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Licensing
The home-country firm licenses a foreign firm to allow it
to use the home-country firm’s production process in the
foreign country
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Investment
Mergers and
The home-country firm buys part (merger) or all
acquisitions (M&A) (acquisition) of the shares of an already-existing
production facility in the foreign country
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Category Mode Characteristics
Domestic None Purely domestic firm supplying home market
Exporting Indirect Exporting Another firm acts as sales agent
Exporting Direct Exporting Firm completes export transaction itself
1 Contractual
Contractual
Licensing
Franchising
License to foreign firm to produce abroad
License with conditions to ensure consistency
Contractual Subcontracting Contract with materials and specifications
Investment Joint Venture Jointly owned separate firm
Investment Mergers and Purchase of part or whole of foreign firm
Acquisitions
The Foreign
Market Entry
Menu
Nature of IPOM
International business environment where not just economics but
also international quality standards have to be maintained.
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Nature of IPOM
The International stint makes the company more aware of its
surroundings, thus making it more competitive.
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As IPOM is dynamic in nature, organization has
to design it strategic objectives which cover
Meeting international following points:
1
quality standards
Profitability 3
Minimum production
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cost
Adaptation to modern
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available technology
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INTERNATIONAL
PRODUCTION
production of goods and services in
international locations and markets
involves management process which has to
PRODUCTION
encompass vertical production chains extended
across the countries in the region as well as
distribution networks throughout the world
value adding activity owned or controlled, and
organized by a firm outside its national
boundaries
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Motivations for International
Production
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GROSS DOMESTIC PRODUCT
measures production inside of a monetary value, in local currency, of all final broadest financial measurement of
country, no matter who makes it economic goods and services produced in a a nation’s total economic activity
country during a specific period of time
total goods and services bought by consumers enables economic policymakers to assess whether
encompasses all private expenditures, the economy is weakening or progressing if it
government spending, investments, and needs improvements or restrictions
exports but excludes imports that take place
within a designated country
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GDP = C + I + G +(x-µ)
C = 130 000 000
I = 59 000 000
G = 34 000 000
x = 12 000 000
µ = 10 000 000
GROSS NATIONAL PRODUCT
value of all goods and services made by counts the investments made by computes the value of all products
a country's residents and businesses, residents of the country both inside and manufactured by domestic
regardless of production location outside the country companies, regardless of where
they are made
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GNP FORMULA
GNP = C + I + G + X + Z
C = 130 000 000
I = 59 000 000
G = 34 000 000
x = 12 000 000
µ = 10 000 000
Z = 50 000 000
CHALLENGES
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Culture
Domestic POM has to content with homogenous culture where as
IPOM has to content with multi-culture multi-ethnicity scenario.
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Business
Environment
Domestic POM has to consider local economical and social factors where as
IPOM has to deal with economical and social factors across geography and
countries. 21
Market
Segmentation
Domestic POM is around local market where as IPOM has to
developed and diversified market.
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Usage of resources
Domestic POM has to deal with in-flexibility of moving around of
resources within one location while IPOM has advantage of moving
around of resources from high cost market to low cost market. 23
Quality Standards
Domestic POM has to look at single local market therefore not much
variation in quality standards where as IPOM has to consider different
international markets with different quality standard requirements. 24
Pricing
Pricing for Domestic POM may not be a challenge as competition would also
operate in the same environment. IPOM has to consider the customer paying
capacity which may vary from developed country to developing country. 25
Economies of Scale
Domestic POM has to deal with limited local market, hence limiting scope
of economies of scale whereas IPOM has to access to larger market thus
providing a change of achieving larger economies of scale. 26
Technology
In domestic environment innovation and usage of technology is much
more comparable among competition. For IPOM owing to different quality
and pricing requirements investment in technology becomes important. 27
IPOM Strategies
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REPORTERS
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