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Principles of Marketing - Philip Kotler
Another common area of access to foreign markets is the combination of efforts with partner country businesses to establish production and marketing capacity. The joint entrepreneurial activity differs from exports that formed a partnership in which abroad are certain capacities. And from the direct investment it is distinguished by the fact that the partner country is formed by association with a local organization. There are four types of joint ventures.
LICENSING. This is one of the easiest ways to producer involvement in international marketing. Licensor enters into an agreement with the licensee in the foreign market, offering the right to use the manufacturing process, trademark, patent, trade secret or any other valuable significance in return for a fee or royalty. The licensor receives a minimal risk to enter the market, and the licensee does not have to start from scratch, because it immediately gets work experience, a well-known product or name. With licensing operations firm "Gerber" put on the Japanese market their products for baby food. The company "Coca-Cola" conducts its international marketing activities by providing licenses to different companies in different parts of the world or, more precisely, by giving them trade privileges because the concentrate is required for production of the drink, the company provides itself.
Potential disadvantages of licensing is that with him the company has less control over the licensee, than on his newly created company. In addition, the licensee will succeed big profits will go to him, but by the end of the terms of the contract the company can find that has created a competitor.
Contracting production. Another option activity - contracting with local manufacturers on the product release. The company "Sears" used this method when opening its stores in Mexico and Spain, finding qualified local manufacturers who could produce many of the goods sold by it.
Lack of contracting production - in a smaller firm control over the production process and the loss associated with this production potential profits. At the same time it gives the company the opportunity to expand operations faster, with less risk and with a view to entering into a partnership with a local manufacturer or buying his company.
MANAGEMENT CONTRACT. In this case, the firm provides foreign partner "know-how" in the field of management, and that provides the necessary capital. Thus, the company did not export the goods, but rather management services. This method is used for the organization of the work of hotels in different parts of the company "Hilton" light.
Management contract - a way of entering the foreign markets with minimal risk and the receipt of income from the very beginning of its activity. However, it is inappropriate to resort to if the firm has a limited staff of skilled managers, which can be used more profitably for themselves or when the self-realization of the enterprise will bring much more profit. In addition, while management of the contract deprives the company the possibility to deploy their own businesses.
COMPANIES JOINT OWNERSHIP. The company co-ownership - is to unite the efforts of foreign capital and local investors to create a local business, they own and operate together. A foreign investor may buy a stake in the local company, local firm may buy a stake in an existing local company of a foreign company, or both parties can work together to create an entirely new venture.
The company co-ownership may be necessary or desirable for economic or political reasons. The firm may lack the financial, physical and managerial resources to undertake the project alone. A possible co-ownership is a condition in which a foreign government specifies the admission to the market of the country.
The practice of joint ownership has certain disadvantages. Partners may differ in opinions regarding the investment, marketing and other business principles. While many US firms tend to use earned money to re-invest in the expansion of business, local businesses often prefer to withdraw the proceeds of trafficking. While US firms play a big role marketing, local investors can often rely solely on the sales organization. Moreover, the joint ownership may hinder transnational company enforcing specific policy settings and the production and marketing worldwide.