Question

compare the advantages and drawbacks of the various approaches to going global; include

importing, exporting, licensing, franchising, strategic alliances and foreign subsidiaries.

Answer 1

Ans: Management makes its first attempt to go international by using global sourcing, in which companies take advantage of lower costs and minimal risk.

Next, managers may go international by exporting products to other countries and/or importing products from other countries. Exporting and importing involve minimal risk and provide more control over the company’s products.

In licensing (primarily used by manufacturers) and franchising (mainly used by service organizations), management continues to look at ways to enter the global market, and at the same time, avoid investing a lot of capital.

Strategic alliances and joint ventures allow partners to share both the risks and the rewards incurred in business conducted by the partners through the alliance.

Establishing a foreign subsidiary involves the greatest commitment of resources and the greatest amount of risk of all of the stages of going international. Companies setting up a foreign subsidiary do not have to share profits with a partner but, at the same time, do not have a partner who will share the loss if a business enterprise fails.