Answer to Question 1
Answer: Managers who want to get into a global market with minimal investment may start with global sourcing (also called global outsourcing). This involves purchasing materials or labor from around the world wherever it is cheapest. The goal here is to take advantage of lower costs to be more competitive.
The next step may involve exporting the organization's products to other countriesthat is, making products domestically and selling them abroad. In addition, an organization might import, which involves acquiring products made abroad and selling them domestically. Both usually entail minimal investment and risk.
Managers also might use licensing or franchising, which are similar approaches involving one organization giving another organization the right to use its brand name, technology, or product specifications in return for a lump sum payment or a fee usually based on sales. The only difference is that licensing is primarily used by manufacturing organizations that make or sell another company's products and franchising is primarily used by service organizations that want to use another company's name and operating methods.
When an organization has been doing business internationally for a while and has gained experience in international markets, managers may decide to make a greater direct foreign investment. One way to increase investment is through a strategic alliance, which is a partnership between an organization and a foreign company partner in which both share resources and knowledge in developing new products or building production facilities.
Finally, managers may choose to directly invest in a foreign country by setting up a foreign subsidiary as a separate and independent facility or office. This subsidiary can be managed as a multidomestic organization (local control) or as a global organization (centralized control). This arrangement involves the greatest commitment of resources and poses the greatest amount of risk.
Answer to Question 2
Answer: A
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