Subjective 1: chap 7 International Entry options for horizontal growth

What are the more popular options for international entry?

There are several popular options for international entry.

Exporting is a good way to minimize risk and experiment with a specific product.
Exporting involves shipping goods produced in the company's home country to other
countries for marketing.

Licensing agreement, the licensing firm grants rights to another firm in the host country
to produce and/or sell a product. The licensee pays compensation to the licensing firm in
return for technical expertise.

Franchising agreement, the franchiser grants rights to another company to open a retail
store using the franchiser's name and operating system. In exchange, the franchisee pays
the franchiser a percentage of its sales as a royalty.

Joint Venture Forming a joint venture between a foreign corporation and a domestic
company is the most popular strategy used to enter a new country. Companies often form
joint ventures to combine the resources and expertise needed to develop new products or
technologies.

Acquisitions: A relatively quick way to move into an international area is through

acquisitions - purchasing another company already operating in that area.

Green_field development: If a company doesn't want to purchase another company's

problems along with its assets, it may choose green-field development - building its own
manufacturing plant and distribution system.

Production sharing is the process of combining the higher labor skills and technology
available in the developed countries with the lower-cost labor available in developing
countries .Often called outsourcing.

Turnkey operations are typically contracts for the construction of operating facilities in
exchange for a fee.
The BOT (Build, Operate, Transfer) concept is a variation of the turnkey operation.
Instead of turning the facility over to the host country when completed, the company
operates the facility for a fixed period of time during which it earns back its investment,
plus a profit.

Management contracts offer a means through which a corporation may use some of its
personnel to assist a firm in a host country for a specified fee and period of time.
Subjective 2: Chap 7 Retrenchment Strategies
Define a retrenchment strategy. Discuss the more popular options.
A retrenchment strategy may be used when a company has a weak competitive position in
some or all of its product lines resulting in poor performance - sales are down and profits
are becoming losses.
The more popular options are:
1.Turnaround strategy emphasizes the improvement of operational efficiency and is
probably most appropriate when a corporation's problems are pervasive, but not yet critical.
The two basic phases of a turnaround strategy are contraction and consolidation.
Contraction is the initial effort to quickly “stop the bleeding” with a general, across-the-
board cutback in size and costs.
The second phase, consolidation, implements a program to stabilize the now-leaner
corporation.

2.Captive company strategy

is the giving up of independence in exchange for security.
Management desperately searches for an “angel” by offering to be a captive company to
one of its larger customers in order to guarantee the company’s existence with long term
contract.
3.Sell Out/ Divestment Strategy:
If a corporation with a weak competitive position in this industry is unable either to pull
itself up by its bootstraps or to find a customer to which it can become a captive company,
it may have no choice but to sell out.
The sell-out strategy makes sense if management can still obtaina good price for its
shareholders and the employees can keep their jobs by selling the entire company to
another firm.
Divestment If the corporation has multiple business lines and it chooses to sell off a
division with low growth potential, this is called divestment.

4.Bank ruptcy/liquidation strategy:

Bankruptcy involves giving up management of the firm to the courts in return for some
settlement of the corporation's obligations.
Liquidation is the termination of the firm.
Subjective 3: chapter 7 BCG growth-Share Matrix
Using the BCG (Boston Consulting Group) Growth-Share Matrix is the simplest way to portray a
corporation’s portfolio of investments. Each of the corporation’s product lines or business units
is plotted on the matrix according to both the growth rate of the industry in which it competes
and its relative market share.

As a product moves through life cycle, it’s generally categorized into one of four types for the
purpose of funding decisions:
Question marks sometimes called “problem children” or “wildcats”) are new products
with the potential for success, but they need a lot of cash for development.if such a product
is to gain enough market share to become a leader and thus a star,Money must be taken
from mature product and spent on question mark ,management must decide if the business
worth the investment needed.
Stars are market leaders that are typically at or nearing the peak of their product life cycle
and are able to generate enough cash to maintain their high share of the market and usually
contribute to the company’s profits.
Cash cows typically bring in far more money than is needed to maintain their market share.
In this declining stage of their life cycle, these products are "milked" for cash that will be
invested in new question marks.
Dogs have low market share and do not have the potential to bring in much cash. Dogs
should be either sold off or managed carefully for the small amount of cash they can
generate. Exp IBM sold PC business to Lenovo

The BCG is a very well-known portfolio concept with some clear advantages.it is
quantifiable and esy to use, easy to remember terms for referring to a corporation’s business
units or products.

Unfortunately, the BCG Growth-Share Matrix also has some serious limitations:
■ The use of highs and lows to form four categories is too simplistic.
■ The link between market share and profitability is questionable, low share businesses
can also be profitable