Internalization Strategies- SKULLS

5 entry strategies

exporting and importing, licensing and franchising, alliances and joint ventures, wholly owned subsidiary, mergers and acquisitions

exporting and importing advantages

only available choices for small and new firms wanting to go international, can provide easy access to overseas markets

exporting and importing constraints

reliance on foreign distributors, strategy usually is transitional in nature

licensing and franchising advantages

avoid entry costs and enter firms without making a direct investment

licensing and franchising constraints (4)

create new competitors, dependence on license, concerns about trademark protection, difficult to maintain quality control

alliance and joint ventures advantages (5)

Improve efficiency, pool assets, access to market knowledge, reduced political risk, Gain insider advantages

alliance and joint ventures constraints (5)

lack knowledge about partners, time required to develop trust, must protect IP rights, dependence on partner skills, High switching costs

wholly owned subsidiary advantages

Need/Desire for total control, Belief that managerial efficiency is better without outside partners, When the market becomes attractive

wholly owned subsidiary constraints (2)

Host countries concerns may limit or prohibit fully-owned subsidiaries, home-country unions may view foreign subsidiaries as “exporting jobs”

mergers and acquisitions advantages (2)

contributes strategic strengths, each firm has relevant local knowledge for its domestic market

mergers and acquisitions constraints

Challenges of post-merger integration, commitment of capital limits flexibility and adaptability