It is incontestable that as the universe gets globalized. virtually all companies are compelled to spread out their market to the international or foreign states. Expansion into the foreign states is perceived to be associated with many positive impacts. However. it has been shown that some entry manners are damaging to the public presentation of the company or the house. This implies that before any house decides to spread out. it has to weigh different international entry manners and find the best manner to utilize. This paper discusses one of the modern entry manners. called cross-border strategic confederation. The paper will accomplish this by reexamining one of the elaborate article cross-border strategic confederations.
The article entitled Cross-Border Strategic Alliances and Foreign Market Entry” by Larry Qiu analyzes how houses are motivated to organize cross-border strategic confederations when come ining into new markets. The end of the article seeking to reply the inquiry as to why most houses are organizing cross-border strategic confederations and besides placing the economic factors that facilitate the formation of such confederations. Using a two-country. multi-firm and three-stage economic theoretical account. the writer reveals amazing findings on the mode in which companies enter into international market ( Qiu. 2006 ) . The article reveals that the company can come in into an international market in different ways. Some of the ways include export and foreign direct investings.
Cross-border amalgamations and acquisition. harmonizing to the article is the modern manner in which a state can perforate other states. There are other traditional signifiers such as export and green-field foreign direct investing ( FDI ) . The article analyzes based on the thesis statement that multinationals are switching from the traditional signifiers such as FDI to modern signifiers such as cross-border amalgamations and acquisitions and cross-border strategic confederations.
The factors that are considered to act upon the pick of the entry manner include such facets as variable costs such as trade and conveyance costs and fixed costs. The writer argues that a company may put up merely one works in its ain state and uses it to function both the domestic and foreign markets. Harmonizing to the article. hunt house will be come ining into foreign and international states through export. Alternatively the same house may choose to put up two workss. one works in the domestic state and the other in the foreign state. In such a instance. the house will be come ining into foreign state through foreign direct investing.
The innovation of cross-border strategic confederations. harmonizing to the article. has compelled most states to exchange from export to FDI. This is because the cross-border strategic confederation is associated with legion benefits compared with the export schemes ( Qiu. 2006 ) . For illustration it creates different synergisms in the domestic and foreign markets. In add-on. it promotes production confederations. which help each of the allied houses to cut down production costs both in their domestic workss every bit good as their foreign workss. Equally far as distribution costs is concerned. the article argues that the cross-border selling. which is a merchandise of the cross-border strategic confederation. reduces the allied firms’ distribution costs in their foreign market ( Qiu. 2006 ) .
The foregoing analysis has shown why cross-border strategic confederation is going the most preferable manner of entry every bit far as international trade is concerned. Compared to other entry manner methods. cross-border strategic confederations create different synergisms in the domestic and foreign markets ( Qiu. 2006 ) . Some of the synergisms include production cost synergisms and distribution costs synergisms. These synergisms helps the company cut down the production and distribution costs and therefore acquire net incomes.
Qiu. L. D. ( 2006 ) .Cross-Border Strategic Alliances and Foreign Market Entry. Hong Kong University of Science and Technology. Retrieved from: hypertext transfer protocol: //www. etsg. org/ETSG2006/papers/Qiu. pdf