International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
Is the mindset of your company’s top management sufficiently global? As
the world around you changes and new opportunities open up in various
parts of the world, is your company generally a leader or a laggard in
identifying and exploiting these opportunities? How should you create the
needed global mindset?
5. Vision and long term objective:
Does your company have vision? Is it there with everyone? Whether proper
road-map is in place. Is it only for generation of money or for leadership?
6. Right human resource to handle:
Do you have sufficient HR, especially technical? Or yet to be appointed in
the location of operation?
Once a company has selected the country or countries that will serve as a
launch vehicle for its products, it must determine the appropriate mode of
entry. This issue rests on two fundamental questions:
• To what extent will the company rely on exports versus local production
in the target market? Here the firm has a range of choices as follows. (i)
100 percent export of finished goods, (ii) export of components but
localized assembly, (iii)100 percent local production.
• To what extent will the company exercise ownership and control over the
activities carried out locally in the target market? Again, it faces a range
of choices as follows: (i) 0 percent ownership by licensing or franchising,
(ii0 partial ownership such as joint ventures or collaboration, (iii) 100
percent ownership as a wholly owned subsidiary.
Local production would be appropriate under the following conditions:
1. Longer local production: The local market is larger than the minimum
efficient scale of production. The larger the local market, the more local
production will translate into scale economies while holding down tariff
and transportation costs. An example is the entry of the Japanese tyre
group Bridgestone into the US market by acquiring the local production
base of Firestone instead of exporting tyres from Japan.
2. Cost of logistics and tariffs: Shipping and tariff costs of exporting to the
target market are so high that they neutralize any cost advantages of
manufacturing the product at any place other than the target market. This
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