Market entry strategies in the context of international
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.
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
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.
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
Easy implementation of strategy.
Less investment abroad which helps small firms also to enter international business.
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
Unless you're careful, you can lose focus on your home markets and existing customers.
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.
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
Licensing involves little expense and involvement.
The only cost is signing the agreement and policing its
The property benefit to the licensor is the royalty or fees which
Fees or royalties are regulated by government and does not exceed
five per cent of the sales.
1. Obtain extra income for technical know-how and
2. Reach new markets not accessible by export from
3. Quickly expand without much risk and large
4. Pave the way for future investments in the
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.
Thirty three countries, including the United States, and
Australia, have laws that regulate franchising.
The franchisors success depends on the success of the
Low cost, allows simultaneous expansion into different
regions of the world .Well selected partners bring financial
investment as well as managerial capabilities to the
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
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 &
Many turnkey contracts involve government/public sector as buyer.
A way of earning great
economic returns from the
know-how & exporting process
This strategy is useful where
FDI is limited by host
Less risky than FDI in
countries with unstable
political and economic
Means of exporting process
Firm has no long term interest
in the country – can take
minority equity interest in
Firm may inadvertently create
a competitor (middle east oil
If firm’s process technology is a
source of competitive
advantage, then selling
technology is also selling
competitive advantage to
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
Source : International Business: Strategy, Management, and the New Realities.
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
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
Equity positions are held by each of the partners
Local marketing and production/
procurement of expertise from local
Better understanding of the host
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 &
Sharing market development costs &
risks with local partner.
In some countries, political
considerations make JVs the only
feasible entry mode.
Risk of giving control of technology
to the partners.
Shared ownership arrangement can
lead to conflicts and battles of control
between the investing firms.
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
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