FOREIGN MARKET ENTRY STRATEGY

Click to edit Master subtitle style Lakshmi udayan 1st batch MGT1005220

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Foreign market entry strategy

Institutional arrangement that makes possible the entry of a companys products, technology, human skills, management or other resources into foreign country. The expansion into foreign markets can be achieved via the following 5 mechanism
Exporting Licensing Joint ventures Direct investments Franchising

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EXPORTING

Exporting is the marketing & direct sale of domestically produced goods in another country. Exporting is a traditionally & well established method of reaching foreign markets. Most of the cost associated with exporting take the form of marketing expenses
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Exporting commonly requires coordination among 4 players Exporter Importer Transport provider Government

a) b) c) d)

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ADVANTAGES

Minimizes risk & investments Speed of entry Maximizes scale; uses existing facilities

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Disadvantages

Trade barriers & tariffs add to costs Transport costs Limits access to local information Company viewed as an outsider

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Licensing

Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, & production techniques The licensee pays a fee in exchange for the right to use the intangible property & 6/7/12 possibility for technical assistance.

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ADVANTAGES

Minimizes risk & investment Speed of entry High ROI Able to avoid trade barriers

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DISADVANTAGES

Lack of control over use of assets Licensee may become competitor License period is limited
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Joint venture

The join venture entitle the establishing a firm i.e. jointly owned by two or more independent firms. There are five main objectives in joint venture market entry, risk/reward sharing, technology sharing, & joint product development, & conforming to government regulation
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Advantages

Combines resources of 2 companies Potential for learning Overcomes ownership restrictions & cultural distances. Viewed as insider Less investment required.
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Disadvantages

Greater risk than exporting & licensing Difficult to manage Dilution of control Partner may become a competitor

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Foreign direct investment (FDI)

FDI is the direct ownership of facilities in the target country. It involves the transfer of resources including capital, technology, & personnel. Direct foreign investment may be made through the acquisition of an existing entity or the establishment 6/7/12 of a new enterprise.

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Advantages

Greater knowledge of local market. Can better apply specialized skills. Minimizes knowledge spill over. Can be viewed as an insider.

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Disadvantages

Higher risk than other modes Requires more resources & commitments May be difficult to manage the local resources.

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Franchising strategy

A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system.

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Advantages

Low political risk Low cost Well selected partners bring financial investment as well as managerial capabilities to the operation.

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Disadvantages

Franchisees may turn into future competitors A wrong franchisee may ruin the companys name and reputation in the market
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Thank u

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