International Expansion: Licensing and Franchising

International Expansion

• There are four ways to expand internationally: licensing, franchising, strategic alliance, and wholly owned foreign subsidiary.

Licensing

• Allowing a foreign organization to manufacture and distribute a product in their country in return for a negotiated fee.

Franchising

• Selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits.

Strategic Alliance

• Managers pool their organization's resources and know-how with a foreign company, sharing risk and reward.

• Joint Venture: a strategic alliance among two or more companies that agree to jointly establish and share the ownership of a new business.

Wholly Owned Foreign Subsidiary

• Establishing production operations in a foreign country independently of local direct involvement.

Planning and Implementing Strategy

• Allocate responsibility for implementation to appropriate individuals or groups.
• Draft detailed action plans that specify how a strategy is to be implemented.
• Establish a timetable for implementation that includes precise, measurable goals linked to the attainment of the action plan.

Diversification

• Unrelated Diversification: entering a new industry or buying a company in a new industry that is not related to an organization's current businesses or industries.

Global Strategy

• Selling the same standardized product and using the same basic marketing approach in each national market, resulting in cost savings, but vulnerable to local competitors.

Multi-Domestic Strategy

• Customizing products and marketing strategies to specific national conditions, helping gain local market share, but raises production costs.

Exporting and Importing

• Exporting: making products domestically and selling them abroad.
• Importing: selling at home products that are made abroad.

Formulating Corporate-Level Strategies

• Concentration on a Single Industry: reinvesting a company's profits to strengthen its competitive position in its current industry.

Vertical Integration

• Expanding a company's operations either backward into an industry that produces inputs for its products or forward into an industry that uses, distributes, or sells its products.