BH FINAL CHAPTER 6 PDF

## Chapter 6: Crossing Borders ### Entering existing markets - Multinational follows incremental process as to enter y evolve in foreign markets. #### Incremental process - Export - selling through agents - Est. distribution company - Local production - Process multinational commonly go through....

## Chapter 6: Crossing Borders ### Entering existing markets - Multinational follows incremental process as to enter y evolve in foreign markets. #### Incremental process - Export - selling through agents - Est. distribution company - Local production - Process multinational commonly go through. Other methods: acquisition ### Multinational investment - Capabilities - Market knowledge - Resources - Market transition often triggered by external causes of origin such as: - Imposition of tariffs - Competitive industry - Internal decision-making dynamics (within firms) ### Greenfield vs. Acquisition #### Greenfield - New tech, potential acquisition - Favored by large multinationals (reduce uncertainty) - Only invest in parts of the company (not 100%) #### Acquisition - Best to enter foreign market (avoid uncertainty) - Adaptable to enter oligopolistic markets (speed-up response, reduce noks) - Higher rates in faster-growing markets (speedy process) - Suitable entry: Static/ declining target market - Seize a whole company (will be under parent company) ### Acquisition - Accelerated after WW2. - Became means of consolidating highly fragmented industries. - How it works: - Example: Unilever acquired small, family owned businesses throughout Europe, U.S, Australia. - By 1980s, Unilever held 30% of the European ice cream market. ### Fragmented Market - No company could influence an industry into a particular direction. - Consists of small, medium companies that compete with larger ones. #### History - Start from mid 1950s - From "hostile takeover" bid made against directors - Became est in the British & U.S business systems - Rare in Continental Europe & Japan ### Risks - The process & the past-effects (lack of information as an unfamiliar domain) - Value added often went to shareholders. - Cross-border acquisitions higher risks unfamiliar dimensions of org. issues - Creates post-acquisition problems (management problems) ### Alliances & constellations #### Joint Ventures - Interwar years: - Financial pressures ↑ in joint ventures - Political risk ↑ - High capital demand ↑ - 1930s widely used in production, refining & marketing operations in Middle East (political sutures) ### Collaborative Agreements - Reason: Capital shortage - IG Farben (German): lost investments & trademarks from WW1. - Acquired equity Stakes in U.S chemical & pharmaceutical companies. - Successfully reacquired strong market position without extensive capital investment. ### Licensing - To access foreign markets without managerial & financial commitment - Oce (Dutch) expanded abroad through licensing agreements (copying paper) - Income & export market for special chemicals.