ib ppt ch-4
TRANSCRIPT
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CHAPTER- 4An Overview of Licensing; Joint Ventures Technology and
Global Competition; Globalization and Human Resource
Development; Globalization with Social Responsibility;World Economic Growth and the Environment; Country
Evaluation and Selection; International Business
Diplomacy: Negotiating an International Business, Issues
in Asset Protection; Multilateral Settlements; ConsortiumApproaches; External Relations Approach (Elementary
Idea Only).
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Entrant Strategies
How to Enter in Foreign Market???
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Entrant Strategies:
1. Import-Export
2. Fully owned subsidiary
3. Licensing
4. Joint ventures
5. Franchising
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Licensing
Licensing is defined as the process of leasing a
trademarked or copyrighted entity (known as a
property) for use in conjunction with a product, service
or promotion. The property could be a name, likeness,logo, graphic, saying, signature, character or a
combination of several of these elements.
It is usually based on a contractual agreement between two
business entities: the owner or agent of the property, alsoknown as the licensor and the renter of the rights, and
the prospective licensee.
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When to go for Licensing??
When market cannot be served by exports. When exports are expensive.
When trade restriction or foreign exchange
restrictions are high. To protect its technology to being copied in
other countries, so officially licensed somebody
to use it.
When company needs immediate cash flows.
When risk in present market is not
manageable.
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Franchising
Franchise is a local representative of any organization
who markets and conducts the entire marketing activity
under complete guideline and support of franchisor in
the area allotted to the franchisee. It is a kind of
authorization granted to an individual or corporation by afranchisor to sell its goods or services in a defined way.
Franchise means expanding the business in the new
market by transferring trademark and goodwill to
franchisee by charging fees.
The concept of a franchise was originated in USA.
http://www.siliconindia.com/franchiseindia/franchises.html
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Features of Franchise
1. Well established business
2. Needs limited investment
3. Easy entry in new markets4. Business has large establishments
5. Helps in diverting business risks
6. Separates labour and specialisation
7. Business is based on mutual agreement
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Difference b/w Licensing and
Franchising
In franchising, the franchisee and the franchisor are very closelylinked and have better working relationships. The relationship
between a licensee and the parent company is not as tight-knit.
The franchisee gets to retain the rights to the franchisors logo and
trademark. Licensee does not hold the rights to the trademark and
logo of the parent companys brand.
Franchisees are often an extension of the parent company, in that
they represent the parent companys brand and image. Therefore,
they are usually provided assistance from parent company.
Licensees also do not receive the same extent of support and
training as compared to a franchisee
Another key difference is in the fact that licensees do not get to
have territorial rights from the parent company. Which means that
licensing organization gets to sell similar licenses and products in
the same geographical area..
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Exercise
You have been in the restaurant business for thepast five years. You have perfected the systemof running it. You know where to get the bestingredients for your secret recipes. You have arecognized brand name. The business is rather
successful and you are keen to expand to otherareas. You dont have the financial and humanresources to open or manage new restaurantseffectively but want to ensure these new
restaurants look and feel the same as theoriginal.
In your view, what is the best way to expand yourbusiness, licensing or franchising? Why??
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Joint-venture
A joint venture can be described as
participation of two companies in the
ownership, management and control of a
third enterprise designed to benefit both.
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What are the cost and benefit to the
company??
For JV the immediate cost are greater financing
requirement for technology, raw material,
management and mktg. etc. but it broken
down in two (or more) partners.The benefit will primarily be increase in the
sales, entrant in new market, increased
assistance in technology, mktg., mgmt., and
other skills.
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What percentage of the ownership do the company
require??What restrictions does local government
impose?
The ownership of the both partners determined
on the basis of cost and benefit analysis and
on the basis of share in expected return. In
many countries what can be a foreign partner
owned is limited by the law.
The local government may restrict the
companys options in JV. The most significantlimits may be on ownership, requirement to
place, key positions in management etc.
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Types of Joint Venture
1. Equity Based JV
2. Contractual JV
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Critical issues for starting JV
Type of JV
Issue of ownership and control.
Sharing of revenues and liabilities.
Type of Hierarchy (Dual/Single)
Product and market standardized strategies.
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Critical issues in operating JV
Partner commitment and compatibility is a very
critical issue in JV.
Divergent objectives of the partners.
Problem of coordination and control.
Tolerance towards ambiguity.
Lack of information is relationship-specific
routes. Product diversification and innovation.
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Technology & Global Competition
What are the technological capabilities??
Product innovationProcess innovation
Sustainability in innovation
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Technological Learning &
Development
Technological learning is an incremental
process. It is often faces an uncertain
environment where the skills , information,networks and credit needed are not really
available.
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Globalization & Human Resource
Development
Effect of Globalization on Human Resource
Development:
a) Employment Generation
b) Employment Quality
c) Upgrading skills
d) Public Private Partnership Model (P3) for skill
developmente) Industrial Relations advancement.
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Globalization with Social
Responsibility
The concept of social responsibility implies
that firms have some obligations that go
beyond the requirements of the companyresponsibility.
Flowchart
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World Economic Growth & The
Environment
Environmental Strategies of MNCs:
I. Work for the benefits of environment with due
regards to domestic laws.
II. A parent firm can establish uniform
environmental standards across the country.
III. Same approach is used for the stakeholders
such as- Suppliers, distributors.
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Country evaluation and
selectionFirms lack sufficient resources to pursue all
opportunities, they must: determine the order of country entry
establish the resource allocation across countries
find specific geographic locations to produce ormarket their products
take a Portfolio approach
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What factors should consider to evaluate a
country?
Return (opportunity) Issuesmarket size [sales potential]
ease and compatibility of operation
costs and resource availability
Risk Issues Political Risk
Competitive risk
Monetary risk
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International Business
Diplomacy
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It is the art and practice of
conducting negotiations between representatives of
groups or states.It is the conduct ofinternational relations through the
intercession of professional diplomats with regard to
issues of peace-making, trade, war, economics, culture,
environment, and human rights. International treaties are
usually negotiated by diplomats prior to endorsement bynational politicians.
In an informal or social sense, diplomacy is the
employment of tact to gain strategic advantage or to find
mutually acceptable solutions to a common challenge,one set of tools being the phrasing of statements in a non-
confrontational, or polite manner.
http://en.wikipedia.org/wiki/Negotiationhttp://en.wikipedia.org/wiki/International_relationshttp://en.wikipedia.org/wiki/Warhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Culturehttp://en.wikipedia.org/wiki/Environmental_policyhttp://en.wikipedia.org/wiki/Human_rightshttp://en.wikipedia.org/wiki/Treatyhttp://en.wikipedia.org/wiki/Politicianhttp://en.wikipedia.org/wiki/Strategyhttp://en.wikipedia.org/wiki/Strategyhttp://en.wikipedia.org/wiki/Politicianhttp://en.wikipedia.org/wiki/Treatyhttp://en.wikipedia.org/wiki/Human_rightshttp://en.wikipedia.org/wiki/Environmental_policyhttp://en.wikipedia.org/wiki/Culturehttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Warhttp://en.wikipedia.org/wiki/International_relationshttp://en.wikipedia.org/wiki/Negotiation -
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Negotiating
Every wish or need may cause a negotiation.
Once people exchange their ideas to adjust
their relation, or they exchange views to reachagreements, they are negotiating
Gerafd I Niernberg, The Art of Negotiating
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Negotiation is a discussion intended to produce an agreement; a treaty
with another respecting sale or purchase; a transaction of business
between nations; the mutual interaction of governments by diplomatic
agents, in making treaties, smoothing differences, etc.Negotiation is a viable way of resolving a conflict when the following
conditions hold true:
1) There are two or more parties
2) There is a conflict of interest between two or more parties;
3) The parties negotiate because they think they can use some form of
influence to get a better deal than simply take what the other side will
voluntarily give them or let them have. Negotiation is largely a voluntary
process.
4) The parties, at least for the moment, prefer to search for agreement
rather than to fight openly, have one side capitulate, permanently break off
contact, or take their dispute to a higher authority to resolve it. Negotiationoccurs when there is no fixed or established set of rules, procedures, or
system for resolving the conflict, or when the parties prefer to work
outside of the system to invent their own solution to the conflict;
5) Finally, in negotiate, we expect give and take. We expect that both
sides will modify or give in somewhat on their opening statements,
requests, or demands.
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External Relation Approach
Diplomacy
Negotiation
Intellectual Property Rights
Conflicts Resolution
International labor laws
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Issues in Assets Protection
1) Trade Related Intellectual Property Rights
(TRIPS):
Intellectual Property Rights are copyrights, patent,
trademark etc. Under TRIPS, owner of patentget asset registered for a particular period of
time. Any person who wants to use that patent
can use it by paying the royalty to the owner of
the patent.
Only those properties can be patented which are
new, involve research and can be put to
industrial use. But plants cannot be patented.
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Under TRIPS life of the patent has been
fixed as follow:
General Patent
Copyrights
Trade Mark
Industrial Designs
Medicines
20 years
50 years
7 years10 years
10 years
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Case:
Historically, in the developed economies, key drivers for theadoption of good corporate governance have been the
following: the search for investment capital, the desire to list
on major global stock exchanges, the need to gain access to
technology, and the desire to build solid supply chains. In
todays global economy, corporate governance is becoming
increasingly recognized as a key factor affecting businesses
success in emerging markets as well. Opportunities and
competitive threats created by the global economy make
instituting good corporate governance practices key todeveloping a strategy for the company to prosper. Improving
corporate governance allows companies to attract greater
investment at lower cost, strengthens corporate strategy and
its implementation, clarifies accountability, enhance
shareholders
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Contd.
protection, and helps to attract and retain quality
employees. This is true not only for large publicly-listed
multinationals but for other types of companies as well.
For controlling shareholders, corporate governance
clarifies roles and improves accountability, enhancessenior executives professionalization, and increases
company value. Crucially, for society as a whole,
corporate governance minimizes the occurrence of
corruption, reduces the risk of devastating systemiccrises, and improves productivity.
Comment on the situation.