Foreign Market Entry Modes Essay

1216 words - 5 pages

Name: 馮光合
Student ID: 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 ...view middle of the document...

* Export management is outsourced, alleviating pressure from management team
* No direct handle of export processes.
Disadvantages
* Little or no control over distribution, sales, marketing, etc. as opposed to direct exporting
* Wrong choice of distributor, and by effect, market, may lead to inadequate market feedback affecting the international success of the company
* Potentially lower sales as compared to direct exporting (although low volume can be a key aspect of successfully exporting directly). Export partners that incorrectly select a specific distributor/market may hinder a firm's functional ability.
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.
Advantages:
* Obtain extra income for technical know-how and services
* Reach new markets not accessible by export from existing facilities
* Quickly expand without much risk and large capital investment
* Pave the way for future investments in the market
* Retain established markets closed by trade restrictions
* Political risk is minimized as the licensee is usually 100% locally owned
* Is highly attractive for companies that are new in international business.
Disadvantages:
* Lower income than in other entry modes
* Loss of control of the licensee manufacture and marketing operations and practices leading to loss of quality
* Risk of having the trademark and reputation ruined by an incompetent partner
* The foreign partner can also become a competitor by selling its production in places where the parental company is already in.
3. Franchising:
The franchising system can be defined as: "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."
Compared to licensing, franchising agreements tends to be longer and the franchisor offers a broader package of rights and resources which usually includes: equipment, managerial systems, operation manual, initial trainings, site approval and all the support necessary for the franchisee to run its business in the same way it is done by the franchisor. In addition to that, while a licensing agreement involves things such as intellectual property, trade secrets and others while in franchising it is limited to trademarks and operating know-how of the business.
Advantages:
* Low political risk
* Low cost
* Allows simultaneous expansion into different regions of the world
* Well selected partners bring financial investment as well as managerial capabilities to the operation.
Disadvantages:
* Maintaining control over franchisee may be difficult
* Conflicts with franchisee are likely, including legal disputes
...

Other Essays Like Foreign Market Entry Modes

Business Strategy Essay

3224 words - 13 pages . Because the United States is the world’s largest financial market, ING recognized that to be a key player, it would need a significant market presence. To become one of the 10 largest companies in the industry, the company embarked on a series of acquisitions beginning with the Equitable Life Insurance Company of Iowa in 1997. * Entry modes 1. These are six different ways to enter a foreign market: ①exporting; ②turnkey projects

Nero in China Essay

1105 words - 5 pages Entry Modes The choice of entry mode is decisive for the successful performance of the business in the foreign market. After China’s accession in the World Trade Organisation in 2001 the Foreign Direct Investments in the country were stimulated by introducing the non-tariff barriers, tax exemptions and lower tax rate.( Cavusgil, 2002) The fact that the most of the foreign investments in China are made in the form of direct investments is a

Bus 401 Case 1

995 words - 4 pages Touro University Richard Gonzalez BUS 401 Module 1 Case Dr. David Marshall Hunt The purpose of this paper is select three international marketing issues and apply them to the Coca-Cola Company. During the next few paragraphs I will discuss entry modes, Indian market characteristics and importance, and elements of the four “Ps”, as Coke expands to India. Let me start the next paragraph by addressing the first international marketing

Mob Globalization

1832 words - 8 pages to be less dependence on domestic market but earn money from other countries. It is easy to entry exporting and it help (SMEs) to save the operation cost because the foreign partner will help to bear the burden. But (SMEs) will need to face the tariff and non-tariff barriers such as the limit of quantity, taxes and customs.(William and McWilliam, 2010).For example, if New Zealand’s apples is not acceptable in Australia because of the bacteria from

Mydin Analysis

2720 words - 11 pages in Sri Lanka. 5.0 PROPOSED MODE OF ENTRY MYDIN, looking to become multinational need to adapt small scale modes of entry with minimum risks despite large scale entrance has its own benefits of attracting customers, distribution and deterring potential competitors but the cost of failure is very high. A small size with little strategic commitment will allow MYD to learn about foreign market with minimal risk. (Liu, 2007) Strategic option

International Investment and Finance

2732 words - 11 pages alternative modes of entry into the foreign market. This unit will later address itself to determinants of international investment decisions, factors influencing FDI, FDI location choice and, last but not least, the practice of transfer pricing, 3.2 INTERNATIONALISATION OF FIRMS The internationalisation process of a firm can be visualised as a series of 47 International Business : Role and Processes successive stages of

Introduction to Uob

2507 words - 11 pages -engineering of processes for cost-effective solutions an operational efficiency * Managing cost efficiency Exercise care and prudence in the management of expenses and overhead costs CHAPTER 4 - ENTRY DECISIONS AND MODES OF ENTRY UOB EXPANDING GLOBAL NETWORK UOB adopt the foreign direct investment (FDI) method in expanding their business worldwide. Some of their expanding based on the Greenfield Investment and some based on the Acquisition

How Multinational Corporations Enter New Markets

1680 words - 7 pages risk. However, licensing is a limited form of entry & doesn’t guarantee future expansion. Licensor might create its own competition with the licenser. After the expiry of licensing agreement, the licensee may compete in home market as well as in foreign markets with the intellectual properties. Licensor can face problem of leakage of trade secrets as well. TURNKEY PROJECTS: An agreement by the seller to supply the buyer with a facility

Do Foreign Banks Always Bring Positive Impacts Into the Domestic Banking Sector?

2007 words - 9 pages after foreign banks entry to protect their market benefits. In an earlier paper on this issue, Jeon, Olivero and Wu(2011) claim that the presence of Foreign banks contributes to increased competition in the banking sector. First, with the increased competition, the presence of foreign banks put old-style banking practices under pressure, so the quality, pricing, and availability of domestic banking financial services have to improve, which

Management of International Business - Expanding Debenhams Into Singapore

5334 words - 22 pages Modes * Foreign Direct Investment There are also advantages and disadvantages of each of them (see below). Mode | Primary Advantages | Primary Disadvantages | Exporting | Relatively low financial exposurePermit gradual market entryAcquire knowledge about local marketAvoid restrictions on foreign investment | Vulnerability to tariffs and NTBsLogistics complexitiesPotential conflicts with distributors | International Licensing | Low

Moon Beam Electronics Case Study

1464 words - 6 pages imported items till the production is finished. The tax to be paid only if the finished product enters in to the United States’ market. If finished goods are exported to another country or those goods or those items that will not be sold in the United States do not have to pay the tax. Weekly Entry Savings- Weekly Entry (permitted to Foreign-Trade Zone user) gives economies to both Customs and Foreign-Trade Zone users. Under Weekly Entry

Related Papers

Foreign Market Entry Essay

1590 words - 7 pages Assignment # 4: Foreign Market Entry and Diversification 1. Discuss trends in the steel industry and how it may impact Nucor’s strategy. The steel industry is a volatile and unpredictable market that is reaching its maturity level. The unpredictability and volatility of the steel market depends on the status of the global economy. Many American steel industries have disappeared in the last quarter of a century due to new foreign steel

Foreign Market Entry And Diversification Essay

1397 words - 6 pages Foreign Market Entry and Diversification Identify and discuss the trends in the global beer markets. Among the trends in the global beer market is the need for consolidation. In the early years of brewing, beer was developed differently in every country to meet the need of that region’s tastes and unique recipes (Thompson, Strickland, & Gamble, 2010). This soon became a problem with the many local breweries, the

The Effect Of Cultural Distance On Entry Mode Choice: The Moderating Effect Of Language Diversity

2665 words - 11 pages differ per enterprise and country. The hierarchical model of market entry modes by Pan and Tse (2000) shows that there are different choices of entry modes. Entry modes can be seen as equity-based versus non-equity based. Within equity-based modes, there is a division between equity joint ventures and wholly owned operations. Within nonequity based modes, there is a division between export and contractual agreements. Prior research demonstrated

Pricing When Entering A New Market In B2 B Environment

5634 words - 23 pages ) state that the higher the resource commitment and desired control of an entry mode, the higher is the cost which requires higher levels of investments (Johnson and Tellis 2008). Figure 3. Analysis of different market entry modes in terms of risk and profit potential. International diversification through foreign market entry can result in high growth and profitability unavailable in home markets (Root 1994). However, matching strategy and