might prefer greenfield investment to reduce uncertainty and build from the ground up.

Firms choose between greenfield investment and acquisition based on their internal capabilities, available resources, and the specifics of the target market.

A market where no single company has enough power to control the industry's direction. It's made up of many small to medium-sized businesses competing with each other, along with some larger companies.

Increased use of acquisitions to control other companies started in the late 1940s, especially in the United States.

Unilever, a large consumer goods company, built its international ice cream business by acquiring smaller, often family-owned ice cream companies in various countries.

A hostile takeover bid refers to an attempt to acquire a company against the wishes of its current management and board of directors.

Acquisitions in developing countries were less frequent than in developed countries due to complicated negotiations, political sensitivity, and sometimes different legal systems.

Unilever, a multinational company, used acquisitions to grow in Brazil, where it bought its main competitor, Companhia Gessy Industrial, to become dominant in the soap and detergent market.

The increased use of acquisitions was helped by the rise of hostile takeover bids, where a company could buy another against its will, a practice that became common in the UK and US in the 1950s.

The acquisition of a company by another company without the consent of the target company's management. This is considered an aggressive strategy.

The practice of expanding a company's operations into foreign markets. This often involves direct investment or acquiring foreign companies.

The process of combining two or more companies into a single entity. This can be done through mergers or acquisitions.

The unique characteristics, values, and practices that define a company. This can vary significantly across different countries and cultures.

The potential problems or risks that might arise during the process of acquiring a company. This includes issues related to information asymmetry, management issues, and cultural differences.

The practice of using existing resources more efficiently to achieve higher profits. This can involve reducing costs, improving productivity, or increasing sales.

A situation where managers of acquiring companies prioritize their personal gains over the interests of shareholders.

The difficulties that arise when companies with different cultures and management styles are merged together. This can include language barriers, communication breakdowns, and cultural clashes.

The process of integrating an acquired firm into the parent company's systems and structures. This involves standardizing practices, procedures, and even cultural aspects.

This refers to a specific strategy employed by Unilever to integrate acquired firms. It involves introducing corporate standards, systems, and practices to create a unified culture.

During the 1930s, the formation of the Kuwait Oil Company highlighted the use of joint ventures to address political concerns and potentially mitigate risks of sole ownership by a foreign company.

The process of gradually integrating an acquired company's operations into the parent company's systems and structures.

The potential for a merger to negatively impact the acquired company's unique strengths and capabilities, such as local knowledge and relationships.

Mergers are complex processes that require careful consideration and strategic planning to achieve successful integration while maintaining key attributes of the acquired company.

Firms collaborate by sharing risks, like when Standard Oil of California and Texaco partnered to search for oil in Saudi Arabia.

Capital shortages drove firms to create collaborative arrangements to access resources and re-establish market position.

IG Farben used equity stakes and limited full ownership in US companies to regain market position without significant capital investment.

Firms used licensing to access foreign markets without heavy financial or managerial commitment, like Océ van der Grinten's paper manufacturing licensing agreements.

Océ van der Grinten expanded globally by licensing its copying paper manufacturing process to firms worldwide, earning income and knowledge exchange.

Licensing provided income and export market for specialty chemicals used in copying paper, allowing Océ to learn about foreign markets.

Océ transitioned from licensing to establishing its own factories as it grew and became a public company.

The shift from licensing to direct investment by companies like Océ reflects their growth and need for greater control.