INSTRUCTIONS: Please RESPOND to this answer from the Point of view as a student. Use credible sources and respond as if you are a manager of a marketing agency. Tell this student what your marketing agency would think of each of these answers from a Management perspective in about 4-5 paragraphs:
The world has become a smaller place, and in many industries globalization and increased competition necessitates international expansion. “New transportation, shipping, and communication technologies have made it easier for us to know the rest of the world, to travel, to buy and sell anywhere” (Kotler & Keller, 2015, p. 14). Entering markets across the globe is now considerably more feasible now than in the past, but there are still dangers in doing so. In addition to researching risks associated with doing business abroad, firms must invest heavily in their due diligence, and must understand the various modes of entry into foreign markets. “For a company of any size or any type to go global, it must make a series of decisions” (Kotler & Keller, 2015, p. 219). Decisions include whether to go abroad at all, which markets they might enter, how to enter the markets, deciding on a marketing program, and deciding on the marketing organization (Kotler & Keller, 2015). Once a company decides they are going to enter a particular market abroad, they must determine the best mode of entry. Broadly speaking, the modes of entry include exporting, contractual agreements (E.g. licensing), Alliances (E.g.joint ventures), and direct investment (E.g. foreign direct investment) (Carpenter & Sanders, 2008).
Licensing, a primary form of contractual agreements, is arguably the simplest way to enter foreign markets, as “the licensor issues a license to a foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty” (Kotler & Keller, 2015, p. 227). Franchising is also a popular contractual agreement, and both licensing and franchising are considered to be forms of strategic alliances (Carpenter & Sanders, 2008). Prior to entering an agreement much due diligence is necessary. Both of the aforementioned types of contractual agreements transfer the risk of market entry to the licensee or franchisee. There is also risk for the licensor and franchisor, as they risk the franchisee/licensee “violating the terms of the agreement, either to the detriment of the product or service itself, by refusing to pay agreed-upon fees or royalties, or simply selling a copy of the product or service under a different name” (Carpenter & Sanders, 2008, p. 217).
Alliances are also popular international market entry vehicles. Alliances allow firms to enter into strategic partnerships with firms who are already familiar with government regulations, culture, and markets. “Some combination of these three factors – regulations, market familiarity, or operational complexity- typically explains why alliances are so often used by firm competing internationally” (Carpenter & Sanders, 2008, p. 217).
Direct investment is “the ultimate form of foreign involvement” (Kotler & Keller, 2015, p. 228). “Foreign direct investment (FDI) as the term implies, is an international entry strategy whereby a firm makes a financial investment in a foreign market to facilitate the startup of a new venture” (Carpenter & Sanders, 2008, p. 217). One of the most popular forms of FDI is an acquisition. With this type of foreign investment, a firm purchases an existing business that is already operating successfully (Carpenter & Sanders, 2008). As with the aforementioned methods of foreign market entry, risk exposure analyses should be performed, and risk management strategies should be created.
Identifying potential changes in enterprise risks, creating an action plan to address them, and managing changes to risk management strategies post-acquisition are critical to developing short- and long-term solutions for integrating financial risk management considerations in an acquisition (Pwc.com, n.d., n.p.).
Carpenter, M., Sanders, Wm. (2008). Strategic Management: A Dynamic Perspective. Upper Saddle River, N.J: Prentice Hall.
Kotler, P., & Keller, K. L. (2015). Marketing Management (15th ed.). Pearson.
Pwc.com. (N.d.). Financial Risk Management Considerations in an Acquisition. Retrieved November 10, 2016, from http://www.pwc.com/us/en/cfodirect/publications/me…