Direct Investment and Collaborative Strategies

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Fourteen first discusses reasons for not exporting and then explores the motives that drive firms to engage in noncollaborative and collaborative arrangements, as well as the various types of possible arrangements, including foreign direct investment, licensing, franchising, joint ventures, and equity alliances. It goes on to explore the various problems that may arise in FDI and collaborative ventures and concludes with a discussion of the various methods for managing these evolving arrangements.

Chapter Outline

OPENING CASE: The Fizz Biz: Coca-Cola

With more than 70% of its sales outside the United States, Coca-Cola is a truly international company. Coca-Cola began as a soda fountain drink in 1886 and began international sales to Canada and Mexico as early as 1897. Its first foreign bottling plant was in Panama in 1906. Coke continued to expand internationally during the 1920s and 1930s, but its big international push came during World War II. The company received ...

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is usually the preferred alternative since it allows firms to produce in their home countries, participating in some markets may require using a variety of other equity and nonequity arrangements. These can range from wholly owned operations to partially owned subsidiaries, joint ventures, equity alliances, licensing, franchising, management contracts, and turnkey operations.

II. WHY EXPORTING MAY NOT BE FEASIBLE

Companies may find more advantages by producing in foreign countries rather than by exporting to them due to a variety of reasons.

A. When It's Cheaper to Produce Abroad

Competition requires companies to control their costs and to choose production locations ...

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