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Discussion Topic 2: Anthony

Anthony ‘s post:

 Some of the factors that motivate a company to enter a specific company with a specific mode of entry is the amount of risk that they are willing to assume. The company could consider obtaining an export base to create their product or should they issue a license. Perhaps the company is first to move into the market which could make a partnership or creating a new subsidiary appealing (UMGC, 2024). Each of these modes has a potential up and downside.

When a company exports their goods to a new market, they benefit from the simplicity of using their current manufacturing which lowers the cost to produce the goods, however they will not be in complete control of their goods following the export in addition to the difficulty to create a region-specific product complementing the native preferences. They will also have additional transportation fees and may be required to hire distributors for services (UMGC, 2024).

Should the company make the decision to issue a license to a secondary company to manufacture their product essentially requiring the licensee to pay money directly to the parent company for the permission to create and sell their product. With an international license there is an agreement that allows the licensee an exclusive or a non-exclusive right to create the product for a fixed amount of time in a specific region or market (Pressbooks, 2024). This mode allows the parent company to make a direct profit from the initial sale of the licensee but limits the additional profit from the success of the licensee (UMGC, 2024).  

It’s important to understand the organization’s goals and objections when selecting one of the discussed modes. Value chains consist of the following: inbound logistics, operations, outbound logistics, marketing, sales, and service (Lauridsen, 2011). A company can reduce barriers to communication both physical and psychological by sourcing as many pieces of the chain in the same region. When a company physically locates in a new country and assimilates with the native persons, they gain not only a more holistic understanding of their customers but also they become a company that directly impacts the local population (UMGC, Learning Topic: Globalizing the Management Model, 2024).

References

Lauridsen, B. (2011). Shifting the Paradigm: Value-Chain Analysis Applied to Online Learning. Retrieved from semanticscholar.org: https://www.semanticscholar.org/paper/Shifting-the-Paradigm%3A-Value-Chain-Analysis-Applied-Lauridsen/ea56f2e309d9f9831898ae2f0d70e80f39ced85a

Pressbooks. (2024, 08 18). 7.3 Licensing. Retrieved from Opentext.wsu.edu: https://opentext.wsu.edu/cpim/chapter/7-3-licensing/#:~:text=An%20international%20licensing%20agreement%20allows%20foreign%20firms%2C%20either,available%20to%20the%20licensee%20in%20the%20host%20country.

UMGC. (2024, 08 18). Learning Topic: Globalizing the Management Model. Retrieved from University of Maryland Global Campus: https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba670/learning-topic-list/globalizing-the-management-model.html?ou=1040566

UMGC. (2024, 08 18). Learning Topic: Modes of Entry. Retrieved from University of Maryland Global Campus: https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba670/learning-topic-list/modes-of-entry.html?ou=1040566

 

Project 3 Discussion 2 - Radabaugh

Autumn’s post:

What factors influence an organization's choice to enter a specific foreign country with a particular mode of entry?

Discuss how the chosen mode fits with an organization's goals and objectives and how the culture and geography proximity affect an organization's value-chain activities when relocated to the country.

Foreign market entry is the strategy or process an organization seeks to enter beyond its domestic market. In today's global market, competition is not purely local; even small firms in less developed parts of the world may have competitive local conditions that allow them to compete successfully in other countries. Foreign market entry is a two-part process. First, an organization should decide to enter a foreign market; this decision is usually relatively straightforward, often a natural next step as firms seek to grow. However, the next step in deciding the mode of entry can be much more complex, and this difficulty increases with government regulations/language rules that govern how foreign firms enter the country. Political and economic instability, social/cultural distance, environmental factors, and market size influence this decision. ( Modes of Entry, n.d.)

The relocation of value-chain activities to another country is a complex decision that can be based on traditional and non-traditional reasons. Regardless of this rationale, removing any value-chain activities is an enormous task for the company regarding logistics, physical, and human resources. Some perspectives, however, are rarely cited in the literature: the role of organizational culture and geographical proximity between R&D and production units at the end of the value-chain activity transfer process. These two points of view can be highly significant in deciding the destination country. ( International Strategy, n.d.)

As in most literature regarding transferring value-chain activities to a new country, this analysis will focus mainly on cost-driven relocation projects. It is well-known that companies often require this task to be performed correctly. A thorough analysis of why each relocation project followed its course is illustrated by comparing the case studies of three global companies that moved their value-chain activities to India, a highly similar environment in terms of studies and legacy. Two companies performed only partial relocation, retaining their R&D departments at the central hub in the previous host country. At the same time, the third one decided to move them entirely to India. ( International Strategy, n.d.)

Both scenarios were equally viable, but the deciding factors were somewhat unconventional. As organizational culture and geographical proximity are rarely analyzed in the literature on relocation decisions, these factors can be challenging to determine and measure ( International Strategy, n.d.).

References

International Strategy. (n.d.). University of Maryland Global Campus.              https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba670/learning-topic-list/international-strategy.html?ou=1040566

Modes of Entry. (n.d.). University of Maryland Global Campus.  https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba670/learning-topic-list/modes-of-entry.html?ou=1040566