Hierarchical Modes
Hierarchical Modes
Hierarchical Modes
The firm completely owns and control foreign market entry mode
Allocation of responsibility and competence between head office and
subsidiaries:
1.
2.
3.
4.
5.
4. Region centres
The formation of region centres implies creation of a regional
headquarters or appointment of a lead country, which will
usually play the role of coordinator and stimulator with reference
to a single homogeneous product group
Region centres - The regional HQ (lead country) will usually play the role
of coordinating and stimulating sales in the whole region.
Look back at the illustration The rst variant shows that the downstream functions have been
transferred to the region. In the second variant even greater commitment
is shown to the region because here all the value chain activities are
moved to the region, whereby the rm has become a fully edged insider
in the region. At this stage the rm has all the necessary functions in the
region to compete effectively against local and regional competitors. At
the same time, the rm can respond to regional customer needs
5. Transnational organization
Transnational organization - Integration and coordination of
operations (R&D, production, marketing, and sales and services)
across national boundaries in order to achieve synergies on a
global scale.
5. Transnational organization
5. Transnational organization
Environmental stability
Attractiveness of
current operations
Strategic fit
Incentives to
exit
Governance issues
Figure 12.5
Probability
of
exit
Summary of domestic-based
sales representatives
Advantages
Better control of sales
Close contact with
customers
Table 12.1
Disadvantages
High travel expenses
Too expensive for
markets far from home
Disadvantages
High initial capital investment
Loss of flexibility
High risk
Taxation problems
Disadvantages
Potential for increased
bureaucracy
Limited national level
responsiveness
Missing communication between
head office and region centre
Summary of acquisition
Advantages
Quick access to
Distribution channels
Labour force
Management experience
Local knowledge
Local contacts
Established brand names
Disadvantages
Expensive option
High risk
Integration concerns
Summary of
greenfield investment
Advantages
Optimum format
possible
Optimum technology
possible
Disadvantages
High investment cost
Slow entry of new
markets