Chapter 8 gives many examples of multinational companies that have expanded their business abroad and their reasons for choosing a particular entry strategy from the list below:
international joint ventures
cross-border mergers and acquisitions
For example, some firms choose to enter foreign markets as an export/import business because it is a relatively low-risk operation given the fact that capital is not tied up and it is relatively easy to enter or exit out of the market. Other companies choose licensing as an entry strategy to take advantage of lower transportation, labor and raw material costs or because the licensor may not have the financial resources needed for making the overseas investment in plant and equipment. Franchising also allows for expansion of a firm’s business without significant capital investment but offers the franchisor a greater degree of control over the business than licensing affords. Strategic alliances are non-equity arrangements that are primarily aimed at enhancing revenues, while international joint ventures allow a business seeking to expand abroad to share the increased risk as well as returns with a local partner where the capital investment needed is so large that no single company would be willing to come up with all the needed funds or to accept all the risk. Cross-border mergers and acquisitions are relatively risky because of the significant capital investment involved but by merging the strengths of the home company with those of the host country firm, the new firm will become more competitive internationally. A company may choose to build and operate its own new facilities overseas as a wholly- owned subsidiary which offers the greatest rewards but also carries the greatest risk due to the large capital investment required. See the chart in the textbook at page 193 describing the risk profile of the various entry strategies and the risk-return trade-offs.
For this assignment, you will choose a particular multinational company, and identify the target market it chose for expansion and what entry strategy it chose and why. Specifically, you will identify: a particular multinational company; the target market it chose for foreign expansion (global, regional or a specific country); the entry strategy from the list above that it chose to adopt, and why it chose that entry*
why it chose that entry*
*For the fourth part, explaining WHY the business chose that strategy, you may get lucky and find a detailed explanation in your research which can be your answer. But, if you do not find a detailed explanation of WHY the business chose that entry strategy, it’s okay to answer by mentioning the advantages of the different modes of entry given in the text book and summarized above. See my announcement posted October 28 for more information.
You may choose any multinational company for this assignment. Chapter 8 gives many examples. I have also included a list below of suggested multinational companies for this assignment but you do not have to choose from the list.
Suggested Multinational Companies:
Ford Motor Company
General Motors Company
Johnson & Johnson
Samsung Electronics Co., Ltd.
Carrefour SA (food services)
Yum! Brands, Inc. (KFC, Pizza Hut, and Taco Bell)
Wal-Mart Stores Inc.
ABB Ltd. (engineering services)
Deutsche Post AG (transport services)
Prudential Plc (insurance and financial services)
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