Describe and provide examples of four different strategies for reaching global markets.
What will be an ideal response?
There are several strategies a firm can use to reach global markets. Students can choose among the following: Exporting can be accomplished through the use of an export trading company to assist in facilitating the transfer of goods from a domestic market to an international destination. This is generally considered to be the simplest method of international involvement. Licensing involves an agreement in which a producer (licensor) allows a foreign company (licensee) to produce its products in exchange for a fee (royalties). Disney is an example of a company that is involved in a licensing agreement. The company agrees to permit a foreign company, Oriental Land Company, to open Disneyland in Tokyo and Disney is paid a royalty. Licensing can be a dangerous strategy because the company is transferring technology and possibly creating a future competitor. Franchising is also a method of establishing a presence in a foreign market. Franchising is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory in a specified manner. McDonald's and Dunkin' Donuts are two excellent examples of multinational franchising. Joint ventures involve a partnership in which two or more companies (often from different countries) join to undertake a major project. Joint ventures allow for shared technology, shared marketing expertise, entry into otherwise closed markets, and shared risks. A strategic alliance is a long-term partnership between two or more companies established to help each company build competitive market advantages. Such alliances can provide firms with access to new markets, capital, and technical expertise. Unlike joint ventures, strategic alliances do not typically involve sharing costs, risks, management, or even profits. Contract manufacturing involves a foreign company producing private-label goods to which a domestic company then attaches its own brand name or trademark. Foreign direct investment is the buying of permanent property and businesses in foreign nations. The most common form of foreign direct investment is a foreign subsidiary, a company that is owned in a foreign country by another company called the parent. Creating foreign subsidiaries is an expanded level of international involvement whereby a company that is owned by another company operates in a foreign market. Pillsbury was actually a foreign subsidiary of a major British firm at one time. Examples of strategies for reaching global markets may vary.
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