Discuss how the need for control over foreign operations varies with firms’ strategies and core competencies. What are the implications of the choice of entry mode?
If a firm’s competitive advantage (its core competence) is based on control over proprietary technological know-how, licensing and joint venture arrangements should be avoided if possible so that the risk of losing control over that technology is minimized. For firms with a competitive advantage based on management know-how, the risk of losing control over the management skills to franchisees or joint venture partners is not that great. Consequently, many service firms favor a combination of franchising and subsidiaries to control the franchises within particular countries or regions. The subsidiaries may be wholly owned or joint ventures, but most service firms have found that joint ventures with local partners work best for controlling subsidiaries.
Answer 2: A company’s core competencies can dictate how they choose to operate overseas in foreign markets. Often times, the method of entry, which has been our focus for the last week, can foreshadow the company’s position on this matter. A more formal or strict company may require more control over foreign operations, this would be because the company values rigidity highly within the organization. This is how I would run the company because it allows me to remain informed on all matters. Eventually, once I had more trust and established a relationship with the leaders in these markets I could see myself allowing them more control of their operations. However, I would most likely not allow for them to make their own decisions before learning enough from them to at least understand why they’re making the choices they are making.