Chapter Eight

1. Chapter Eight Strategies for Entering International Markets

2. With rare exceptions, products just don’t emerge in foreign markets overnight---a firm has to build up a market over time. Several strategies, which differ in aggressiveness, risk, and the amount of control that the firm is able to maintain, are available. Seen from the perspective of the international marketer, market entry modes can be classified into three groups

3. 1. Export modes ( low control, low risk, high flexibility) • 2. Intermediate modes (contractual modes) ( shared control and risk, split ownership) • 3. Hierarchical modes ( investment modes) (high control, high risk, low flexibility)

4. Product differentiation advantage International experience Product complexity Firm size Risk averse + + + + - Control + Entry mode decision Export modes (externalization) Intermediate modes Hierarchical modes (internalization) Flexibility + (Increasing internalization Tacit nature of Know-how + Transaction frequency + + Opportunistic behavior Transaction costs + Asset specificity + + + + Uncertainty - - - Sociocultural Distance between Home country And host country Country risk/ Demand uncertainty Market size And growth Direct and Indirect Trade barriers Intensity of competition Small number of relevant export Intermediaries available

5. 机会主义行为是指在信息不对称的情况下人们不完全如实地披露所有的信息及从事其他损人利己的行为。一般是用虚假的或空洞的，非真实威胁或承诺谋取个人利益的行为。如虚假广告、专利剽窃、偷税漏税、违约现象、偷懒行为等。 • 　　机会主义行为就是一种损人利己的行为。新制度经济学家威廉姆森认为，人们在经济活动中总是尽最大能力保护和增加自己的利益。自私且不惜损人，只要有机会，就会损人利己。损人利己的行为可分为两类：一类是在追求私利的时候，“附带地”损害了他人的利益，例如化工厂排出的废水污染了河流，另一类则纯粹是以损人利己为手段为自己谋利，如坑蒙拐骗、偷窃。机会主义行为使各种社会经济活动处于混乱无序状态，造成资源极大浪费，给社会带来难以估计的损失，阻碍了社会的发展。具体到管理活动中，机会主义行为会降低管理绩效，使管理目标难以达成。

6. 资产专用性 • 　　资产专用性是指用于特定用途后被锁定很难再移作他用性质的资产,若改作他用则价值会降低,甚至可能变成毫无价值的资产。 • 　　英文为Asset Specificity，和Asset homogeneity资产通用性相对。不同行业有不同的要素品质、要素结构和特征，即资产具有专用性。因此资产要素在不同行业间的再配置必然涉及一定的费用而产生成本。某行业要素的资产专用性越强，说明改变旧资产的转换成本越高，于是行业的进入壁垒和垄断程度越高。相反，资产同质性越强，则变更经营领域的成本越低。

7. Criteria for selecting an option • The business’s financial resources and hence its capacity to purchase or set up foreign establishments • Physical and technical characteristics of the product (simple products are easy to manufacture abroad) • Availability of marketing and general business services in target foreign markets • Ease of communication with intermediaries (agents, consortium buyers, etc) in specific countries

8. Local constraints on the foreign ownership of businesses and/or licensing arrangements • The degree of market penetration desired (deep penetration normally requires a permanent presence within the country concerned) • the firm’s experience and expertise in selling and operating abroad

9. Size of the margins taken by intermediaries in particular countries • Tariff levels, quotas and other non-tariff barriers within a market • Availability of trained and competent personnel for staffing foreign subsidiaries • Political stability of the foreign countries the firm wishes to enter and other risk factors

10. How quickly the firm wishes to commence operations in the market (outright purchase of a fully operational local business is usually the speediest method • Volatility （发挥性） of, and competitive intensity in , the countries concerned • The ease with which intellectual property (知识产权） can be protected (this is particularly important for licensing and joint ventures)

11. Export Modes 出口模式 • 1.Indirect exporting • Indirect exporting means that a firm may export only occasionally to sell surplus or obsolete inventory or that part of its production is used in another firm’s products and then sold abroad.

12. Forms: • 1) Domestic-based export merchant: buys the manufacturer’s products and then sells them abroad • 2) Domestic-based export agent: seeks and negotiates foreign purchases and is paid a commission. Included in this group are trading companies

13. 3) Export management company (EMC)/ export house (EH): agrees to manage a company’s export activities for a fee • 4) Cooperative organization: carries on exporting activities on behalf of several producers and is partly under their administrative control. Often used by producers of primary products---fruits, nuts, and so on.

14. 2. Direct exporting直接出口 • Direct exporting occurs when a firm makes a commitment to seek export business. • Performs all the necessary export functions, including contacting local distributors, conducting the required marketing research, preparing export documentation, and setting prices.

15. Forms: • 1) Domestic-based export department or division: an export sales manager carries on the actual selling and draws on market assistance as needed • 2) Overseas sales branch or subsidiary: an overseas sales branch allows the manufacturer to achieve greater presence and program control in the foreign market

16. 3) Traveling export sales representatives: the company can send home-based sales representatives abroad to find business • 4) Foreign-based distributors or agents: the company can hire foreign-based distributors or agents to sell the company’s goods. They might be given exclusive rights（专有权） to represent the manufacturer in that country or only limited rights.

17. Difference between an agent and a distributor • a distributor purchases a supplying firm’s products (assuming thereby full responsibility for their condition, sale and any bad debts) • A agent: put their clients in touch with third parties but then drop out of resulting contracts, so that the agreements are between the agent’s client and third parties, without the agent being further involved.

18. 3. Cooperative export marketing groups • 合作出口营销群体 • Among small and medium-sized enterprises attempting to enter export markets for the first time

19. Intermediate Entry Modes中间商进入模式 • Main intermediate entry modes • Licensing 许可证 • Franchising 特许经营 • Joint ventures 合资 • Strategic alliances 战略联盟 • Management contracting 管理合约

20. Advantages and disadvantages of export modes • Advantages: • A minimal risk • Low capital required • Providing a pedestal for learning from the foreign markets • Being easy to exit the market

21. Disadvantages: • Unsatisfied agency contracts, containg vague and being difficult to enforce performance criteria • Threatens by the initial stages of a firm’s internationalization to the firm’s future market entry and expansion activities

22. Licensing 许可证 • Definition： It is a contractual agreement in which a seller ( or licensor) allows its technology, patents, trademarks ( brand names), company name, designs, processes, or intellectual property to be used by a buyer (or licensee) in exchange for fees ( or royalties). Foreign licensing is an agreement in which a firm permits a foreign company to produce and distribute its merchandise or use its trademark, patent, or processes in a specified geographical area.

23. The license contract- key elements • Fees and royalties • Geographical area covered by the agreement • Permissible selling prices • Frequency of payments • Confidentiality requirements • Procedures for settling disputes and which country’s law shall apply to the agreement

24. Minimum production levels • Termination and renewal arrangements • Ownership of new inventions resulting from the licensor’s work • Licensee’s capacity to become involved with competing products • Support services to be given by the licensor (e.g. training)

25. Franchising 特许经营 • Franchising involves a comprehensive licensing agreement. A franchisor (授予特许者) grants to a franchisee the use of its trademark, operating procedures, products, and various support services in exchange for fees and often, a percentage of the profits • Franchiser n. 经销商, 代销商 • Franchisee n. 总经销商, 有代销权的人或团体

26. 与特约经销、特约代理、独家经销的区别 • 特许经营是总部将商标、商号、专利、经营诀窍等的使用许可和经营指导等作为组合提供给加盟商的，并由此获得加盟商支付的使用费，是一揽子服务。与此相反，特约店、代理店、专卖店是基于合同，就附有某一制造商商标的特定商品进行持续性地买入、再卖出，或者受其委托代为经销该产品。在特许经营中，必须要确保特许经营体系的统一性和产品、服务质量的一致性，即总部对加盟店的经营给予全面的指导、援助；在特约店、代理店、专卖店中，也有制造商对其进行指导、援助的，但这只不过是制造商附随商品的批发销售的二次行为，该行为自身通常不能请求支付使用费。

27. Joint ventures 合资 • Joint ventures intend to share the risk, cost and management with a partner in a foreign country. • Within a foreign joint venture a domestic firm enters into a partnership with a firm in the target nation. Joint ventures usually require a direct investment and result in a loss of control

28. Strategic alliances 战略联盟 • Non-equity based alliances can be formed to share costs, to gain market knowledge, to serve an international market, to develop industry standards together, or to combine skills. • They may achieve goals unattainable by each firm alone and have advantages and disadvantages similar to equity based ventures.

29. Typically such alliances use no formal contract, no equity terms, but are a loose, evolving arrangement with guidelines and expectations of shared gains. • Finding the right partner and developing the right relationship can be time consuming and expensive.

30. 20世纪80年代初的美国汽车行业正陷入极为严重的衰退期，能源价格居高不下和消费者偏好的改变导致了对高质省油的小型车的巨大需求。通用公司为适应全球竞争的需要，加大了在研究与开发方面的投入，但收效甚微。丰田公司是当时世界上汽车行业中最具成本竞争力的生产者，又拥有生产小型车的经验，并有首创的丰田管理模式。然而，由于日本汽车的对美出口受到出口限额的限制，要积极的争取巨大的美国市场，需要丰田公司将生产基地向美国转移。如果双方进行合作，通用公司就可以从丰田公司获得小型车生产技术、改善车间管理的经验以及稳定的供销关系等，而丰田公司则可以成功的打破汽车行业的贸易壁垒、积累在美国的海外运作经验等。双方于1983年2月曾签订协议，共同出资在美国加利福尼亚建立合资企业——新联合汽车制造公司。通过双方之间的股权合资，通用公司成功的引入了高新技术，提高了自己在中小型汽车领域的竞争实力。而丰田公司则通过合资成功的打入了美国市场，并且掌握了在美国从事汽车生产的经验，弥补了缺乏海外运作经验的缺陷。

31. Management contacting • Refer to contracts to provide specific services, management expertise or technical assistance to a foreign firm either for a flat fee or a percentage of sales or profits. • Providing only management skills

32. A management contract is an arrangement under which operational control of an enterprise is vested by contract in a separate enterprise which performs the necessary managerial functions in return for a fee. Management contracts involve not just selling a method of doing things (as with franchising or licensing) but involves actually doing them. A management contract can involve a wide range of functions, such as technical operation of a production facility, management of personnel, accounting, marketing services and training.

33. In Asia, many hotels operate under management contract arrangements, as they can more easily obtain economies of scale（规模经济）, a global reservation systems, brand recognition etc. It is not unusual for contracts to be signed for 25 years, and having a fee as high as 3.5% of total revenues and 6-10% of gross operating profit.

34. Advantages and disadvantages of intermediate modes • Advantages: • Less capital then foreign direct investment • Quick access to markets • Disadvantages: • Lack of control over the activities abroad

35. 8.6 Hierarchical Modes全资模式 • The higher the control the more the firm is able to affect the business activities in the foreign market place, and, of course, the bigger the risk the greater the revenue. However, the risk also increases going downwards because the capital investment is larger.

36. Advantages and disadvantages of hierarchical entry modes • Advantages: • Better understanding of market opportunities • Disadvantages: • Much more capital than the intermediate ways • The local know-how not being as effectively exploited as in intermediate modes • Slower access to markets