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Exhibit 5.5: World’s Top Companies Ranked by Foreign Assets

Exhibit 5.5: World’s Top Companies Ranked by Foreign Assets

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Exhibit 5.5: World’s Top

Companies Ranked by Foreign

Assets



Copyright© 2005 South-Western/Thomson Learning All rights reserved



Formulating Participation

Strategy

•• Must

Must take

take into

into account

account several

several issues:

issues:

•• Basic

Basic functions

functions ofof each

each participation

participation strategy

strategy

•• Strategic

Strategic considerations

considerations and

and intent

intent ofof company

company

How

How best

best toto support

support companys

companys multinational

multinational

strategy

strategy



Copyrightâ 2005 South-Western/Thomson Learning All rights reserved



Deciding on Export Strategy

•• Does

Does management

management need

need toto control

control sales,

sales, customer

customer

credit,

credit, and

and sale

sale ofof the

the product?

product?

•• IfIf yes,

yes, choose

choose direct

direct exporting

exporting

•• Does

Does company

company have

have resources

resources toto manage

manage export

export

operations?

operations?

•• IfIf not,

not, use

use indirect

indirect exporting

exporting

•• Does

Does company

company have

have resources

resources toto design/execute

design/execute

international

international promotional

promotional activities?

activities?

•• IfIf not,

not, use

use foreign

foreign intermediaries

intermediaries and

and indirect

indirect

exporting

exporting

Copyrightâ 2005 South-Western/Thomson Learning All rights reserved



Export Strategy

Does

Does company

company have

have resources

resources toto support

support extensive

extensive

international

international travel

travel or

or possibly

possibly an

an expatriate

expatriate sales

sales

force?

force? IfIf so,

so, choose

choose direct

direct exporting.

exporting.

•• Does

Does company

company have

have time

time and

and expertise

expertise toto develop

develop

overseas

overseas contacts

contacts and

and networks?

networks? IfIf not,

not, rely

rely on

on

foreign

foreign intermediaries

intermediaries or

or indirect

indirect exporting.

exporting.

•• Will

Will time

time and

and resources

resources affect

affect domestic

domestic operations?

operations? IfIf

not,

not, choose

choose direct

direct exporting.

exporting.

Copyright© 2005 South-Western/Thomson Learning All rights reserved



Licensing Decision

•• Based

Based on

on three

three factors

factors

•• Characteristics

Characteristics ofof the

the products

products

•• Best

Best products

products are

are older

older or

or soon-to-be

soon-to-be replaced

replaced

•• Characteristics

Characteristics ofof the

the target

target country

country

•• Situation

Situation inin target

target country

country

•• Nature

Nature ofof the

the licensing

licensing company

company

Company

Company may

may lack

lack resources

resources toto go

go international

international

Copyrightâ 2005 South-Western/Thomson Learning All rights reserved



Licensing: Disadvantages

••

••

••

••



Gives

Gives up

up control

control

May

May create

create new

new competitors

competitors

Often

Often generates

generates only

only low

low revenues

revenues

Opportunity

Opportunity costs

costs (barriers

(barriers toto other

other participation

participation

strategies)

strategies)



Copyright© 2005 South-Western/Thomson Learning All rights reserved



Motivations for Strategic

Alliances

••

••

••

••

••

••



Partner’s

Partner’s knowledge

knowledge ofof the

the market

market

Government

Government requirements

requirements

To

To share

share risks

risks

To

To share

share technology

technology

Economies

Economies ofof scale

scale

Low

Low cost

cost raw

raw materials

materials or

or labor

labor



Copyright© 2005 South-Western/Thomson Learning All rights reserved



Key Considerations for

Alliances

•• Could

Could other

other participation

participation strategies

strategies better

better satisfy

satisfy

strategic

strategic objectives?

objectives?

•• Does

Does firm

firm have

have management

management and

and capital

capital resources

resources toto

contribute?

contribute?

•• Can

Can partner

partner benefit

benefit the

the companys

companys objectives?

objectives?

What

What isis expected

expected payoffs?

payoffs?



Copyrightâ 2005 South-Western/Thomson Learning All rights reserved



Foreign Direct Investment

(FDI)

••

••



Most

Most experienced

experienced international

international firms

firms choose

choose FDI

FDI

Advantages

Advantages

•• Greater

Greater control

control

•• Lower

Lower costs

costs ofof supplying

supplying host

host country

country

•• Avoid

Avoid import

import quotas

quotas

•• Greater

Greater opportunity

opportunity toto adapt

adapt product

product toto local

local

markets

markets

•• Better

Better local

local image

image ofof the

the product

product

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Disadvantages of FDI

••

••



Increased

Increased capital

capital investment

investment

Increased

Increased investment

investment ofof managerial

managerial and

and other

other

resources

resources

•• Greater

Greater exposure

exposure ofof the

the investment

investment toto political

political and

and

financial

financial risks

risks



Copyright© 2005 South-Western/Thomson Learning All rights reserved



Exhibit 5.6: Advantages and

Disadvantages of FDI



Copyright© 2005 South-Western/Thomson Learning All rights reserved



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Exhibit 5.5: World’s Top Companies Ranked by Foreign Assets

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