Building and Buying Overseas Operations
A well-established and still popular method for securing a business presence abroad is for a company to buy or build production and distribution facilities in a foreign country. Indeed, despite the attention to strategic alliances in the popular literature, most overseas operations of U.S. manufacturing multinationals in developing countries are wholly owned. 1 So are the divisions of most U.S. companies operating in Europe. 2 Of the high-growth companies belonging to the American Business Conference, fully onethird entered foreign markets through either the construction of new facilities or the acquisition of existing ones. 3
The primary exception occurs when the host country places restrictions on the extent of ownership by foreign businesses. These may be formal investment barriers, less formal but often equally powerful barriers in the form of tax breaks to competing local companies, and local content laws requiring local producers to use locally made supplies. 4 For these reasons, in Asia and in Eastern Europe joint ventures and other strategic alliances are the dominant modes used by foreign companies attempting to develop a presence in local markets (see chapters 5 and 6).
In some circumstances, a host government may be will-