One Advantage Of Contractual Agreements Is

While licensing may be the least cost-effective way to enter the market, the risks and headaches are less than for direct investment. It is a legitimate way to use intellectual property in a foreign market and such agreements can also benefit the economies of the destination countries. Licensing has several forms. Licenses may be granted for production processes, for the use of a trade name or for the distribution of imported products. Licensing can be tightly controlled or self-sustaining and allow for expansion without a large capital or personnel commitment if the underwriters have the required skills. Not all licensing experiences are successful, as licensees do not need to be found, monitored and inspired. Among the advantages of a strategic alliance: [35] The likelihood of creating a new 100% subsidiary (also known as the Greenfield Venture) is often complex and potentially costly, but it offers maximum control to the company and has the greatest potential to achieve above-average returns. The costs and risks are high given the cost of starting a new business in a new country. The company may need to acquire the knowledge and know-how of the existing market, either by hiring host countries – perhaps competitive companies – or expensive consultants. One of the advantages is that the company retains control of all its operations. Chapter 9 « Export, import and global sourcing » continues discussions on 100% subsidiaries. However, some sectors benefit more from globalization than others, and some nations have a comparative advantage over other nations in certain sectors.

To create a successful global strategy, leaders must first understand the nature of global industries and the dynamics of global competition, the international strategy (i.e., internationally dispersed subsidiaries act independently and act as if they were local companies, with minimal coordination on the part of the parent company) and a comprehensive strategy (leading to a multitude of business strategies and a high degree of adaptation to the local environment). In principle, there are three essential differences between them. First, it is the degree of participation and coordination of the Centre. In addition, the difference relates to the degree of product standardization and responsiveness to the local business environment. The last is that the difference is related to the integration of policies and competition measures. Some strategic alliances involve many companies that face fierce competition outside the specific framework of the alliance. This carries the risk that one or both partners will try to use the alliance to create an advantage over the other. The advantages of this alliance can create imbalances between the parties, there are several factors that can cause this asymmetry:[38] On the other hand, there are many disadvantages and problems to achieve the success of the activity. Exporting is usually the easiest way to enter an international market, which is why most companies begin their international expansion with this entry-level model. Exporting is the sale of goods and services abroad that are purchased from the country of origin. The advantage of this type of access is that companies avoid the costs of setting up in the new country. However, companies must have the opportunity to market and market their products in the new country, which they usually do through contractual agreements with a local company or distributor.

When exporting, the company needs to think about market labelling, packaging and supply pricing. In terms of marketing and promotion, the company must inform potential buyers of its offers, whether through advertising, fairs or local distribution. In this section, we will look at traditional international entry patterns. Beyond imports, international expansion is achieved through exports, licensing agreements, partnerships and strategic alliances

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