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Foreign operations - Assignment Example

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Ultimately, the selection process involves tradeoffs between the benefits and the risks (Nande & Shaila, 2007). The nature of the firm’s core competencies…
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Foreign Operations Foreign Operations Firms select a specific entry mode based on the assessment and evaluation of their variousadvantages and disadvantages. Ultimately, the selection process involves tradeoffs between the benefits and the risks (Nande & Shaila, 2007). The nature of the firm’s core competencies plays a significant role in the evaluation and selection of the optimum mode of entry. A firm’s core competence may be found in technological or managerial knowhow. In case a firm enjoys strong competitive advantage based on technological knowhow, it would be prudent for it to avoid joint ventures and licensing. This would enable the firm to retain control over its foreign operations and proprietary rights over its technology. In this case, wholly owned subsidiaries may be the ideal mode of entry because it reduces the risks of losing control over the foreign operations. Alternatively, a firm may prefer licensing as a mode of entry in case the technological competence is only transitory. On the other hand, firms enjoying competitive advantage based on managerial knowhow may rely on international trademark regulations to protect trademarked products and services (Nande & Shaila, 2007). Further, these firms experience a lower risk of losing control of management skills, thus making franchising and joint ventures attractive modes of entry.
The strategies adopted by a company also determine its mode of entry in foreign markets. For instance, Tesco has assumed a rather unique strategic approach in its global expansion within the grocery industry. Tesco’s strategy entails ignoring highly competitive markets and pursuing markets with high growth potential and low levels of competition (Tesco, 2014). As such, Tesco is able to use its competence in management knowhow to expand within the international markets, without incurring the unnecessary costs of competing in mature and highly competitive markets. Tesco’s global expansion strategy entails identifying underserved markets with strong growth potential, identifying local companies with effective understanding of their markets and with strong distribution systems, entering into joint venture agreements with them, transferring management expertise to these ventures and later acquiring these ventures (Tesco, 2014). The joint venture strategy has proven to be a very effective entry strategy for Tesco within the international market. The company has been able to improve its financial performance and competitive advantage by leveraging its expertise and tapping into the knowledge of the local markets possessed by their partners (Tesco, 2014). By hiring local managers, with the support of expatriates, Tesco is able to bring its competitive advantages in the local markets and later acquire the established ventures. Tesco has come to the realization that joint venture offers the best mode of entry to foreign markets, while ensuring maintenance of control over its foreign operations.
Reference
Nande, A. & Shaila, D. (2007). International Business and New Trends. Pune, India: Nirali ` Prakashan.
Tesco (2014). Tesco PLC annual report and financial statements 2014. Retrieved on September ` 1, 2014 from ` http://www.tescoplc.com/files/pdf/reports/ar14/download_annual_report.pdf Read More
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