CHAPTER 11

ENTRY AND EXPANSION

Firms do not become experienced in international business overnight,but rather progress gradually through an internationalization process.The process is triggered by different motivations to go abroad.The motivations can be proactive or reactive.Proactive motivations are initiaded by aggressive management,whereas reactive motivations are the devensife response of management to environmental changes and pressures.Firms that are primarily stimulated by proactive motivations are more likely to enter international business and succed.
In going abroad ,firms encounter multiple problems and challenges,which range from a lack of information to mechanics and documentation.In order to gain assistance in its initial international experience ,the firm can make use of either intermediaries or facilitators.Intermediaries are outside companies that actively participate in an international transaction.They are export management companies or trading companies.In order for these intermediaries to perform international business functions properly,however,they must be compensated.This will result in a reduction of profits.
International facilitators do not participate in international business transactions,but they contribute knowledge and information.Increasingly,facilitating roles are played by private sector groups,such as industry associations,banks,accountant,or consultants,and by universities and federals,state,and local government authorities.
Apart from exporting and importing ,alternatives for international business entry are licensing ,franchising,and local presence.The basic adventage of licensing is that it does not involve capital investment or knowledge of foreign markets.Its major disadvantage is that licensing agreements typically have time limits,are often proscribed by foreign governments,and may result in creating a competitor.The use of franchising as a means of expansion into foreign markets has increased dramatically.Franchisors must learn to strike a balance between adapting to local environments and standardizing to the degree necessary to maintain international recognizability.
Full ownership is becoming more unlikely in many markets as well as industries,and the firm has to look at alternative approaches.The main alternative is interfirm cooperation,in which the firm joins forces with other business entities,possibly even a foreign government.In some cases,when the firm may not want to make a direct investment,it will offer its management expertise for sale in the form of management contracts.