...“Assess the merits and demerits of international licensing as a mode of entry into new markets” Disney does not have to produce t-shirts, USB sticks and even waffles with Mickey Mouse’s happy face on it. Instead, it can license the right to use its famous character to different companies around the globe and enjoy the hefty royalties, which in 2010 totaled 28.6 billion dollars (Rorie, 2011). Does it then mean that licensing as a mode of entry into foreign markets is the best option available? Not necessarily so. Given a multitude of foreign market entry methods, all of them being used in practice in some contexts, it is crucial to determine under which circumstances licensing will pay off. The decision factors include the specifics of the foreign market; ownership, location and internalization advantages; resources and capabilities; and the general global strategy of a company. This essay will attempt to analyse what kind of environment would be favourable for the introduction of licensing and use this analysis as a context to assess the pros and cons of this mode of foreign market entry. It is useful to start with the detailed definition of the subject matter. According to Daniels, 2003, “under a licensing agreement, a company (the licensor) grants rights to intangible property to another company (the licensee) to use in a specified geographic area for a specified period in exchange for a fee” (called royalty). The “intangible property” might encompass patents, designs...
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...I. Various Modes of Entry that can be used by companies to enter foreign markets 1. Exporting: Exporting is the process of selling of goods and services produced in one country to other countries * Direct Exports * Indirect Exports A brief discussion on the advantages and disadvantages and the legalities involved in the export process. 2. Licensing: An international licensing agreement allows foreign firms, either exclusively or non-exclusively to manufacture a proprietor’s product for a fixed term in a specific market. A brief discussion on the advantages and disadvantages and the legalities involved in the process to acquire or grant a license. 3. Franchising: A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system A brief discussion on the advantages and disadvantages and the legalities involved in the process of becoming or appointing a franchisor / franchisee. 4. Turnkey Projects: A turnkey project refers to a project when clients pay contractors to design and construct new facilities and train personnel. A turnkey project is way for a foreign company to export its process and technology to other countries by building a plant in that country. A brief discussion on the advantages and disadvantages and the legalities involved in...
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...type of market structures I will give advantages and disadvantages for all and how they have direct relationship with pricing and output decisions. Monopoly A monopoly in the market structure controls the industry; it is the one and only business in that industry. The entry barriers are very high a somewhat impossible to get in and out of, they have no competition so can set quite high prices depending on the demand for the product and set government regulations. Advantages for Monopoly is the business can make huge profit but as this would be an advantage for the business this would also be a disadvantage as they have control over pricing they will set high prices for their product or service, as it is only the one in business in the industry there is little to no change or new products brought in to the industry. The direct relationship monopoly has with pricing and output decisions as it can set high prices the prices also change regular as the demand for the product changes as the demand goes down prices go up and as the demand goes up the price go down. Oligopoly Oligopoly in the market structure is a few businesses that control the industry; the market is shared between those businesses. The entry barriers are high and is difficult to enter the industry but not impossible. They sell identical or similar products so have to think of their competition when it comes down to pricing of their product or service they are selling. Advantages for oligopoly in the market when a...
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...Case 8.3: Kansayaku Research online news services to identify recent developments impacting the accounting and auditing profession in Japan. Briefly summarize these developments in a bullet format. There have been recent developments in Japan that have impacted the accounting and auditing profession. Two of these developments are the Kanebo scandal of 2004 and the 2011 fraud scandal at Olympus Corp. The Kanebo scandal of 2004 involved ChuoAoyama PricewaterhouseCoopers, a leading auditor in Japan. It was discovered that ChuoAoyama's monitoring systems failed to show that its employees had been cooking the books for Kanebo for five years. After this scandal was uncovered, the Japanese Financial Service Agency revised auditing standards, the CPA Law and the Financial Instruments and Exchange Law. The FSA also introduced the Internal Control Report and Audit and quarterly financial statement reviews. In addition, the CPAAOB was formed and was to become an independent regulator under the FSA. Further reforms include requiring auditors to rotate client teams every seven years, with a two year interval before they return. Another development was the Olympus Corp. fraud of 2011. Olympus Corp. admitted to hiding large securities losses by using payments to merger advisers and venture capital funds. The two auditing firms that were under investigation were KPMG ASZA and Ernst & Young ShinNihon. With each firm, there was a failure to obtain sufficient, competent...
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...gains an advantage over the actual and potential rivals” (First Mover Advantage, 2012). The chart below gives advantages and disadvantages for being the first mover to being the late mover. Advantages of 1st Mover: By being first to enter the market, the business gains an advantage over its actual and potential rivals* Can capture market shares easily without worrying about rivals capturing the same customers The first mover will have established familiar products, brand loyalty, and the best retail outlets By beating rivals into the market, the first-mover can consolidate its position and compete more effectively continuing to expand Advantages of Late Mover: Have strong resources and capabilities could overtake the first mover. Free ride on a pioneering firms investments in a number of areas. By the time the late mover enters the market, the technological and market uncertainty has been resolved giving them an advantage. Late movers have the advantage of seeing what methods work after reviewing the 1st movers methods Disadvantages of 1st Mover: Can be less profitable than late movers because of high costs that overwhelm the sales gains Higher premiums accrues to pioneers, which is directly attributable to the timing of entry (entry costs) High advertising cost and entrenched in their original ways of doing things Followers learning from 1st movers mistakes giving them advantages over more efficient processes and technologies. Disadvantages of Late...
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...share; and, (c) Diversification into new industry. B. The firm’s foreign business strategy 1. There are 6 main steps in the firm's foreign business strategy: (a) the firm’s evaluation; (b) selection of a target market (country/region); (c) selection of product to make/sell in target market; (d) selection of market entry-entry mode (exporting, franchising, licensing, sub-contracting, joint ventures or wholly owned companies); (e) Business plan development and execution; (f) Monitoring and evaluation of results. 2. Exporting has the advantage of low costs and risks, avoiding the costs of setting up manufacturing operations in another country. The business plan in the case of exporting can take the form of an export marketing plan. 3. The main advantage of licensing is represented by the low costs for the franchisor because the franchisee bears the costs and risks of opening a new market; the main disadvantage is the risk for the franchisor of losing the control over technology. 4. The main advantage of franchising is that the franchisee bears the costs and risks of opening a foreign market. The main disadvantage is the lack of control over quality. 5. The main advantage of sub-contracting (‘toll production’) is low investment...
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...firms and consumers alike, because it influences how they (firms and consumers operating within the market or industry) behave in terms of pricing, supply, entry & exit, competition and efficiency. Currently, there are four types of market structures practiced in the world. These are: 1. Perfect Competition 2. Imperfect or Monopolistic Competition 3. Monopoly 4. Oligopoly These market structures are as a result of the different degrees of competition within the industry. Each structure is differentiated by freedom of entry and exit, number of buyers and sellers, product differentiation, etc. However, each market structure has got its advantages and disadvantages. Below are some of the advantages and disadvantages of each market structure. Perfect Competition In a perfect competition market structure, there is freedom of entry and exit, products are homogeneous, there is a large number of buyers and sellers, and in this market structure firms are price takers. Examples include Financial markets and Agricultural markets. Advantages 1. There is most efficient use of resources, due to a high degree of competition 2. The consumer benefits 3. Price is usually equal to marginal cost 4. Normal profit is made in the long run (i.e. over time) 5. Firms operate at Maximum efficiency. Disadvantages 1. With introduction of a new idea, firms can make abnormal profit over a short term period Oligopoly Market An oligopoly market has a small number...
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...Foreign Market Entry Modes International Business and Institutions 1 Modes of Foreign Market Entry • • • • • Exporting Licensing/Franchising Management Focus: Tata Group: Foreign Entry Strategies pp.443-444 Joint Ventures Wholly Owned Subsidiaries Mergers & Acquisitions (M&A) 2 Exporting • Advantages – Avoids the substantial costs of establishing operations in the host country – Achieve experience curve and location economies • Disadvantages – High transportation costs, esp. for bulk products – Tariffs – Divided loyalties of local agents 3 Licensing • An arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specific period, in return, the licensor receives a royalty fee from the licensee. • Intangible property: patents, inventions, formulas, processes, designs, copyrights, and trademarks • Advantages – Licensing firm does not need to bear the development costs and risks – Make use of intangible property that a firm possesses that they do not want to develop itself 4 • Disadvantages – Does not give a firm tight control – Limits a firm’s ability to coordinate strategic moves across countries – Difficult to control its technological know-how— Opportunistic Behaviour of Licensee 5 Franchising • Similar to licensing, but franchising involves longer term commitment and insisting strict rules on licensees • Franchiser assists...
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...Chapter 13: Entry Strategy and Strategic Alliances TECHNICO Chose wholly owned subsidiary (agribusiness) 1. Enter into china … not prepared to let chinese counterparts exploit their technology 2. Avoiding technical and licensing agreement 3. No risk in allowing co to use licensing strategy and not using it well | Basic Entry Decisions OLI a) Location b) Ownership specific advantage c) internalisation-specific attributes (entry modes) 1) Which foreign markets? * Assessment of nations long run profit potential * Assess overall attractiveness of model * Suitability of product to that region * Nature of indigenous competitors 2) Timing of entry * Consider first mover advantages a) ability to pre-empt rivals and capture demand by establishing strong brand name b) ability to build sales volume before other entrants cost savings allow you to further cut your costs c) create switching costs that tie customers into products * first mover disadvantages a) pioneering costs: costs that firms have to bear that late entrants can avoid… eg cost of business failure b) research shows that higher probability of survival of an international business after several firms done so c) costs of promoting and marketing the product in a new market 3) scale of entry and strategic commitments * entering market on large scale involve commitment of significant resources; also provides rapid entry ...
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...ABSTRACT This report examines the issue on first mover in the perspective of study on supporting issue and non-supporting issue. This perspective can be discussion in terms of first mover advantages and disadvantages. While this study replicates some previous research on the issue, it also builds on the previous research by developing new theoretical arguments and adopting different research method. This reports shows that there are many different perspective on how first mover contributes to its advantages and disadvantages to a firms. In this paper, we categorize mechanisms that confer advantages and disadvantages on first-mover firms. Our aim is to begin to provide a more detailed research on the issues and to serve as a guide for future research. INTRODUCTION TO THE ISSUE The aim of this paper is also to present issues of importance for practitioners, including furthering our understanding of this issue in developing markets. As the growth of markets in developed countries has been slowing down, multi-national enterprises (MNEs) in developed countries are becoming more and more dependent on the growth of developing markets. With regard to the issue of first mover, what are the advantages and disadvantages of first mover strategy in a firm? It would be helpful for practitioners to have more knowledge of this issue. In recent years of strategic management scholars have expressed enormous interest in the resource based view of the firm. A previous winner of the SMJ best...
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...BUSINESS ENTRY. Contents EXECUTIVE SUMMARY 3 1.0 INTRODUCTION 4 1.1Background 4 1.2 Purpose of International Business Entry 4 1.3 Scopeof international Business Entry 4 1.4 Basic Issues an Organisation Faces 5 1.5 Strategies used by Firms 5 ENTRY STRATEGIES 6 2.0 EXPORTING 6 2.1 Advantages and Disadvantages of Exporting 7 2.2 Passive exports Vs Aggressive exports 7 2.3 Direct and Indirect Export 8 2.4 Case Study 9 3.0 PIGGYBANKING…………………………………………………………………………………….10 4.0COUNTERTRADE……………………………………………………………………………………10 4.1 Forms of Countertrade…………………………………………………………………………….10 4.2 Examples of Countertrade…………………………………………………………………………11 4.3 Disadvantages of Countertrade……………………………………………………………………11 5.0 BARTER………………………………………………………………………………………………11 5.1 Forms of Barter Trade…………………………………………………………………………….11 6.0 FOREIGN PRODUCTION……………………………………………………………………………14 6.1 Licensing…………………………………………………………………………………………..14 6.2 Joint Ventures……………………………………………………………………………………..15 6.3Ownership………………………………………………………………………………………….16 6.4 Exports Processing zones………………………………………………………………………….17 7.0 ANALYSIS AND CONCLUSION…………………………………………………………………...17 7.1 Conclusion and Recommendation………………………………………………………………..17 8.0 REFERENCES………………………………………………………………………………………...19 EXECUTIVE SUMMARY. There are a variety of ways in which a company can enter a foreign market. No one market entry strategy...
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...Charts) Number of Pages : Question: Using a case study of an actual company, explain the advantages and disadvantages of different international strategies and organisational structures for large multinational enterprises. In your answer you should discuss the relationship between strategies and structures and the conditions under which particular strategies and structures are more or less appropriate. You must also use models of strategies and structures as discussed during the course and presented in the textbook. One example of a case could be IBM’s transformation towards a more global model, but you can choose any similar case as long as some information on the case is publicly available. “This is to certify that the work I am submitting is my own. All external references and sources are clearly acknowledged and identified within the contents. I am aware of the University of Warwick regulation concerning plagiarism and collusion. No substantial part(s) of the work submitted here has also been submitted by me in other assessments for accredited courses of study, and I acknowledge that if this has been done an appropriate reduction in the mark I might otherwise have received will be made.” Table of Contents 1. Introduction 3 1.1 Essay Structure 3 2. The Firm – Huawei – The “Glocalized” MNE 4 2.1 Early Beginnings 4 2.2 The first steps to Internationalization 5 2.3 Entry into Advanced Markets 5 2.4 The Push into the Triad 5 3. Literature Review and Analysis 7 ...
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...Name: 馮光合 Student ID: M0414102 Foreign market entry modes 1. Exporting: Exporting is the process of selling of goods and services produced in one country to other countries. There are two types of exporting: direct and indirect. * Direct Exports The most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. The main characteristic of direct exports entry model is that there are no intermediaries. Advantages: * Control over selection of foreign markets and choice of foreign representative companies * Good information feedback from target market, developing better relationships with the buyers * Better protection of trademarks, patents, goodwill, and other intangible property * Potentially greater sales, and therefore greater profit, than with indirect exporting. Disadvantages: * Higher start-up costs and higher risks as opposed to indirect exporting * Requires higher investments of time, resources and personnel and also organizational changes * Greater information requirements * Longer time-to-market as opposed to indirect exporting * Indirect exports Indirect export is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the...
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...managers should be able to make valid choices concerning the release time of that product. This paper addresses the advantages and disadvantages of first move or late move into a market. It also explains how and why companies have succeeded and failed in both theories. Part One: First Mover Theory First Mover Advantages (FMA) FMAs have a unique opportunity to create barriers to competition such as limited resources and patents. They may have a sustainable advantage in technology that is Intellectual Property (IP), R&D, Patents, and resources. They have a monopoly of sorts, however short term that it may be (Lieberman & Montgomery, 1988). Rapid expansion of market share with a new product is extremely likely. Introducing new products involves in-depth market research and a large investment of time and other resources. The results of the market penetration by a first mover can be difficult to overcome for subsequent entries. Setting the benchmark is an advantage that first movers can exploit. If they introduce a product that becomes a high demand item, establish the brand name and provide good service, then they set the bar really high for late entries. Tendency to make a high impact, lasting impression on customers, strong brand recognition, and often, a high consumer cost of switching to late entries (Innovation Zin, 2006). First Mover Disadvantages (FMD) Consumer education is often expensive. When a new product is introduced there is a unique challenge of educating...
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...EXPORT STRATEGIES AVAILABLE TO FIRMS INTERNATIONALISING This report gives an insight into exporting, its definitions and other international business transactions, it goes on discussing the different strategies available to a firm internationalizing for the first time, and these include both direct and indirect strategies available, and provides examples of firms that use export strategies. It also gives the advantages and disadvantages of such strategies. At the end of the report it provides a conclusion and recommendations to what strategies a firm can adopt depending on the situation. 2.0 INTRODUCTION AND BACKGROUND The most conventional forms of international business transactions are international trade and investment. International trade refers to an exchange of products and services across borders. Exchange can be through exporting, importing or countertrade. Exporting is an entry strategy involving the sale of products and services to customers located abroad from the home base or third country. Importing is the buying of products abroad and bringing them to the home market. Countertrade is a business transaction where all or partial payments are made in kind rather than cash. Both finished and intermediate goods, such as raw materials and components are subject to trade. While on the other hand international investment refers to the transfer of assets to another country, or acquisition of assets in that country through foreign direct investment and contractual...
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