Entering Foreign Markets: Foreign Direct Investment

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來自 University of Virginia 的課程

高级企业战略

485 個評分

University of Virginia

高级企业战略

485 個評分

課程 2（共 5 門，Specialization Business Strategy）

Advance your strategic analysis skills in this follow-up to Foundations of Business Strategy. In this course, you'll learn the tools to analyze strategy across time (competitive dynamics), industries ( corporate strategy), geographies (international strategy), and institutions (non-market strategy). We'll introduce the tools you need to complete a comprehensive evaluation and understand the strategy dynamics of an industry: Competitive Lifecycle, Internationalization and Stakeholder Analyses, and Diversification Matrices. We'll apply these tools in case studies of industry leaders Disney, Orascom Telecom Holding, Sony, and GE Healthcare India.

從本節課中

International Strategy

Welcome! Industry and firm globalization has taken off in the past few decades. Firms can realize great gains by moving into foreign markets, but they only do so if they act strategically. In this module, we'll discuss the rise of globalization and explore two primary strategic questions: Where to compete and how to enter that market. We'll consider the pros and cons of strategic options for entering foreign markets. By the end of this module, you'll be able to complete an internationalization analysis and apply this tool to a case study about Orascom Telecom.

Introduction to International Strategy8:06

Patterns of Internationalization7:09

Where to Compete4:44

Entering Foreign Markets: Exporting5:20

Entering Foreign Markets: Licensing and Alliances5:35

Entering Foreign Markets: Foreign Direct Investment4:46

Foreign Direct Investment: Entry Mode5:59

Module Lessons4:19

與講師見面

Michael Lenox
Senior Associate Dean and Chief Strategy Officer
Darden School of Business
Jared Harris
Samuel L. Slover Research Chair in Business Administration
Darden School of Business

We're talking about internationalization strategy, and

specifically we're focused now on

the question of how an organization can choose to enter that new foreign market.

There are several ways an organization can approach market entry.

Depending on your business or your industry, an organization might

be able to just enter a new foreign market simply by exporting.

Alternatively, again, depending on one's business or industry, a firm might decide

to enter a new foreign market through some sort of licensing or a strategic

alliance with a local partner who already operates in that foreign market.

Finally, an organization might decide to go all in and establish some operations

in that new foreign location, and this is known as foreign direct investment or FDI.

That's what I'm going to focus on for a few moments right now.

So what is foreign direct investment?

Again, it's when a firm establishes a controlling stake

in a host country entity to manufacture or sell its products.

Why would firms want to pursue this particular

way of entering a new foreign market?

Well, there are a handful of potential advantages.

First of all, a firm might gain some local cost or production advantage.

In other words, it might just be more cost-effective to get some operations

going right in that new location because you can manufacture or

produce those goods more cheaply right there on location.

And it makes sense that that might also be a way to avoid high transportation costs

or importing tariffs to that foreign location.

So those are a couple of potential advantages.

What are some others?

Well, one thing to think about is foreign direct investment establishing

operations in that new location might allow you to easier,

to more easily transfer your capabilities.

These are the things that your organization really knows how to do.

And so we can transfer those capabilities easier

if we enter through foreign direct investment.

Now, why is that?

It's essentially because we're transferring those capabilities to

ourselves.

Instead of trying to transfer them to some other sort of strategic partner in that

new foreign location, we're just establishing operations there, and

it's very easy for us to kind of transfer the way we do things, right?

And related to that, it might be also be easier to protect those capabilities.

Remember, one of the risks with something like a strategic alliance or

having a foreign partner in that new location is that they might learn

a lot about your business and they might learn enough to actually decide

to distance themselves from you and directly compete with you.

But if we have established our own operations there,

we've transferred our capabilities to that new operation,

it's also easier to protect the way we do things because it's all in-house.

And that also gives us a tighter control over our operations.

I mean, if we're worried about things like quality control or

the way we're marketing our goods or services, again,

foreign direct investment is a way to keep control over all of those things.

So these are a number of potential advantages

to pursuing a foreign direct investment strategy to entering a new market.

Now, are there some downsides?

Of course there are.

There's some potential disadvantages here.

First of all, it can be very costly to set up operations in a new foreign location.

So there's some risks in doing that.

There's higher managerial or bureaucratic costs.

I mean, we might not know everything there is to know about effectively

managing those operations with local employees.

Customs and norms might be different in that new foreign location and

there's a learning curve there.

And so, again, there's potentially higher financial costs and risks.

There's potentially some higher managerial or

bureaucratic costs that we may incur as we try to get that operation off the ground

in this new foreign location that we might not know that much about.

There's also potentially a perception

in that new foreign location of us being foreigners, right?

There's this kind of liability of foreigness when we establish

operations in a foreign location where we're the outsider coming in.

That might have implications for how much customers want or value our product or

service, right?

And finally, you know, the domestic competitors in that new location

presumably may know something about competing in that foreign location.

They might be more politically connected.

They might have certain advantages because they've

established relationships with suppliers and things.

There may be a host of things that would advantage those local players and

we'll have to compete against them if we do it.

So, again, with foreign direct investment,

this is where we go all in in a new foreign location.

There are some advantages potentially and there are some potential disadvantages.

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