Marketing chapter 15

Terms in this set (42)

Licensing: entering foreign markets through developing an agreement with a licensee in the foreign market. For a fee or royalty payments, the licensee buys the right to use the company's manufacturing process, trademark, patent, trade secret, or other item of value. The company thus gains entry into a foreign market at little risk; at the same time, the licensee gains production expertise or a well-known product or name without having to start from scratch.

Contract manufacturing: company contracts with manufacturers in a foreign market to produce the product or provide its service. The drawbacks are decreased control over the manufacturing process and loss of potential profits of manufacturing. The benefits are the chance to start faster, with less risk, and the later opportunity either to form a partnership with or buying out the local manufacturer.

Management contracting: domestic firm supplies the management knowhow to a foreign company that supplies the capital. The domestic firm exports management services rather than products. Management contracting is a low-risk method of getting into a foreign market, and it yields income from the beginning. The arrangement is even more attractive if the contracting firm has an option to buy some share in the manages company later one. The arrangement is not sensible, however, if the company can put its scarce management talent to better uses or if it can make greater profits by undertaking the whole venture. Management contracting also prevents the company from setting up its own operations for a period of time.

Joint ownership: Company creates a local business with investors in a foreign market, who share ownership and control. Joint ownership may be needed for economic or political reasons.


Direct investment: Entering a foreign market by developing foreign-based assembly or manufacturing facilities. A company may buy an interest in a local firm, or the two parties may form a new business venture. Advantages: lower costs, improved image in the host country, deeper relationships, full control over investment. Disadvantages: restricted or devalued currencies, falling markets
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