Professional Documents
Culture Documents
So baring some very local businesses, it is not possible to stay insulated from
international business because of the above mentioned reasons.
• Scale Economy
• International Product Life Cycle--IPLC stages followed by a product are
different in different countries. These differences provide different market
opportunities in different countries.
• Lead Market--companies want to be leaders in some market and just want
to present in some other lead markets. If a company wants to be global,
then it has to know what is happening in the lead market for its product.
For this the company needs to have a presence in the lead market.
• Following the Customer -- Every company has some core customers.
Companies follow their core customers whereever they go in the
international arena.
2. To acquire resources
1. Exports
2. Contract Manufacturing
3. Licensing
4. Assembly
5. Joint Venture
6. Wholly owned subsidiary
7. Acquisition
1.Exports
The company goes for exports because it has higher competitive advantage. The
transportation costs are low. The tariff rates are also low.
2. Contract Manufacturing
In contract manufacturing the parent/hiring company approaches a firm known as
contract manufacturer with a design/formula. Once the contract is finalised then
the contract manufacturer manufactures the components/products for the hiring
company.
3. Licensing
In licensing, first the licensor searches for a potential licensee. Then the licensor
permits the use of technology for manufacturing a component/product to the
licensee for a definite period at a certain location.
A contract manufacturer only produces products where as a licensee produces
as well as sells for the licensor. The advantage in licensing being the licensor
gets tie ups with best distributors, knows local market and has cost
advantage.The disadvantage is at the expiry of the licensing agreement the
licensee will become the competitor to the licensor. So the market presence
increases with licensing.
4. Assembly
Disadvantages
7. Acquisition
Acquisition may be defined as a corporate action in which a company buys most,
if not all, of the target company’s ownership stakes in order to assume the control
of the target firm.
Advantages
Disadvantages
• Obsolete technology
• Resources might not be best in class
• Processes and practices might not be world class
• World market
• Political environment
• Legal system
• Cultural difference
• Communication
• Distance are higher
• Diversity
• Uncertainty-Political, economical and currency risks
• Uncontrollability-The degree of Uncontrollability is higher in host countries
• Competitions
• Competence-people in different countries are at different levels of
competence.
• Global
• Multi-domestic
• Transnational
Global Company
Transnational Company