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EXPORTING LICENSING JOINT

VENTURE MANUFACTURING ASSEMBLY OPERATIONS MANAGEMENT CONTRACT TURNKEY OPERATIONS ACQUISITION STRATEGIC ALLIANCES

WHY EXPORTING? Exporting is a Strategy in which a company, without any marketing or production organization overseas, export a product from its home base. The exported product is fundamentally the same as the one marketed in the home market. Risks are minimal because the company simply exports its excess production capacity when it receives orders from abroad.

The

exporting strategy functions poorly when the companys home-country currency is strong.
In the 1970 the Swiss franc was so strong that

Swiss companies found it exceedingly difficult to export and sell products in the U.S. market. U.S. firms not only found it extremely difficult to export U.S. products but they also had to contend with a flood of inexpensive imports.

When a company finds exporting ineffective but is hesitant to have direct investment abroad, licensing cab be a reasonable compromise. Licensing is an agreement that permits a foreign company to use industrial property (Patents, trademarks and copyrights), technical know-how and skills (technical advice), architectural and engineering designs. Licensor allows a foreign company to manufacture a product for sale in the licensees country and sometimes in other specified markets.

Licensing

is not only restricted to tangible products. A service can be licensed as well. An owner of a valuable brand name can greatly benefit from brand licensing. Coca-Cola has licensed its brand name to more than 3,000 products which are marketed by 200 licensees in 30 countries.

joint venture is simply a partnership at corporate level, it is formed for specific purpose. Joint venture hold by two or more investors sharing ownership and control. Joint venture strategy is the only way, other than through licensing, that a firm can enter a foreign market. This is especially true when wholly owned activities are prohibited in a country.

Marketers

consider joint ventures to be dynamic because of the possibility of a parent firms change in mission or power.
Ex- a technology firm gains a foothold in an

unfamiliar market by acquiring a partner that can contribute local knowledge and marketing skills. If the technology partner becomes more familiar with the market, it buys up more or all equity in the venture or leaves the venture entirely.

The goal of a manufacturing strategy may be to set up a production base inside a target market country. Manufacturing ranging from complete manufacturing to contract manufacturing( with a local manufacturer) and partial manufacturing. Companies avoid fixed investment with the use of contract manufacturing.

From the perspective of the host countries, it is obvious as to why they want to attract foreign capital. Although job creation is the main reason, there are several other benefits for the host country as well. Foreign direct investment, unlike other forms of capital inflows, almost always brings additional resources that are vey desirable to developing economies. The other reason may be gaining advantage of resources for its manufacturing operations, access to raw materials. Another reason may be to take advantage of lower labor costs or other abundant factors of production ( labor, energy and other inputs).

An assembly operation is a variation on a manufacturing strategy.


Assembly means the fitting or joining

together of fabricated components.

In this strategy, parts or components are produced in various countries in order to gain each countrys comparative advantage.
Capital intensive parts may be produced in

advanced nations and labor-intensive assemblies may be produced in an LDC.

It

is a contract with the government or the new owner in order to manage the business for the new owner.
In

some cases, government pressure and restrictions force a foreign company either to sell its domestic operations or to relinquish control. The company may have to formulate another way to generate the revenue, so that company goes under management contract.

Turnkey Operation is an agreement by the seller to supply a buyer with a facility fully equipped and ready to be operated by the buyers personnel, who will be trained be the seller.

When

a manufacturer wants to enter a foreign market rapidly and yet retain maximum control, direct investment through acquisition should be considered. Reason behind it to acquire a foreign company, acquisition of expertise (technology, marketing and management).

International

merger and acquisition are complex, expensive and risky.


Problems

are numerous: finding a suitable company, determining a fair pricing, acquisition debt, merging two management teams, languages and culture differences.

A Strategic Alliance is a formal relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property.
Toshibas

approach is to develop strategic alliance with different partners for different technologies because a single company cannot dominate any technology or business by itself.