International Business Study Set 9

What entry mode do fashion designers such as Pierre Cardin, and some high-tech firms like Texas Instruments, share in common? Why might this be an attractive option for entering foreign markets?

What is the difference, if any, between a joint venture and a strategic alliance?

Under what circumstances might piracy be beneficial to an exporter?

Under what conditions might a company prefer a joint venture to a wholly owned subsidiary when making a foreign investment?

What are the distribution options that a direct exporter can use, and what are the primary strengths and weaknesses of each type?

What is indirect exporting, and how does it differ from direct exporting? What are the main types of indirect exporting, and what are the primary strengths and weaknesses of each type?

Use the globalEDGE site (http://globalEDGE.msu.edu/) to complete the following exercises: You are working for a computer manufacturer that is planning to set up an assembly unit in Uruguay to serve the region. Because this would involve importing parts from other countries and then exporting the finished products throughout Latin America, top management has requested information on the trading practices of Uruguay. In particular, these managers want to know (a) the average time to clear both imports and direct exports through Customs; (b) the percentage of losses from direct export due to theft, as well as, breakage; and (c) the percentage of firms identifying Customs and trade regulations as a major constraint. Using Enterprise Surveys, a site provided by the World Bank, that measures business perceptions of the investment climate, prepare a brief executive report summarizing your findings. How does Uruguay compare to other countries in Latin America on these measures?

The Foley Company, a manufacturer of soybean harvesters, has for years sold a substantial number of machines in Brazil. However, a Brazilian firm has begun to manufacture them, and Foley's local distributor has told Jesse Osborne, Foley's president, that if Foley expects to maintain its share of the market, it will also have to manufacture locally. Osborne is a quandary. The market is too good to lose, but Foley has had no experience with foreign manufacturing operations. Because Brazilian sales and repairs have been handled by the distributor, no one in Foley has had any firsthand experience in that country. Osborne has made some rough calculations that indicate the firm can make money by manufacturing in Brazil, but the firm's lack of marketing expertise in the country troubles him. He calls in Joanne Poe, the export manager, and asks her to prepare a list of all the options open to Foley, with their advantages and disadvantages. Osborne also asks Poe to indicate her recommendation. Which of the options would you recommend? Why?

If a company wanted to be a pioneer for entering a market, what conditions might increase the likelihood of success? If the company wanted to instead be a fast follower, what would be different in terms of the conditions that would increase the likelihood of the company's successful entry?

The Foley Company, a manufacturer of soybean harvesters, has for years sold a substantial number of machines in Brazil. However, a Brazilian firm has begun to manufacture them, and Foley's local distributor has told Jesse Osborne, Foley's president, that if Foley expects to maintain its share of the market, it will also have to manufacture locally. Osborne is a quandary. The market is too good to lose, but Foley has had no experience with foreign manufacturing operations. Because Brazilian sales and repairs have been handled by the distributor, no one in Foley has had any firsthand experience in that country. Osborne has made some rough calculations that indicate the firm can make money by manufacturing in Brazil, but the firm's lack of marketing expertise in the country troubles him. He calls in Joanne Poe, the export manager, and asks her to prepare a list of all the options open to Foley, with their advantages and disadvantages. Osborne also asks Poe to indicate her recommendation. Assume you are Joanne Poe. Prepare a list of all the options available to Foley, and give the advantages and disadvantages of each.

Use the globalEDGE site (http://globalEDGE.msu.edu/) to complete the following exercises: Entrepreneur magazine annually publishes a ranking of America's top 200 franchisers seeking international franchisees. Provide a list of the top 10 companies that pursue franchising as a mode of international expansion. Study one of these companies in detail, and provide a description of its business model, its international expansion pattern, the qualifications it looks for in its franchisees, and the type of support and training it provides.

How can a company control a joint venture if it only has a minority share of the equity?

Piracy as a Means of Foreign Market Entry Although we discuss elsewhere in this chapter the threats to companies from piracy of intellectual property such as brand names or patented technology, piracy can also contribute to the global spread of a product-sort of market entry by accident. a Japanese anme has estimated global sales of $80 billion, 10 times what it was a decade ago. Former Japa­nese Prime Minister Junichiro Koizumi once called it the "savior of Japanese culture." Disney has purchased the American rights to a number of anime films. The Cartoon Network shows several anime series as part of its Adult Swim programming. TOKOPOP will publish 400 volumes of translated Japanese comics for U.S. consumption. Two decades ago, there was no U.S. market for Japanese anime. The change occurred not through a concerted push from Japanese media companies but in response to American fans who pulled anime in. Although Japanese anime was exported to the West in the early 1960s, some saw it as inappropriate for American children, and by the late 1960s it was available only in Japanese overseas communities. The advent of the videotape recorder allowed dubbing and sharing, and soon anime fans were contacting both Japanese citizens and American soldiers stationed in Japan for tapes. Fan clubs emerged as essentially lending libraries and dubbing centers. In the late 1980s and 1990s, amateurs began dubbing these tapes into English: this "fansubbing" spread. In the early 1990s, large-scale anime conventions brought artists and distributors from Japan, who were astonished to see this thriving content they had never marketed. They returned to Japan ready to service this market commercially. The fan clubs continued their operations, but stopped fansubbing and distributing titles as they became commercially available. This "piracy" is now supported by the commercial industry, which in fact sponsors events where fan-made manga, b a highly derivative version of the commercial product, is sold. The media companies use these events to publicize their own releases, spot new talent, and monitor shifts in audience tastes. The idea that some piracy actually helps to diffuse new products is not limited to Japanese anime. It has also been tested for software. Careful analysis actually found that software piracy is not necessarily harmful to a software firm seeking to launch a new product, because it establishes initial adopters (pirates) and speeds up software diffusion: these initial adopters then influence others to buy the product. Generally speaking, however, as the product diffuses in the market, the level of protection against piracy should be increased. In a third industry, an international sample across 25 countries suggested that piracy of theatrical movies was actually slightly beneficial to the movie industry! How can piracy help a company to successfully, and profitably, enter foreign markets?

The Foley Company, a manufacturer of soybean harvesters, has for years sold a substantial number of machines in Brazil. However, a Brazilian firm has begun to manufacture them, and Foley's local distributor has told Jesse Osborne, Foley's president, that if Foley expects to maintain its share of the market, it will also have to manufacture locally. Osborne is a quandary. The market is too good to lose, but Foley has had no experience with foreign manufacturing operations. Because Brazilian sales and repairs have been handled by the distributor, no one in Foley has had any firsthand experience in that country. Osborne has made some rough calculations that indicate the firm can make money by manufacturing in Brazil, but the firm's lack of marketing expertise in the country troubles him. He calls in Joanne Poe, the export manager, and asks her to prepare a list of all the options open to Foley, with their advantages and disadvantages. Osborne also asks Poe to indicate her recommendation. Assuming that the president's calculations are correct and that a factory to produce locally the number of machines that Foley now exports to Brazil will offer a satisfactory return on investment, what special information about Brazil will you want to gather?

Why would a global firm or multinational require that a wholly owned foreign subsidiary sign a management contract when it already owns the subsidiary?

What are the methods by which a firm can enter foreign markets?

Why might a company want to engage in exporting?