Terms in this set (7)

Country-specific resources

If the firm's competitive advantage is country based, the firm must exploit an overseas market by exporting. For instance: Tata Motors' competitive advantage is low domestic cost base, it must produce in India and export to foreign markets.

Barriers to trade

If the product is not tradable because of transportation constraints or import restrictions, then assessing that market requires entry by investing in overseas production facilities or by licensing the use of key resources to local companies within the overseas market. Other barriers include exchange rate risks and information cost.

Resources and capabilities

Competing in overseas market is likely to require that the firm acquire additional resources and capabilities, particularly in market and distribution. Assessing such resources is most easily achieved by establishing a relationship within firms in overseas market. It might appoint distributor or agent with exclusive territorial rights. Firm might also license its product or technology to the local manufacturer. Alternatively, the company might pursue a joint venture with the local firm.

Appropriate returns of trade

Whether a firm licenses the use of its resources or choose to exploit directly depends on appropriatability considerations. If a company has patent protection, patent licenses to particular producers can be an effective means of appropriating returns. With all licensing arrangements, key considerations are the capabilities and reliability of the local license.

Transaction costs

A key issue that arises in licensing trademarks or technology concerns the transaction costs of negotiating, monitoring and enforcing the terms of such agreement as compared with internalisation through fully owned subsidiary. In expanding overseas, Starbucks owns and operates most of the coffee shops while McDonalds franchises.