How can companies globalise?
Companies can go international by (1), (2), (3), and (4)
- Licensing
Licensing is the selling of rights to market brand name products or to use patented processes or copyright materials.
2. Franchising
Franchise is a type of licensing arrangement in which a company sells a package containing a trademark, equipment, materials, and managerial guidelines.
3.Joint ventures / Strategic alliances
A joint venture is a business undertaking in which foreign companies and domestic companies share the costs of building production or research facilities in foreign countries. Joint ventures may be the only way to enter certain countries, where, by law, foreigners cannot own businesses. In other situations, joint venture let companies pool technological knowledge and shares the expenses and risk of research that may not produce marketable goods.
4. Exports
In this instance, a firm does not even have to set up a plant in the foreign markets, but simply continues to produce from home and sell abroad. The obvious advantage of such an approach is that the firm will not need any significant investment outlays consistent with other modes of entry.
5. Setting up Production operations
Most manufacturing firms have set up production facilities in foreign markets for a variety of reasons, one of which would be to take advantage of cheaper raw materials, most notably labour. Yet another reason why this may be a preferred option is that it will often enable a firm to circumvent (by-pass) tariffs and other forms of restrictions on imports as their product will be considered local.
6. Management contracts
The Hotel industry, with a high requirement for minimum international standards, would be ideal for the above approach. Specifically, international hotel firms will access other markets throughout the world by offering management services. This approach could also be combined with other options discussed earlier, such as strategic alliances/joint ventures
7. Global strategic partnerships
Global strategic partnership is an alliance formed by an organisation with one or more foreign countries generally with an eye towards exploiting the other countries’ opportunities and towards assuming leadership in either supply or production.
