CAOT 31 Lecture 8:
11 Oct 2020
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Document Summary
Exporting: most attractive if competitive advantage based on resources of home countr, usually low-cost & low-risk, potential risks: 1) bad debt from overseas customers 2) currency fluctuations (answer: price in own currency + forward-purchase local currency) Licence and franchise: most attractive if product is already standardised & fast growth wants to be achieved, built upon local market knowledge minimises risks. Strategic alliance, partnership & joint venture: partners bring different resources to joint venture & share profits and risks effective to overcome deficiencies smes have in resources and capabilities. Direct investment: setting up of wholly-owned subsidiary: either 1) marketing and distribution only 2) fully integrated production most expensive and risky option. Before deciding on option: pestel analysis: analysis of environment of country, porters 5 forces: assessment of profit potential with 1 additional dimension exit barriers, assessment of cultural differences, product life cycles. Innovators: completely new & emergent; people who think for themselves and try things; below 5% of target market.
