Internationalization Strategies

EMBA Class of 2017

Internationalization Risks: CAGE

• Cultural Distance• Administrative Distance• Geographic Distance• Economic Distance

Entry Modes

Entry Modes

Ownership and Control

Inve

stm

ent R

isk

ExportingLicensing

FranchisingAlliances and JVs

Subsidiaries/Acquisitions

Exporting

• Creating goods in the home country and shipping to another country

• Good place to start because low-cost way of seeing if products are appealin

Licensing

• Granting a foreign company the right to create or sell your product in exchange for a fee

• Common with patented technologies

• Avoids costs

Franchising

• Renting a firm’s brand name and business process.

• Common in service industries• Little financial investment from the

franchisor• Typical U.S. franchisor has 140

domestic locations before moving overseas

Alliances & Joint Ventures

• Strategic Alliance describes firms that create agreements to work together without forming a new organization.

• Equity Joint Venture is when two or more organizations each contribute to creation of a new entity

• Advantages• Provides local knowledge• Facilitates acceptance in local markets• Clears regulatory paths

Subsidiaries• Business operation in a foreign country that a

firm fully owns.• Demonstrates strategic commitment, which is

affirming for customers, suppliers and investors

• Types:• Greenfield Operation is building a subsidiary

from scratch.• Acquisition, sometimes called a brownfield

operation

Acquisitions

• Acquisition: Takes place when one company purchases another company. The acquired company is (generally) smaller than the firm that purchases it

• Merger: Joining of two companies into one. Involves similarly sized companies

• Takeover: A special type of acquisition when the target firm did not solicit the acquiring firm’s bid for outright ownership.

Acquisitions

If shareholders don’t gain value from acquisitions, then why do firms acquire other firms?

Acquisitions

• Complementary assets/resources• Friendly as opposed to hostile• Careful, long selection processes• Maintain financial slack, Low-to-moderate debt• Maintain key personnel• Sustain emphasis on innovation (continued R&D)• Flexibility (managerial experience with change)

Acquisition Success