...I. Various Modes of Entry that can be used by companies to enter foreign markets 1. Exporting: Exporting is the process of selling of goods and services produced in one country to other countries * Direct Exports * Indirect Exports A brief discussion on the advantages and disadvantages and the legalities involved in the export process. 2. Licensing: An international licensing agreement allows foreign firms, either exclusively or non-exclusively to manufacture a proprietor’s product for a fixed term in a specific market. A brief discussion on the advantages and disadvantages and the legalities involved in the process to acquire or grant a license. 3. Franchising: 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 A brief discussion on the advantages and disadvantages and the legalities involved in the process of becoming or appointing a franchisor / franchisee. 4. Turnkey Projects: A turnkey project refers to a project when clients pay contractors to design and construct new facilities and train personnel. A turnkey project is way for a foreign company to export its process and technology to other countries by building a plant in that country. A brief discussion on the advantages and disadvantages and the legalities involved in...
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...MODES OF ENTRY USED BY INTERNATIONAL FIRMS TO ENTER INTO NEW MARKETS. TERMPAPER SUBMITTED IN PARTIAL FULLFILMENT OF THE REQUIREMENTS OF THE COURSE GLOBAL STRATEGIC MANAGEMENT, DEPARTMENT OF BUSINESS ADMINISTRATION, AND UNIVERSITY OF NAIROBI. DATE17TH MARCH 2012 Modes of entry used by international firms to enter into new markets. Introduction A mode of entry into an international market is the channel which an organization employs to gain entry to a new international market. International firms use several entry modes to expand their businesses globally, and to enter into new markets, there are some basic decisions that the firm must takes before foreign expansion like: first they determine which markets to enter, when to enter those markets, and on what scale. The decision on which foreign markets to enteris based on the nation’s long run profit potential.-The international firm looks in detail at economic and political factors which influence foreign markets.-Long run benefits of doing business in a country depends on following factors:- Size of market (in terms of demographics)- The present wealth of consumer markets (purchasing power)- Nature of competition. By considering such factors firm can rank countries in terms of their attractiveness andlong-run profit. The time of entry is an important factor to be considered. Entry is early when an international business enters a foreign market before other foreign firms and late when it enters after other international businesses...
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...M0414102 Foreign market entry modes 1. Exporting: Exporting is the process of selling of goods and services produced in one country to other countries. There are two types of exporting: direct and indirect. * Direct Exports The most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. The main characteristic of direct exports entry model is that there are no intermediaries. Advantages: * Control over selection of foreign markets and choice of foreign representative companies * Good information feedback from target market, developing better relationships with the buyers * Better protection of trademarks, patents, goodwill, and other intangible property * Potentially greater sales, and therefore greater profit, than with indirect exporting. Disadvantages: * Higher start-up costs and higher risks as opposed to indirect exporting * Requires higher investments of time, resources and personnel and also organizational changes * Greater information requirements * Longer time-to-market as opposed to indirect exporting * Indirect exports Indirect export is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign market. Types:...
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...BUSINESS ENTRY. Contents EXECUTIVE SUMMARY 3 1.0 INTRODUCTION 4 1.1Background 4 1.2 Purpose of International Business Entry 4 1.3 Scopeof international Business Entry 4 1.4 Basic Issues an Organisation Faces 5 1.5 Strategies used by Firms 5 ENTRY STRATEGIES 6 2.0 EXPORTING 6 2.1 Advantages and Disadvantages of Exporting 7 2.2 Passive exports Vs Aggressive exports 7 2.3 Direct and Indirect Export 8 2.4 Case Study 9 3.0 PIGGYBANKING…………………………………………………………………………………….10 4.0COUNTERTRADE……………………………………………………………………………………10 4.1 Forms of Countertrade…………………………………………………………………………….10 4.2 Examples of Countertrade…………………………………………………………………………11 4.3 Disadvantages of Countertrade……………………………………………………………………11 5.0 BARTER………………………………………………………………………………………………11 5.1 Forms of Barter Trade…………………………………………………………………………….11 6.0 FOREIGN PRODUCTION……………………………………………………………………………14 6.1 Licensing…………………………………………………………………………………………..14 6.2 Joint Ventures……………………………………………………………………………………..15 6.3Ownership………………………………………………………………………………………….16 6.4 Exports Processing zones………………………………………………………………………….17 7.0 ANALYSIS AND CONCLUSION…………………………………………………………………...17 7.1 Conclusion and Recommendation………………………………………………………………..17 8.0 REFERENCES………………………………………………………………………………………...19 EXECUTIVE SUMMARY. There are a variety of ways in which a company can enter a foreign market. No one market entry strategy...
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...Chapter 13: Entry Strategy and Strategic Alliances TECHNICO Chose wholly owned subsidiary (agribusiness) 1. Enter into china … not prepared to let chinese counterparts exploit their technology 2. Avoiding technical and licensing agreement 3. No risk in allowing co to use licensing strategy and not using it well | Basic Entry Decisions OLI a) Location b) Ownership specific advantage c) internalisation-specific attributes (entry modes) 1) Which foreign markets? * Assessment of nations long run profit potential * Assess overall attractiveness of model * Suitability of product to that region * Nature of indigenous competitors 2) Timing of entry * Consider first mover advantages a) ability to pre-empt rivals and capture demand by establishing strong brand name b) ability to build sales volume before other entrants cost savings allow you to further cut your costs c) create switching costs that tie customers into products * first mover disadvantages a) pioneering costs: costs that firms have to bear that late entrants can avoid… eg cost of business failure b) research shows that higher probability of survival of an international business after several firms done so c) costs of promoting and marketing the product in a new market 3) scale of entry and strategic commitments * entering market on large scale involve commitment of significant resources; also provides rapid entry ...
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...------------------------------------------------- FOR OFFICE INFORMATION ONLY Extensions All extensions requests must be submitted to programmes administrators in advance of the submission deadline. | Extension granted until: | Authorised by: | Most common Strategies to enter an International Market Development in International Businesses Jonas Meyer Glasgow University | | | | Adam Smith Business School | | | | Place & date: | Glasgow, 17. February 2015 | | | | Name, initials: | Meyer, JonasExchange Student fromMaastricht University | | For assessor only | | ID number: | Glasgow ID: 2185941MMaastricht ID: i6054474 | | 1. Content | | Study: | Development of International Business | | 2.Language structure | | Course code: | MGT 4060 | | 3.Language accuracy | | Tutorial number: | Wednesdays, 9-11am | | 4.Language: Format& citing/referencing | | Course Coordinator: | Dr Valerio Cerretano | | Overall: | | Writing assignment: | Essay | | Assessor’s initials | | Your Glasgow email address: 2185941M@student.gla.ac.uk Table of Content 1. Introduction 2 2. Motives of International Business 2 3. Forms of International Business 3 3.1 Equity Entry Modes 3 3.2...
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...Foreign Market Entry Modes International Business and Institutions 1 Modes of Foreign Market Entry • • • • • Exporting Licensing/Franchising Management Focus: Tata Group: Foreign Entry Strategies pp.443-444 Joint Ventures Wholly Owned Subsidiaries Mergers & Acquisitions (M&A) 2 Exporting • Advantages – Avoids the substantial costs of establishing operations in the host country – Achieve experience curve and location economies • Disadvantages – High transportation costs, esp. for bulk products – Tariffs – Divided loyalties of local agents 3 Licensing • An arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specific period, in return, the licensor receives a royalty fee from the licensee. • Intangible property: patents, inventions, formulas, processes, designs, copyrights, and trademarks • Advantages – Licensing firm does not need to bear the development costs and risks – Make use of intangible property that a firm possesses that they do not want to develop itself 4 • Disadvantages – Does not give a firm tight control – Limits a firm’s ability to coordinate strategic moves across countries – Difficult to control its technological know-how— Opportunistic Behaviour of Licensee 5 Franchising • Similar to licensing, but franchising involves longer term commitment and insisting strict rules on licensees • Franchiser assists...
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...the need for control over foreign operations varies with the strategy and distinctive competencies of a company? 1. The basic reason for a firm to have a foreign business strategy is that most product and factor markets extend beyond the boundaries of a single country. 2. However, most companies start operations as domestic companies and for achieving their profit objectives they develop first a domestic strategy. The options for a domestic strategy may include: (a) Investment in product development; (b) Expansion of the domestic market share; and, (c) Diversification into new industry. B. The firm’s foreign business strategy 1. There are 6 main steps in the firm's foreign business strategy: (a) the firm’s evaluation; (b) selection of a target market (country/region); (c) selection of product to make/sell in target market; (d) selection of market entry-entry mode (exporting, franchising, licensing, sub-contracting, joint ventures or wholly owned companies); (e) Business plan development and execution; (f) Monitoring and evaluation of results. 2. Exporting has the advantage of low costs and risks, avoiding the costs of setting up manufacturing operations in another country. The business plan in the case of exporting can take the form of an export marketing plan. 3. The main advantage of licensing is represented by the low costs for the franchisor because the franchisee bears the costs and risks of opening a new market; the main disadvantage is the risk for the franchisor...
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...International business or Global marketing is growing at a fast rate and there are more than 180 nations-sates in the world with different market and profitable potential. However for an organization to earn sufficient income in the global market it needs to know the right time and form of market entry mode whilst entering International market (Hill, 2003). Therefore this essay will focus and assess the need for an organisation to use a range of modes of entry while entering the international market. In due course it will give an overview on International marketing literature review, views on variety of entry modes, entry selection criteria, examples based on cased studies and conclusion. General Understanding of International marketing refers to marketing of goods and services from one country to another. Producing and marketing of products in more than one country is also termed as international or multinational marketing. But according to Mc Auley (2001) International marketing can be defined quite simply as “the performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit” much similar to domestic marketing. However Kahler (1983) argues and identifies that “International marketing differs from domestic marketing for one basic reason: it involves doing business with individuals, firms, organizations, and/or government entities in other countries”. The author further argues that the difference...
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...FDI)? What are the Theories of FDI? What Are the pons & cons , Cost/ benefitr fro the cost country n home country? Answer: Foreign Direct Investment: FDI occurs when a frim invest directly in facilities to produce or market product in a foreign country. The Theories of FDI: Theroies of FDI may be classified under the following------ 1. Production or product Cycle Theory of Vernon 2. The theory of Exchange Rate on Imperfect Capital Market 3. The Internalisation Theory 4. The Eclectic Paradigm of Dunning Production or product Cycle Theory of Vernon Production or product theory developed by Vernob in 1966 was used to explain certain types of FDI. He believes that there are four stage of production cycle— * Innivation * Growth * Maturity * Decline. Vernon’s production life-cycle suggest that frims undertake FDI at particular stage in the life cycle of products they have developed or produced. However, Vernon’s theory does not adresss the issue of whether FDI is more efficient than exporting or licensing for expanding abroad. The theory of Exchange Rate on Imperfect Capital Market: This is another theory which tried to explain FDI. Initially the foreign exchange risk has been analyzed from the perspective of international trade. However, currency risk rate theory cannot explain simultaneous foreign direct investment between countries with different currencies. The sustainers argue that such investments are made in different times...
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...competencies across national markets, to realize location economies from basing individual value-creation activities in the optimal location for that activity, and to ride down the experience curve more rapidly than competitors that are focused on just their domestic market. Next the chapter examines two types of competitive pressures that firms competing in the global marketplace typically face: pressures for cost reductions and pressures to be responsive to local conditions. These pressures place conflicting demands on a company. The sources of pressures for cost reductions and pressures for local responsiveness are explored. The discussion then turns to the different strategies that companies can pursue in the global arena. Four different strategies are reviewed in some detail—an international strategy, a multidomestic strategy, a global strategy, and a transnational strategy. The pros and cons of each of these strategies are debated. A link is made between the appropriateness of different strategies and the pressures for cost reductions and local responsiveness. It is suggested that the optimal strategy is contingent on the extent of pressures for cost reductions and local responsiveness facing a company. We then discuss the basic entry decisions a company faces when going international. In particular, we look at three basic decisions that a firm contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on what scale? In the...
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...trade: suggests that the national government should actively intervene to ensure that domestic firms’ exports receive an equitable share of foreign markets and that imports are controlled to minimize losses of domestic jobs and market share in specific industries. Discuss industry-level arguments and national trade policies * Industry-level arguments a) The national defense argument: used as a reason to support government protection of specific industry Country must be self-sufficient in critical raw materials, machinery, and technology or else be vulnerable to foreign threats Eg: Japan banned the imports of rice as a mean of promoting its self-sufficiency of dietary staple. b) The infant industry argument * Give firms temporary protection from foreign competition until firms are fully established * Powerful economic development strategy. * Infant industry protection is often done on a political basis * Once an industry is granted protection, it may be reluctant to give it up Eg: Japan has developed thriving metal fabrication industries by eliminating tariffs of row ores, and imposing high tariffs on processed ores. c) Maintenance of existing jobs * Jobs in high-wage countries threatened by imports from low-wage countries * Firms and workers often petition their governments for relief from foreign competition. d) Strategic trade theory * National trade policies Economic development programs: country depends on single exportsdiversify...
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...dddddddddddddddddddddd Chapter 7: Market Entry Strategies Chapter Objectives Structure Of The Chapter Entry strategies Special features of commodity trade Chapter Summary Key Terms Review Questions Review Question Answers References Bibliography When an organization has made a decision to enter an overseas market, there are a variety of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones. Having decided on the form of export strategy, decisions have to be made on the specific channels. Many agricultural products of a raw or commodity nature use agents, distributors or involve Government, whereas processed materials, whilst not excluding these, rely more heavily on more sophisticated forms of access. These will be expanded on later. Chapter Objectives The objectives of the chapter are: Structure of the Chapter The chapter begins by looking at the concept of market entry strategies within the control of a chosen marketing mix. It then goes on to describe the different forms of entry strategy, both direct and indirect exporting and foreign production, and the advantages and disadvantages connected with each method. The...
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...3/4/2015 Global Fixed Income 1. Key Macro Indicators: | China | Saudi Arabia | Comments | Population | 1,300 million (growing at 0.47%) | 28 million (growing at 2.28%) | China has the edge | GDP | 9.10% | 6.77% | China has a stronger GDP | Trade as a Share of GDP | 55.84% | 92.24% | China is more of a self serving nation than Saudi Arabia | CPI | 5.41% | 5.01% | China has slightly higher inflation | Approximate Real GDP | 3.69% | 1.76% | China has higher real GDP | Exchange Rate (e0) | 6.37 Yuan per $ | 3.75 Riyals per $ | Saudi Arabia has a stronger currency. It is also pegged making it more predictable | Wood Product consumption (WPC) | 250 million CMB | 1million CBM | China has the edge on total consumption. Of the 250 million China consumes, China imports roughly 100 million CBM (150million produced locally). Chinas demand import is expected to go to 150million by 2015. | Consumption per Person (WPC/Population) | .0192 | .0357 | Saudi Arabia has stronger consumption per person | 2. Factors that should be monitored are: * Supply/Demand Factors * Monitor Consumption and new demand (ie monitor for developments in construction in current territory and China/Saudi Arabia) * Exchange and inflation risks * Inflation is higher in China slightly. Also, Saudi Arabia’s currency is pegged; China’s is not * Inflation in Lebanon is roughly 5.2% * Tax rates and changes * Taxes are a major concern when...
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...Modes of entry into an International Business:- There are some basic decisions that the firm must take before foreign expansion like: which markets to enter, when to enter those markets, and on what scale. Which foreign markets? -The choice based on nation’s long run profit potential. -Look in detail at economic and political factors which influence foreign markets. -Long run benefits of doing business in a country depends on following factors: - Size of market (in terms of demographics) - The present wealth of consumer markets (purchasing power) - Nature of competition By considering such factors firm can rank countries in terms of their attractiveness and long-run profit. Timing of entry:- It is important to consider the timing of entry. Entry is early when an international business enters a foreign market before other foreign firms. And late when it enters after other international businesses. The advantage is when firms enters early in the foreign market commonly known as first-mover advantages First mover advantage;- 1. it’s the ability to prevent rivals and capture demand by establishing a strong brand name. 2. Ability to build sales volume in that country. so that they can drive them out of market. 3. Ability to create customer relationship. Disadvantage: 1.firm has to devote effort, time and expense to learning the rules of the country. 2.risk is high for business failure(probability increases if business enters a national market...
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