1. 12-1 Strategies for Analyzing and Entering Foreign Markets Discuss how firms analyze foreign markets Outline the process by which firms choose their mode of entry into a foreign market Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

2. 12-2 Foreign Market Analysis Assess alternative markets Evaluate the respective costs, benefits, and risks of entering each Select those that hold the most potential for entry or expansion Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

3. 12-3 Table 12.1 Critical Factors in Assessing New Market Opportunities Product-market dimensions Major product-market differences Structural characteristics of national market Competitor analysis Potential target markets Relevant trends Explanation of change Success factors Strategic options Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

4. 12-4 Figure 12.1 Choosing a Mode of Entry Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

5. 12-5 Exporting Advantages Relatively low financial exposure Permit gradual market entry Acquire knowledge about local market Avoid restrictions on foreign investment Disadvantages Vulnerability to tariffs and NTBs Logistical complexities Potential conflicts with distributors Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

6. 12-6 International Licensing Licensing is when a firm, called the licensor, leases the right to use its intellectual property—technology, work methods, patents, copyrights, brand names, or trademarks—to another firm, called the licensee, in return for a fee. Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

7. 12-7 Licensing Advantages Low financial risks Low-cost way to assess market potential Avoid tariffs, NTBs, restrictions on foreign investment Licensee provides knowledge of local markets Disadvantages Limited market opportunities/profits Dependence on licensee Potential conflicts with licensee Possibility of creating future competitor Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

8. 12-8 Franchising A franchising agreement allows an independent entrepreneur or organization, called the franchisee, to operate a business under the name of another, called the franchisor, in return for a fee. Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

9. 12-9 Franchising Advantages Low financial risks Low-cost way to assess market potential Avoid tariffs, NTBs, restrictions on foreign investment Maintain more control than with licensing Franchisee provides knowledge of local market Disadvantages Limited market opportunities/profits Dependence on franchisee Potential conflicts with franchisee Possibility of creating future competitor Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

10. 12-10 Contract Manufacturing Advantages Low financial risks Minimize resources devoted to manufacturing Focus firm’s resources on other elements of the value chain Disadvantages Reduced control (may affect quality, delivery schedules, etc.) Reduce learning potential Potential public relations problems Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

11. 12-11 Management Contracts Advantages Focus firm’s resources on its area of expertise Minimal financial exposure Disadvantages Potential returns limited by contract expertise May unintentionally transfer proprietary knowledge and techniques to contractee Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

12. 12-12 Foreign Direct Investment Advantages High profit potential Maintain control over operations Acquire knowledge of local market Avoid tariffs and NTBs Disadvantages High financial and managerial investments Higher exposure to political risk Vulnerability to restrictions on foreign investment Greater managerial complexity Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall