International Business and Economics
Franchising is very similar to licensing except in the degree of control by the licensor in that a franchise has to adhere strictly to a set of standards such as in marketing strategy and in its sales promotions (Welch, Benito, and Petersen, 2007, p. 53). Example of licensing would be a Mickey Mouse logo licensed to a kids shoe manufacturer while franchising is a McDonald’s. Turnkey operations are a type of business entry mode in which one company contracts with another company to build, construct and complete ready-to-use facilities (Paul, 1966, p. 162). Most turnkey projects are usually in the construction and industrial-equipment sectors which require big capital and specialized expertise (Daniels, Radebaugh and Sullivan, 2008, p. 45). Management contracts pertain to agreements between investor groups of a big project and the management company hired for their expertise to manage, coordinate and oversee the project. The company is hired provides its management, administrative and organizational talents in return for a management fee such as those quite common in global hotel chains like Hilton. A direct investment is an investment made with a view to acquiring a lasting or long-term part or interest in an existing operational business enterprise in order to have an effective voice in the management of the said enterprise. In practice, this translates to buying the equity of 10% or more in the foreign firm as a form of market entry when other modes are not very assured of success. In this regard, foreign direct investment (FDI) is a way for capital to move from the low-return environment to a higher-profit market (Moosa, 2002, p. 24). Portfolio investment is an investment in stocks and securities for profits only and is called “hot money.” Attitudes to Foreign Cultures – the managers and employees of multinational firms try to adapt to foreign cultures sometimes based on their home culture. In most instances, the managers who are very democratic in their attitudes at their home country also extend these same traits of democratic practices such as sharing of vital information with the employees in a foreign country where they operate in (Toyne, 1980, p. 135). In some situations, the contrast of country managers is very vast such as imposing their home country’s practices, beliefs and values on the host country’s employees (Hofstede, 2003, p. 440) as a frame of reference while others take a more tolerant attitude and try to learn more and understand the foreign culture in a much better and deeper way (Ajami et al., 2006, p. 215). The success of a manager in the foreign country depends to a big extent on his or her cultural intelligence quotient (CQ) level similar to intelligence quotient (IQ) or emotional quotient (EQ) by being able to sufficiently read and analyze individual behaviors, attitudes, group dynamics and the unique situations in the context of the foreign culture (Kreitner, 2006, p. 97) beyond just learning the language. Key Means of Economic Transition – a command economy is an economy that is being managed centrally by the government bureaucrats. In other words, the demand and also the supply of certain products, goods, and services are determined by government planners. It is these people who decide which goods and services are to be produced, how they are priced and how these are to be distributed instead of allowing free market forces to do so.