Acquiring the existing firm Essay

Abstract1. Comp be the advantages and disadvantages of acquiring the existing firm, and continue harvest-homeion in Korea through acquisition for Zip-6. 2. Compare the advantages and disadvantages of re-purchasing the licensing agreement and either establishing Zip-6 subsidiary through Greenfield venture and producing in South Korea, tradeing the product to Korea, franchising to another firm or relicensing to another firm. 3. State your choice of options to dog and reasons for this choice.Answers1. If you get it right, there can be m any good reasons why buying an existing trading could make good disdain sense. immortalise though, that you exit be taking on the legacy of the previous disdain owner, and you need to be aware of every aspect of the logical argument you are about to buy. Advantages areSome of the groundwork to get the business up and running testament have been d unrivaled. It whitethorn be easier to obtain finance as the business will have a proven wrap u p record. A business plan and grocery storeing method should already be in place. A market for the product or service will have already been demonstrated. There are whitethornbe established customers, a reliable income, a reputation to capitalize and build on and serviceable network of contacts. Many of the problems will have been discovered and solved already. quick employees should have experience you can draw on.Disadvantages areZip-6 will oftentimes need to invest a liberal of amount up front, and will alike have to budget for professional fees for solicitors, surveyors, accountants etc.. It will probably to a fault need several months of working capital to assist with cash flow. If the business has been neglected Zip-6 whitethorn need to invest quite a smirch more on top of the purchase price to give it the shell chance ofsuccess. Ravi and Keith may need to honour or renegotiate any outstanding contracts the previous owner leaves in place. They in like manner need ta ke aim why the current owner is selling up and how this might furbish up the business and they are (Zip-6) taking it over. It is possible current staff may not be happy with a new boss, or the business might have been run badly and staff morale may be low.2. I will define licensing agreement in this episode we are talking about an international licensing agreement which allow distant firms, either exclusively or non -exclusively to manufacture a proprietors product for a fixed term in a particular proposition market. Licensing is a relatively flexible work agreement that can be customized to fit the needs and interests of both, licensor and licensee. Advantages of using an international licensing agreement are Is exceedingly attractive for companies that are new in international business. Obtain otiose income for technical know-how and servicesQuick expand without much adventure and large capital investment. Reach new markets not accessible by export from existing facilities. Political lay on the line is minimized as the licensee is usually one hundred percent locally owned. Retain established markets closed by trade restrictions.Pave the way for afterlife investments I the market.Disadvantages are first-class honours degree income than in other ledger entry modes.Risk of having the trademark and reputation done for(p) by an impotent partner The foreign partner can also become a competitor by selling its production in places where the parental company is already in. Loss of control of the licensee manufacture and marketing operations and practices leading to loss of quality.Franchising agreement compare to licensing agreement tends to be longer and the franchisor offers a broader package of rights and resources which usually includes ,equipment, managerial systems, operation manual, initialtrainings, site approval and all the support necessary for the franchisee to run business in the same way it is done by the franchisor. Franchising is limited to trademarks and direct know-how of the business.Advantages of the international franchising areLow political riskLow greetAllows simultaneous expansion into different regions of the world. Well selected partners bring financial investment as well as managerial capabilities to the operation.Disadvantages areFranchise may turn into competitors.Demand of franchisees may scare when starting to franchise a company, which can lead to making agreements with wrong candidates. A wrong franchisee may ruin the companys name and reputation in the market. equivalence to other modes such as exporting and even licensing, international franchising requires a greater financial investment to attract prospects and support and manage franchisees. The tell success for franchising is to avoid sharing strategic activity with any franchisee. curiously for Zip-6 Co they do have a secret ingredients to their soft drink. overlap those strategic activity may increase the potential of the franchisee to be their future competitor cod to the knowledge and strategic spill over.Greenfield investment is organization of a new wholly owned subsidiary, its often complex and potentially costly, but it is able to provide full control to the firm and has the closely potential to provide above average return. Greenfield is more likely preferred where physical capital intensive plants are planned. It is high risk due to the costs of establishing a new business in new state of matter Zip-6 may need to acquire knowledge and expertise of existing market by third parties, such consultant, competitors, or business partners. And also this entry strategy takes much time due to the need of stablishing new operations, scattering network, and the necessity to learn and implement appropriate marketing strategies to compete with rivals in a new a market.3. My option will be achievement because its quick access and it offers thefastest, and largest, initial international expansion of any of the alterna tive. It is also a way to achieve greater market power. It is lower risk than Greenfield investment because of the outcomes of an acquisition can be estimated more easily and accurately. In overall, acquisition is attractive if there are well established firms already in operations or competitors want to enter the region. Of course there are many disadvantages and problems in achieving acquisition success. But where there is risk there is also success.Referenceshttp//www.export.gov/foreign_market_entry_modes.https//www.business.qld.gov.au/business//business/buying. Retrieved from Global Business Today, eighth Edition (Charles W. L. Hill 2014). 2012 books.lardbucket.org/books/challenges-and-opportunities-in-international-business/s13-exporting-importing-and-global.html.