Page 214 - Marketing the Basics 2nd

206 Marketing: the Basics
since JV contract details need to be negotiated, establishing a JV is often quite time consuming and expensive. Indeed, JV negotiations can derail potential ventures as parties discover that they cannot reach agreement on important points. Second, JVs mean you have to share the profits with partners, and finally you have to share decision making, which means that you cannot do things the way you want nor can you have globally consistent manufacturing and marketing policies.
FOREIGN DIRECT INVESTMENT
The ultimate in foreign involvement is foreign direct investment (FDI). This is where your firm owns manufacturing or assembly facilities in another country. The foreign company can have part or full interest in a local company or build its own facilities. Auto giant GM has invested billions of dollars over decades in auto manufacturers around the world, including China’s Shangai GM and Jinbei GM; Italy’s Fiat; Japan’s Isuzu and Suzuki; Korea’s Kaewoo; Sweden’s Saab; Russia’s AvtoVAZ. If the market is large enough to warrant this type of entry, foreign production facilities offer some real advantages. First, the firm enjoys cost savings in terms of cheaper labour or raw materials, foreign government investment incentives and transportation savings since you are much closer to the customer.
There are further advantages of FDI, for example the firm tends to enjoy a better image in the host country with government and customers alike. Wal-Mart and McDonald’s, both well-known US firms, try to do this abroad. Wal-Mart bought Asda in the UK, Seiyu in Japan and Woolco in Canada in order to create a local presence quickly. In the UK and Japan they continued to trade under the names of the firms they bought. In Canada they have sought to Canadianize Wal-Mart as much as possible so it begins to seem like another Canadian firm to Canadian customers. Another advantage is that the firm can build a deeper relationship with customers, local suppliers and the distribution system of the country. This is quite helpful in adapting their products to the particular needs of that country. Also, the company retains control over its investment and can implement global standards in manufacturing and