Which Of The Following Entry Modes Is A Contractual Agreement

April 15, 2021 at 10:04 pm

What if a company wants to do business abroad but doesn`t have the know-how or the resources? Or what if the government does not allow foreign companies to operate within their borders, unless they have a local partner? In these cases, a company could form a strategic alliance with a local company, or even with the government itself. A strategic alliance is an agreement between two companies (or a company and a nation) to pool resources to achieve business objectives that benefit both partners. Thus, Viacom (a leading global media company) has a strategic alliance with Beijing Television to produce Chinese-language music and entertainment programs. [5] Another way to open a new market is a strategic alliance with a local partner. A strategic alliance involves a contractual agreement between two or more companies, which provides that the parties will cooperate in a certain way for a period of time in order to achieve a common goal. To determine whether the alliance`s approach is business-appropriate, the company must determine the value the partner could bring to the business, both materially and immaterially. The benefits of partnering with a local company are that the local business probably understands the local culture, the market and the opportunities to do business better than an external business. Partners are particularly valuable when they have a well-known and serious brand name in the country or have relationships with customers who may be able to access it. Cisco, for example, has entered into a strategic alliance with Fujitsu to develop routers for Japan. Within the alliance, Cisco decided to share Fujitsu`s name to use Fujitsu in Japan for devices and IT solutions, while maintaining the Cisco name, in order to take advantage of Cisco`s global reputation for switches and routers. Steve Steinhilber, Strategic Alliances (Cambridge, MA: Harvard Business School Press, 2008), 113. Similarly, Xerox has entered into strategic alliances to increase sales in emerging markets such as Central and Eastern Europe, India and Brazil. “ASAP has released the winners of the Alliance Excellence Awards 2010”, Association for Strategic Alliance Professionals, September 2, 2010, called February 12, 2011, newslife.us/technology/mobile/ASAP-Releases-Winners-of-2010-Alliance-Excellence-Awards.

There are two main types of entry modes: equity and non-equity. The category of non-clean capital includes export agreements and contractual agreements. [1] The “equity” category includes joint ventures and 100% subsidiaries. [2] Different types of imports are different from three crucial aspects: direct exports are the most fundamental type of export of a company (holding), economies of scale concentrated in the country of origin being capitalized in production and allowing for better control of distribution. Direct exporting works best when volumes are small. Large volumes of exports can trigger protectionism. The main feature of the direct export model is that there are no intermediaries. Investments in green grasslands are a high risk due to the cost of setting up a new business in a new country. [22] A company may be required to acquire knowledge and know-how in the existing market from third parties, such consultants, competitors or business partners.