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Market entry strategies in the context of international

  1. A market entry strategy is the planned method of delivering goods or services to a target market and distributing them there. When importing or exporting services, it refers to establishing and managing contracts in a foreign country.
  2.  The commercial activity of selling and shipping goods to a foreign country .  The most common overseas entry approach for small firms.  Exporting can be either direct or indirect.  In direct exporting the company sells to a customer in another country.  In contrast, indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product.
  3. Exports from India increased 3.9 percent from a year ago to USD 22.54 billion in July 2017, as sales increased for engineering goods (15.2 percent); petroleum products (20.3 percent); organic and inorganic chemicals (20.7 percent); cotton, hand-loom products (5.4 percent) and marine products (30.5 percent). Considering April-July 2017-18, exports rose 8.9 percent to USD 94.76 billion from USD 87.00 billion in the same period of the previous fiscal year
  4. Advantages:  Easy implementation of strategy.  Less investment abroad which helps small firms also to enter international business.  Minimal risks.  Greater production can lead to larger economies of scale and better margins.  You could significantly expand your markets, leaving you less dependent on any single one. Disadvantages  Unless you're careful, you can lose focus on your home markets and existing customers.  Logistical difficulties.  Less suitable for service products.  In overseas markets, you may lose some of the control that you are used to at home.  Not appropriate if other lower cost manufacturing locations exist.  High transport costs can make exporting uneconomical especially bulk products.
  5. The method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how or some other skill provided by the licensor. Licensing involves little expense and involvement. The only cost is signing the agreement and policing its implementation. The property benefit to the licensor is the royalty or fees which licensee pays. Fees or royalties are regulated by government and does not exceed five per cent of the sales.
  6. Advantages: 1. Obtain extra income for technical know-how and services 2. Reach new markets not accessible by export from existing facilities 3. Quickly expand without much risk and large capital investment 4. Pave the way for future investments in the market Disadvantages:
  7. Franchising is a specialized form of licensing in which the franchisor not only sells intangible property to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business.  Longer-term commitments. Thirty three countries, including the United States, and Australia, have laws that regulate franchising. The franchisors success depends on the success of the franchisees.
  8.  Advantages: 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: 1. Licensees may turn into future competitors 2. Demand of franchisees may be scarce when starting to franchise a company, which can lead to making agreements with the wrong candidates 3. A wrong Licensee may ruin the company‘s name and
  9.  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, as in the case oil refineries, steel mills, cement & fertilizer plants etc.  A turnkey operation is an agreement by the seller to supply a buyer with a facility fully equipped & ready to be operated by the buyer, who will be trained by the seller. The term is used in fast food franchising when a franchiser agrees to select a store site, build he store, equip it, train the franchisee & employee. Many turnkey contracts involve government/public sector as buyer.
  10. Advantages :  A way of earning great economic returns from the know-how & exporting process technology.  This strategy is useful where FDI is limited by host government regulations.  Less risky than FDI in countries with unstable political and economic environment.  Means of exporting process technology (chemical, pharmaceutical, petroleum, mining). Disadvantages:  Firm has no long term interest in the country – can take minority equity interest in company.  Firm may inadvertently create a competitor (middle east oil refineries).  If firm’s process technology is a source of competitive advantage, then selling technology is also selling competitive advantage to potential competitors.
  11. One of the world's largest publicly-funded turnkey projects is in Delhi, India. The $2.3 billion project was commissioned by Delhi Metro to build roads and tunnels that run through the city’s central business district. The turnkey consortium includes local firms and Skanska AB, one of the world’s largest construction firms, based in Sweden. Source : International Business: Strategy, Management, and the New Realities.
  12. Joint venture is a strategic alliance in which two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage. Four Characteristics define joint ventures:  JVs are established, separate, legal entities.  The acknowledged intent by the partners to share in the management of the JV.  There are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between individuals.  Equity positions are held by each of the partners
  13. Advantages:  Smaller investment.  Local marketing and production/ procurement of expertise from local partner.  Better understanding of the host country.  Typically 50/50 with contributed team of managers to share operating control.  Firm benefits from local partner’s knowledge of competitive conditions, culture, language, political system & business system.  Sharing market development costs & risks with local partner.  In some countries, political considerations make JVs the only feasible entry mode. Disadvantages:  Risk of giving control of technology to the partners.  Shared ownership arrangement can lead to conflicts and battles of control between the investing firms.
  14. Anticipating China’s rise to the top of the food and beverage global market, Kellogg Company entered into a joint venture agreement with Wilmar International Limited for the purpose of selling and distributing cereal and snack foods to consumers in China. While Kellogg brings to the table an extensive collection of globally renowned products as well as their expertise in the industry, Wilmar offers marketing and sales infrastructure in China, including an extensive distribution network and supply chain. Joining together allows both companies to profit from a synergistic relationship.

Hinweis der Redaktion

  1. 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 & the degree of control which can be exercised over them.• One of the most important strategic decisions in international business is the mode of entering the foreign market