3 im modes of entry

International Marketing
International Marketing or exporting refers to the act of
producing goods or services, in one country and then
selling or trading them in another country or abroad.
International Marketing is usually conducted by the
company that manufactures the product or provides
the service, through either direct or indirect channels.
Exporting is just one of several methods that
companies use to participate in economies outside of
their home country. Ravindra_pujari@yahoo.com
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Modes of entry in International Marketing
When an organization has decided to enter an
overseas market, there are variety of options
open to it.
These options vary with cost, risk & the degree
of control which can be exercised over them.
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.
Choosing the mode is a strategical decision.
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Trade Related
Direct & Indirect, Export/Import.
Piggybacking, Consortia.
Contractual
Licensing, Franchising, Turnkeys
Contracts/Projects, Oversea Manufacturing.
Investments (FDI)
JV, Merger & Acquisition, Fully-owned
manufacturing facilities, Greenfield/brown-
field Operations.
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Exporting is the most traditional and well
established form of operating in foreign
markets. Exporting can be defined as the
marketing of goods produced in one country
into another.
Whilst no direct manufacturing is required in
an overseas country, significant investments in
marketing are required.
The tendency may be not to obtain as much
detailed marketing information as compared to
manufacturing in marketing country.
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It is a situation in which a company sells its
products directly to customers in another
country without using another person or
organization to make arrangements for them,
or a product that is sold.
The direct export of goods involves certain
procedures, which must be adhered to.
(B2C) Direct involvement means that the firm
works with foreign customers or markets
with the opportunity to develop a
relationship. .
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(B2B) Indirect exporting can also involve
selling to an intermediary in the country
where you wish to transact business, who in
turn sells your products directly to
customers or to other importing distributors
wholesalers.
Indirect involvement means that the firm
participates in international business
through an intermediary and does not deal
directly with foreign customers or markets.
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Another means of indirect
merchant exporting is cooperatives.
Cooperative exporting, or piggybacking, takes
place when a company with an established
distribution channel for its own products
contracts to export the goods of a non-
competing foreign manufacturer.
Consortia are groups of small or medium-sized
organizations, that joint together to market
related, or sometimes unrelated products in
international markets.
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Advantages/Disadvantages of Direct
Export.
Relatively low financial exposure, permit
gradual market entry.
Disadvantages.
Vulnerability to tariffs and NTBs( Non
Traffic Barriers), Logistical complexities.
Acquire knowledge about local market.
Potential conflicts with distributors.
Avoid restrictions on foreign investment
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Licensing is another way to enter a foreign
market with a limited degree of risk.
Under international licensing, a firm in one
country permits a firm in another country to
use its intellectual property like patents,
brand, trade marks, technology, expertise
etc.
In lieu of this transfer the intellectual
property the organization charges a fee
and/or royalty.
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Licensing
Advantages
1) Low financial risks
2) Low-cost way to
assess market
potential
3) Avoid tariffs,
NTBs, restrictions
on foreign
investment.
4) Licensee provides
knowledge of local
markets.
Dis-Advantages
1) Licensee do not
provide complete
knowledge of local
markets
2) Limited market
opportunities/profits
3) Dependence on
licensee
4) Potential conflicts
with licensee
5) Possibility of
creating future
competitor.
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Franchising is a form of licensing but the
franchisor, can exercise more control over
the franchisee as compared to that in
licensing.
In such an arrangement the franchisee
pays a fee to the franchisor.
Franchising is an arrangement under
which, an independent organization called
the franchisee operates the business under
the name of another company called the
franchisor.
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Franchisee has to pay a fixed amount and
royalty based on sales.
Franchisee should agree to adhere to
follow the franchisor’s requirements.
Franchisor helps the franchisee in
establishing the manufacturing facilities
Franchisor allows the franchisee some
degree of flexibility. Eg. McDonalds,
Subway, KFC
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Franchisee
Advantages
• Low financial risks.
• Low-cost way to assess
market potential.
• Avoid tariffs, NTBs,
restrictions on foreign
investment.
• Maintain more control
than with licensing.
• Franchisee provides
knowledge of local
market.
Dis-Advantages
• Limited market
opportunities/profits.
• Dependence on
franchisee.
• Potential conflicts with
franchisee.
• Possibility of creating
future competitor.
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Joint Venture
A joint venture (JV) is a business entity
created by two or more parties, generally
characterized by shared ownership, shared
returns and risks, and shared governance.
Companies typically pursue joint ventures for
one of four reasons: to access a new market,
particularly emerging markets; to gain scale
efficiencies by combining assets and
operations; to share risk for major
investments or projects; or to access skills
and capabilities.
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Joint ventures can be defined as "an enterprise
in which two or more investors share
ownership and control over property rights and
operation.” It is a very common strategy of
entering the foreign market.
Sharing of risk.• Joint financial strength.• May
be only means of entry in some countries.•
Partners do not have full control of
management.• May be impossible to recover
capital if need be.• Partners may have different
views on expected benefits.
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A JV can be brought about in the following
major ways:
* Foreign investor buying an interest in
a local company.
* Local firm acquiring an interest in an
existing foreign firm.
* Both the foreign and local
entrepreneurs jointly forming a new
enterprise.
* Together with public capital and/or
bank debt.
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Turnkey contracts are common in international
business in the supply, erection &
commissioning of plants, construction
projects, as in the case oil refineries, steel
plants, cement & fertilizer plants, road
construction, infra-structure development, ship
yards, airports etc..
A turnkey operation is an agreement by the
seller to a buyer with a facility fully equipped &
ready to be operated by the buyer, who will be
trained by the seller.
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Many turnkey contracts involve
government/public sector as buyer.
A turnkey contractor may subcontract different
phases/parts of the project. A company doing
international marketing contracts with firms in
foreign countries to manufacture or assemble
the products while retaining the responsibility of
marketing the product. Many multinationals
employ this in India example: Metro train, Bullet
train project, Steel plants in late 1950’s, L & T
projects in middle East.
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Any form of association which implies
collaboration for more than a transitory
period is a joint venture.
A joint venture may be brought about by a
foreign investor showing an interest in local
company.
A local firm acquiring an interest in an
existing foreign firm or
By both the foreign and local entrepreneurs
jointly forming a new enterprise.
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VISTARA AND AIR ASIA
First example of joint venture in India is-A Joint Venture between
Indian corporate giant Tata Sons and Singapore Airlines (SIA)
Vistara is an excellent example of a Joint Venture company in India
with a foreign firm. While Tata Sons holds a 51% stake, SIA controls
the rest 49% in the carrier airlines.
VE Commercial Vehicles Ltd
Sweden’s automobile group, Volvo and India’s Eicher Motors Ltd
formed this JV in 2008. VE Commercial Vehicles Ltd.

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ICICI Bank ( Insurance & Investments)
India’s private banking giant, ICICI Bank has two
successful JVs to offer insurance products.
ICICI Prudential Life Insurance Company Ltd: is a joint
venture between ICICI Bank and UK-based Prudential
Corporation Holdings Limited.
ICICI Lombard: is a JV between ICICI Bank and Fairfax
Financial Holdings Ltd of Canada.

Mergers and acquisitions (M&A) are
defined as consolidation of companies.
Mergers is the combination of two
companies to form one,
while acquisitions is one company taken
over by the other.
M&A is one of the major aspects of
corporate finance world.
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The reasoning behind M&A generally given
is that two separate companies together
create more value compared to being on an
individual stand. With the objective of
wealth maximization, companies keep
evaluating different opportunities through
the route of merger or acquisition.
Mergers & Acquisitions can take place:
• by purchasing assets
• by purchasing common shares
• by exchange of shares for assets
• by exchanging shares for shares
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Types of Mergers and Acquisitions:
Merger or amalgamation may take two forms:
merger through absorption or merger through
consolidation. Mergers can also be classified
into three types from an economic perspective
depending on the business combinations,
whether in the same industry or not, into
horizontal ( two firms are in the same industry),
vertical (at different production stages or value
chain) and conglomerate (unrelated industries).
From a legal perspective, there are different
types of mergers like short form merger,
statutory merger, subsidiary merger and merger
of equals. Ravindra_pujari@yahoo.com
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Merger is defined as a combination of two or
more companies into a single company where
one survives and the other loses their
corporate existence.
The survivor acquires the assets as well as
liabilities of the merged company or
companies. It is simply a combination of two
or more businesses into one business.
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Laws in India use the term ‘amalgamation’
for merger. It usually involves two
companies of the same size and stature
joining hands.
There are different types of concept in which
merging of the companies take place like,
Horizontal Merger, Vertical Merger,
Conglomerate Merger, and Reverse Merger.
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Acquisition in a general sense means
acquiring the ownership in the property. It is
the purchase by one company of controlling
interest in the share capital of another
existing company. Even after the takeover,
although there is a change in the
management of both the firms, companies
retain their separate legal identity. The
Companies remain independent and
separate; there is only a change in control
of the Companies.
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Contract manufacturing is a strategy of foreign
market entry by a firm/cooperation on a
contractual basis between a domestic
company and an independent contract
manufacturer in the country to enter, without
capital engagement. The manufacturer is only
transferred the know-how to take over certain
steps or even the entire production of goods
and, possibly, logistics (stocking and dispatch)
exclusively for the foreign manufacturer, while
research & design, marketing and distribution
activities remain with the latter.
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Contract manufacturing
Contract manufacturing in international markets
is used in situations when one company
arranges another company in a different country
to manufacture its products; this is also known
as international subcontracting or
international outsourcing.
The company provides the manufacturer with all
the specifications, and, if applicable, also with
the materials required for the production
process.
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This type of contract sets out the requirements,
which the manufacturer must meet concerning
the quality of the products, certification,
quantities, conditions and dates of delivery, etc.
It also establishes guidelines for the inspection
and testing of the products set forth by the
company which contracts out the manufacture,
or by its own clients.
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Furthermore, it also outlines modifications
to orders, as well as guarantees and
compensation in case of breach of contract.
Since the process is
essentially outsourcing production in
foreign markets to a partner that privately
brands the end product, there are a number
of different companies and industries that
can make use of this type of contract. Model
of International Contract Manufacturing.
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In the first phase of its India manufacturing
plan, Apple started working with Wistron Corp.
to assemble the iPhone SE in Bengaluru.
If Wistron doesn’t find it a profitable
proposition and decides to stop manufacturing,
Apple will discontinue phase one
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Nike has hired more than 700 stores worldwide
and has offices in located in 45 countries
outside the United States.
Most factories are found in Asia, including
Indonesia, China, Taiwan, India, Thailand,
Vietnam, Pakistan, Philippines and Malaysia
(Nikebiz, 2010).
Nike's entered India through a seven year
licensing agreement with Sierra Industrial
Enterprises for their sales
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