International Entry Options for Horizontal Growth - 964 Words

INTERNATIONAL ENTRY OPTIONS FOR HORIZONTAL GROWTH When a firm grows internationally it is positively associated with profitability of the firm. There are several options to choose from when entering a foreign market or establishing manufacturing facilities in another country; from simple exporting to acquisitions to management contracts. Some of the most popular options for international entry are as follows: * Exporting: Exporting is the shipping of goods produced in the company’s home country to other countries for marketing. This offers a good way to minimize risk and experiment with a specific product. Critical functions can either be handled by the company or be contracted to an export management company; it is the choice†¦show more content†¦Instead of turning the facility, which is usually a power plant or toll road over to the host country when completed, the company operates the facility for a fixed period of time during which it earns back its investment plus a profit. Then the facility is turned over to the government at little or no cost to the host country. * Management Contracts: These offer a means through which a corporation can use some of its personnel to assist a firm in a host country for a specified fee and period of time. Management contracts are common when a host government expropriates part or all of a foreign-owned company’s holdings in its country. The contracts allow the firm to continue to earn some income from its investment and until local management is trained, keep the operations going. CORPORATE PARENTING AND PORTFOLIO ANALYSIS Corporate Parenting views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units. It generates corporate strategy by focusing on the core competencies of the parent corporation and on the value created from the relationship between the parent and its businesses. Portfolio analysis examines the attractiveness of various industries and by managing business units for cash flow, that is, by using cash generated from mature units to build new product lines. They view matters financially, regarding business units and product lines asShow MoreRelatedElectrolux Case Study949 Words   |  4 Pageschanged over time? How have these changes affected its direct investment activities? Electrolux started pursuing international businesses in order to amortize costs and diminish cost of production per units. As a consequence, the company decided to pursue a strategy of horizontal integration through the acquisition of Arthur Martin, Therma, Tappan, Husqvarna. The idea behind the horizontal integration was to conquer new markets by already-established brands and create a global standard production inRead MoreElectrolux Case Study964 Words   |  4 Pageschanged over time? How have these changes affected its direct investment activities? 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