1 Reading Course in Business English Unit 1 Entering Foreign Markets

2 Teaching objectives Business jargons Five modes of entry Advantages and disadvantages of different entry modes Others

3 Assignment 1 Special terms 进入方式 间接出口 直接出口 许可经营 合资企业 直接投资 中介人, 中间商 国内出口代理商 佣金 贸易公司 初级产品 销售队伍 技术诀窍 Mode of entry Indirect export Direct export Licensing Joint venture Direct investment Intermediary Domestic-based export agent Commission Trading company Primary product Sales force Know-how

4 Assignment 1 Special terms 潜在收益 出口部 仓储 利润 / 展示 / 客服中心 销售分公司 销售代表 国外分销商 / 代理商 专有权 ; 专营权力 商业展览 软件博览会 Potential return Export division wharehousing Profit/display/customer-service center Sales branch/subsidiary Sales representative Foreign-based distributor/agent Exclusive right Trade show Software expo

5 Assignment 1 Special terms 许可协议 无形资产 ( 知识产权 ) 许可方 ( 知识产权 ) 被许可方 特许权使用费 专利 版权 商标 净销售收入 Licensing agreement Intangible property Licenser licensee Royalty fee patent Copyright Trademark Net sales revenue

6 Assignment 1 Special terms 所有权股份 过半数股权 主要竞争对手 白色货物 ( 冰箱, 洗衣机, 被单等等 ) 国有企业 跨国公司 Ownership stake Majority share Arch-rival White goods Corporate giant State-owned company Multinational company

7 Assignment 1 Special terms 独资子公司 老字号企业 成本节约 原材料 投资激励措施 东道国 供应商 分销商 贬值的货币 征用 遣散费, 解雇费, 离职费 Wholly owned subsidiary Established firm Cost economy Raw material Investment incentive Host country Supplier Distributor Devalued currency Expropriation Severance pay

8 Assignment 2 Answer/discuss the questions based on Text A. What are the modes that firms can use to enter a foreign market? What are the advantages of indirect and direct exporting? What is licensing? What are the advantages and disadvantages of licensing? What are the major risks of establishing a joint venture with the local partner? What are the advantages and disadvantages of direct investment?

9 Contents Text A Deciding how to enter foreign markets - to learn the different modes that firms use to enter a foreign market - to understand the advantages and disadvantages of each entry mode Text B Cooperative joints ventures in China

10 Read text A and find out What are the modes that firms can use to enter a foreign market? What are the advantages of indirect and direct exporting? What is licensing? What are the advantages and disadvantages of licensing? What are the major risks of establishing a joint venture with the local partner? What are the advantages and disadvantages of direct investment?

11 Questions to ponder Suppose you are a manufacturer of auto components with the problem of overcapacity but currently you don’t have a sales force that can help you enter foreign markets. How can you still get involved in international marker?

12 # Indirect export -- using intermediaries Major types of international intermediaries ： A. Domestic-based export merchant B. Domestic-based export agent C. Cooperative organization D. Export management companies Advantages: -- less commitment -- less risks Advantage: -- less profit

13 Questions to ponder Why do most companies eventually decide to handle their exports directly? Greater potential return as a result of not paying an intermediary commission/fee.

14 # Direct export: Major types: -- Domestic-based export department or division -- Overseas sales branch or subsidiary -- Traveling export sales representative -- Foreign-based distributors or agents Advantages: -- better knowledge about their products -- better control over international activities -- higher levels of commitment. -- further international involvement.

15 Definition of Licensing Licensor grants the intangible property to licensee, and in return, the licensor receives royalty fee from the licensee. Intangible property includes patents, inventions, formulas, processes, designs, copyrights, and trademarks.

16 # Appeals of licensing The firm does not have to bear the development costs and risks associated with opening a foreign market. --- not requiring capital investment or detailed involvement with foreign customers --- an opportunity to exploit R & D already conducted --- reducing the risk of being expropriated --- help avoid local regulations applicable to equity-ventures --- provide a means to test a foreign market --- preempt a market before the entry of competition

17 # risks of licensing Quickly lose control over its technology --- limited foreign market participation, no guarantee for future expansion --- difficult to track sales and collect payment eg. Newwork TeleSystems --- pirating and copycatting Risk Reduction  Cross-licensing  Joint venture

18 Questions to ponder You have an excellent business idea and think about setting up your own business. However, you only have half the capital needed to start up the company. How can you deal with this issue? You are an experienced exporting specialist. Your friend or relative has an exporting company with weak sales force. How can you possibly be a shareholder in his or her company without contributing your money? --Use your technical know-how as investment for shares.

19 Joint ventures Reasons: --- the foreign firm might lack the financial, physical or managerial resources to undertake the venture alone. --- political consideration to crack the toughest market. Drawbacks: --- disagreement over investment, marketing or other policies. --- hamper an MNC from carrying out specific manufacturing and marketing policies on a worldwide basis.

20 Benefits: --- better outcome for each partner from the pooling of resources eg. A’s new technology + B’s capital A’s distribution system + B’s products --- lower risks --- the only means to operate profitably in some restrictive countries, India -- --

21 Reasons for failures --- conflicts of interest --- differences in management styles --- disclosure of sensitive information --- disagreement over profit sharing ---

22 Direct investment Advantages: --- secure cost economies --- gain a better image in the host country --- develop a deeper relationship with… --- retain full control over investment --- assure access to the market Disadvantages: --- exposed to risks such as devalued currencies, worsening markets, or expropriation. --- expensive to close down operations

23 Language points 1 The firm does not have to develop an export department, an overseas sales force, or a set of foreign contacts. 企业没必要建立出口部，海外销售队伍或国外熟人关系。 The investment and risk are somewhat greater, but so is the potential return as a result of not paying an intermediary. 投资和风险有些增大，但由于无需支付中间商的费用，潜在的收益也会 增大。 The department might evolve into a self-contained export department performing all the activities involved in export and operating as a profit center. 这个部门可能会发展成一个独立的出口部开展所有出口活动成为企业的 赢利中心。

24 Language points 2 An overseas sales branch allows the manufacturer to achieve greater presence and program control in the foreign market. 海外销售部使生产商在国外市场占有更大的一席之地和项目管 理。 A licensing agreement is an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified period, and in return, the licensor receives a royalty fee from the licensee. 许可协议是一种安排，通过这种安排许可方允许另一实体（被 许可方）在一定时间内使用某无形资产，做为回报，许可方获 得被许可方支付的许可使用费。

25 Language points 3 The most typical joint venture is a 50/50 venture, in which there are two parties, each of which holds a 50 percent ownership stake and contributes a team of managers to share operating control. 最典型的合资企业是 50/50 型的企业，也就是说，合资双方各 持有 50% 的股权，并共同组建经理人团队，共享经营控制权。 The firm can either set up a new operation in that country or it can acquire an established firm and use that firm to promote its products in that country ’ s market. 企业可以在该国建立新的经营企业，也可以收购一家已有企业 并通过该企业在该国促销其产品。

26 Language points 4 The main disadvantage of direct investment is that the firm exposes its large investment to risks such as devalued currencies, worsening markets, or expropriation. The firm will find it expensive to reduce or closed down its operations, since the host country might require substantial severance pay to the employees. 直接投资的主要劣势在于，企业使其巨额投资暴露于诸如货币贬 值，市场恶化或政府征用等风险当中。由于东道国可能要求向雇 员支付大量的遣散费，该企业会发觉要想降低或关闭其所经营的 企业代价昂贵。

27 Put the following into English 专门从事出口销售的企业 Firms specializing in exports sales 控制了制造业贸易和投资的相当大的份额 Control a considerable share in manufacturing trade and investment 在生产技术方面具有相对的竞争优势 Enjoy relative competitive advantage in production and technology 遵守特许人的经营策略 Follow the operational strategy of the franchiser 收购东道国现有的企业 Acquire an on-going firm in the host country 丧失了对被许可方在技术上的控制 Lose control over the licensee on technology 充分吸收公司总部提供的最新技术知识 Fully assimilate the latest technology offered by the headquarters 在全球范围内从事经营 Engage in business on a global basis 将新产品推向外国市场 Launch /introduce the new products to foreign markets 持有合资企业半数以上的股权 Hold the majority share of the joint venture

28 Assignment Case study (Page 8) and Exercises Assignment 1: Case study due on 22 nd September. Requirements; Print-out, A4 Size, Your name, student number and class Font : Times New Roman, 12 points Base your arguments on what you’ve learned from text A. Advantages and disadvantages of each entry mode Convincing and logical Well organized and no grammatical mistakes No less than 300 words No plagiarism Assignment 2: Exercise Page 8-11

29 Extension Things to be aware of when giving and receiving business cards. Distinguish yourself from others. Life is like a box of chocolates and you never know what you are going to get. One small act of goodness can make a big difference.