4/14/2015
Carlos Fuentes Rivera
Student number: M00397728

UNIT 6 ASSIGNMENT

Discuss how the need for control over foreign operations varies with the strategy and distinctive competencies of a company?

1. The basic reason for a firm to have a foreign business strategy is that most product and factor markets extend beyond the boundaries of a single country.
2. However, most companies start operations as domestic companies and for achieving their profit objectives they develop first a domestic strategy. The options for a domestic strategy may include: (a) Investment in product development; (b) Expansion of the domestic market 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