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(i) Management contracts: A firms in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed upon fee.
(ii) Acquisitions of Existing Operations.
Firms frequently acquire other firms in foreign
countries as a means of penetrating foreign markets. For example, American Express recently
acquired offices in London, while Procter & Gamble purchased a bleach company in Panama.
Acquisitions allow firms to have full control over their foreign businesses and to quickly
obtain a large portion of foreign market share.
(iii) Licensing.
A firm in one country licenses the use of some or all of its intellectual property
(patents, trademarks, copyrights, brand names) to a firm of some other country in exchange
for fees or some royalty payment. Licensing enables a firm to use its technology in foreign
markets without a substantial investment in foreign countries.
(iv) Franchising.
A firm in one country authorizing a firm in another country to utilize its brand
names, logos,among others in return for royalty payment.
(v) Joint ventures.
A corporate entity or partnership that is jointly owned and operated by two
or more firms is known as a joint venture. Joint ventures allow two firms to apply their
respective comparative advantage in a given project.
(vi) Establishing new foreign subsidiaries.
A firm can also penetrate foreign markets by establishing new operations in foreign countries to produce and sell their products. The advantage here is that the working and operation of the firm can be tailored exactly to the firms needs. However, a large amount of investment is required in this method.
maurice.mutuku answered the question on April 25, 2019 at 05:39