Chapter 11 Flashcards
Mean issues when choosing method of growth
may not have resources
business may have complemantary skills
speed required
retaining control
organisational culture
risk
Axis on Lynch matrix
Company - In/external development
New location
What is Lynch used for
possible expansion methods
Lynch - internal development at home country
internal domestic development
Lynch - Internal development abroad
Exporting
O/s office or manuf
MNC
Global
Lynch - External development home country
JV
Merge
Acquisition
Alliance
Franchise/license
Lynch - External development abroad
JV
Merge
Acquisition
Alliance
Franchise/license
What kind of growth
expansion of size, profits and activities through using own resources and capabilities without taking over other firms
organic growth
Benefits of organic growth
Developing new product = better understanding
genuine technological innovations
no suitable target for ace
financed from current resources
same style of management
hidden losses common in acquisitions
career develpment
cheaper
less risky
Draw backs of organic growth
intensify competition
slow
not gain new knowledge and systems
lack EOscale/experience
Barriers to entry in new markets
Reasons for international expansion
life cycle
home sales in mature or decline, may allow sales growth if expand abroad as products often in different stages
Reasons for international expansion
Competition
Intense competition domestically - look overseas
Reasons for international expansion
reduce dependence
reduce over dependence on single domestic market, increased geographic diversification can help spread risk
Reasons for international expansion
Economies of scale
Large volume may be needed to cover high costs of plant, R&D etc to exploit EOS and experience
Reasons for international expansion
variable quality
dispose discontinued products and seconds since these can be sold abroad without spoiling home market
Reasons for international expansion
Finance
Development emerging markets
depreciation domestic currency
CT benefits
lowering import barriers
Reasons for international expansion
familial
family or cultural connections
Reasons for international expansion
aid agencies
countries benefit from aid often purchase goods they wound have money for
Pro international expansion
Higher profit margin abroad
increase sales volume (reduce unit cost)
product lifecycle extended
level out seasonal fluctuation
dispose excess production abroad
spread risk
obsolescent products sold to International customers
prestige enhanced by global image
Against international expansion
profits affected by external factors
adaptions to product needed diminish EOScale
Extending lifecycle not always cost effective
opportunity cost
anti-dumping duties
Reasons for merger/acquisitoin
Marketing advantage
production advantage
finance and management
risk spreading
retain independence
overcome barriers to entry
outplay rivals
