SUMMARY
SUMMARY ■ The forms of foreign involvement differ in terms of internal as opposed to
external handling of activities and in terms of the proportion of resources committed at home rather than abroad.
■ Although the mode employed for foreign operations should be examined in terms of a firm's strategic objectives, the choice often will involve a trade-off among objectives.
■ Among the factors that will influence the choice of operating mode are legal conditions, the firm's experience, competitive factors, political and economic risk, and the nature of the assets to be exploited.
■ Licensing is granting another firm the use of some rights, such as patents, trademarks, or know-how, usually for a fee. It is a means of establishing foreign production that may minimize capital outlays, prevent the free use of assets by other firms, allow the receipt of assets from other firms in return, and allow for income in some markets where exportation or investment are not feasible.
■ Among the major controversies concerning the terms of licensing agreements are the control of use of assets as they may affect future competitive relationships, the secrecy of technology and contract terms, the method and amount of payment, and how to treat transfers to a firm's controlled foreign facilities.
■ Franchising differs from licensing in that a trademark is an essential asset for the franchisee's business and the franchisor assists in the operation of the business on a continuing basis.
■ Management contracts are a means of securing income with little capital outlay. They are usually used for expropriated properties in LDCs, for new operations, and for facilities with operating problems.
■ Turnkey operations involve a contract for construction of operating facilities owned by someone else. In recent years, most of these have been very large and diverse, thus necessitating specialized skills and abilities to deal with top-level governmental authorities.
■ In the absence of control of vertical operations through ownership, firms are increasingly achieving similar objectives through long-term contract and output-sharing arrangements.
■ Companies usually want to own 100 percent of their foreign operations, if possible, in order to secure control and prevent the dilution of profits. However, sharing ownership is widespread because host countries want local participation and because rapid foreign expansion has necessitated that firms bring in outside resources.
■ Joint ventures are a special type of ownership sharing in which equity is owned by a few organizations rather than the public at large. There are various combinations of ownership, including government and private, same or different nationalities, and two or several organizations participating.
■ Jointly owned operations are often motivated by the complementary resources firms have at their disposal.
■ Contracting foreign business does not negate management's responsibility to ensure that company resources are being worked adequately. This involves constantly assessing the work of the outsiders and evaluating new alternatives.
■ Firms may use different forms for their foreign operations in different countries or for different products. As diversity increases, the task of coordinating and managing the foreign operations becomes more complex.
external handling of activities and in terms of the proportion of resources committed at home rather than abroad.
■ Although the mode employed for foreign operations should be examined in terms of a firm's strategic objectives, the choice often will involve a trade-off among objectives.
■ Among the factors that will influence the choice of operating mode are legal conditions, the firm's experience, competitive factors, political and economic risk, and the nature of the assets to be exploited.
■ Licensing is granting another firm the use of some rights, such as patents, trademarks, or know-how, usually for a fee. It is a means of establishing foreign production that may minimize capital outlays, prevent the free use of assets by other firms, allow the receipt of assets from other firms in return, and allow for income in some markets where exportation or investment are not feasible.
■ Among the major controversies concerning the terms of licensing agreements are the control of use of assets as they may affect future competitive relationships, the secrecy of technology and contract terms, the method and amount of payment, and how to treat transfers to a firm's controlled foreign facilities.
■ Franchising differs from licensing in that a trademark is an essential asset for the franchisee's business and the franchisor assists in the operation of the business on a continuing basis.
■ Management contracts are a means of securing income with little capital outlay. They are usually used for expropriated properties in LDCs, for new operations, and for facilities with operating problems.
■ Turnkey operations involve a contract for construction of operating facilities owned by someone else. In recent years, most of these have been very large and diverse, thus necessitating specialized skills and abilities to deal with top-level governmental authorities.
■ In the absence of control of vertical operations through ownership, firms are increasingly achieving similar objectives through long-term contract and output-sharing arrangements.
■ Companies usually want to own 100 percent of their foreign operations, if possible, in order to secure control and prevent the dilution of profits. However, sharing ownership is widespread because host countries want local participation and because rapid foreign expansion has necessitated that firms bring in outside resources.
■ Joint ventures are a special type of ownership sharing in which equity is owned by a few organizations rather than the public at large. There are various combinations of ownership, including government and private, same or different nationalities, and two or several organizations participating.
■ Jointly owned operations are often motivated by the complementary resources firms have at their disposal.
■ Contracting foreign business does not negate management's responsibility to ensure that company resources are being worked adequately. This involves constantly assessing the work of the outsiders and evaluating new alternatives.
■ Firms may use different forms for their foreign operations in different countries or for different products. As diversity increases, the task of coordinating and managing the foreign operations becomes more complex.
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