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36 Cards in this Set
- Front
- Back
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Foreign Direct Investment |
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 |
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International Collaborative Venture |
a cross border business alliance in which partnering firms pool their resources and share costs and risks of a venture |
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Joint Venture |
a form of collaboration between two or more firms to create a jointly-owned enterprise |
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Where are the leading destinations for FDI? |
- advanced economies (Britian, Japan, North America) are attractive markets - emerging and developing economies have gained appeal |
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What are the 7 factors to consider in selecting foreign direct investment locations? |
-market factors - political and governmental factors - legal and regulatory factors - economic factors - profit retention factors - infrastructural factors - human resource factors |
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What are the 5 characteristics of FDI? |
1. substantial resource commitment 2. local presence and operations 3. investment in countries w/ comparative adv 4. intense dealings with social/cultural variables 5. substantial risk and uncertainty |
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What are the market seeking motives for FDI and Collaborative ventures? |
- gain access to new markets/opportunities - follow key customers - compete with key rivals |
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What are the resouce/asset seeking motives for FDI and Collaborative ventures? |
- access raw materials - access to knowledge/assets - access to technological and managerial know-how |
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What are the efficiency seeking motives for FDI and collaborative ventures? |
- reduce sourcing/production costs - locate production near consumers - government incentives - avoid trade barriers |
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How does FDI provide economies of scale? |
- falling fixed costs - managerial resource efficiencies - specialization of labor - financial economies - volume discounts |
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What are the three ways FDI activities are classified? |
1. form (greenfield vs acquisition vs merger) 2. nature of ownership (wholly vs joint) 3. level of integration (horizontal/vertical) |
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1. Form Greenfield Investment |
direct investment to build a new manufacturing, marketing, or administrative facility as opposed to acquiring existing facilities |
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1. Form Acquisition |
direct investment to purchase an existing company or facility |
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1. Form Merger |
a special type of acquisition in which two firms join to form a larger enterprise |
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2. Nature of Ownership Equity Participation |
acquisition of partial ownership in an existing firm |
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2. Nature of Ownership wholly owned direct investment |
investor fully owns the foreign assets |
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2. Nature of Ownership Equity Joint Ventures |
partnership in which a separate firm is created through the investment of assets by two or more parent firms that gain joint ownership of a new legal entity |
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3. Level of Integration Vertical Integration |
the firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product ex. Ford owned Steel Mills, who produced steel to make Ford cars |
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3. Level of Integration Horizontal Integration |
arrangement whereby the firm owns, or seeks to own, the actives involved in a single stage of its value chain ex. Microsoft owned a firm that makes software used to create movie animation |
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What is an example of down-stream value chain facilities? |
marketing and selling operations |
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What is an example of up-stream value chain facilities? |
factories or assembly plants |
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What are the 2 basic types of international collaborative ventures? |
- Equity Joint Venture - Project Based, Non-Equity Venture |
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Equity Joint Ventures |
formed when no one party has all the assets needed to exploit an opportunity |
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What are the advantages of Equity Joint Ventures? |
- greater control over future direction - facilitate transfer of knowledge between partners - common goals |
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What are the disadvantages of Equity Joint Ventures? |
- complex MGMT structure - coordination between partners - difficult to terminate - exposure to political risk |
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Project Based, Non-Equity Venture |
narrow scope, limited timetable, no legal entity partners collaborate on joint development of new technologies, products, or share other expertise with each other |
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What are 3 types of project based, non-equity ventures? |
1. consortium 2. cross licensing agreement 3. cross distribution agreement |
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Consortium |
initiated by multiple partners to fulfill a large scale project ex. commercial aircraft manufacturing |
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Cross Licensing Agreement |
partners agree to access licensed technology developed by the other, on preferential terms |
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Cross Distribution Agreement |
each partner has the right to distribute products or services produced by the other on preferential terms |
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What are the advantages of Project Based Non Equity Ventures? |
- easy to set up, simple MGMT structure - take advantage of partner's strengths - easy to terminate - respond quickly to changes in tech and trends |
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What are the disadvantages of Project Based Non Equity Ventures? |
- knowledge transfer less straightforward
- no equity commitment - greater emphasis on trust - conflicts hard to resolve - difficult to divide costs and benefits |
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What are the 8 steps in the systematic process for international business partnering? |
1. choose going alone or collaboration 2. decide on type of ideal partner 3. screen/qualify candidates 4. determine nature of legal relationship 5. negotiate agreement / 6. build trust 7. establish criteria to measure performance 8. monitor and measure |
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What does it take to be successful in a collaborative venture? |
- be aware of cultural differences - pursue common goals - pay attention to planning/MGMT - safeguard core competencies - adjust to shifting environment circumstances |
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What are the barriers to retail success abroad? |
- culture and language - loyalty to indigenous retailers - legal and regulatory - local sources of supply |
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What are the success factors for retailers? |
- advance research and planning - establish logistics and purchasing networks - assume entrepreneurial, creative approach - adjust business model to suit local conditions |
