Taking into account international risk factors, how should an organization decide on a mode of entry when expanding internationally? Which mode of entry has a company like Sony used?
The stages of organization's evolution is first of all the organization will start exports of the goods and services because it involves low commitment of capital and in turn low risk and return. Export is the legitimate transportation of domestic or nationalized goods and services from a country intended for use or consumption rendered abroad. Exports can be any good that is shipped out of a government's border for commercial purposes.
Overall it involves low commitment of capital and in turn low risk and return. It is low risk, as it does not involve long-term capital investment in foreign location.
Then next step can be of joint venture or franchising/ licensing route. A joint venture (often abbreviated JV, and sometimes known by the older term joint adventure) is a strategic alliance between two or more parties to undertake economic activity together. The parties agree to create a new entity together by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship such as the Sony Ericsson joint venture. A joint venture is often seen as a very viable business alternative in this sector, as the companies can complement their skill sets while it offers the foreign company a geographic presence.
1. Spreading costs and risks
2. Improving access to financial resources
3. Economies of scale and advantages of size
4. Access to new technologies and customers
5. Access to innovative managerial practices
6. Taxation as a partnership (in the case of unincorporated joint ventures)
Therefore it involve medium risk and medium return strategy.
It can have franchisee or technology licensing across the border
Licensing is a form of strategic alliance, which involves the sale of a right to use certain proprietary knowledge (so called intellectual property) in a defined way. The intellectual property may be registered ...
Over a thousand words describing how Sony expanded into other countries so successfully.