Market Entry Methods
Krishna Kumar Jaisawal
MBA-IB 3rd sem
• When an organization has made a decision to
enter an overseas market, there are a variety of
option open to it.
• These option vary with cost, risk and the degree
of control which can be exercise over them.
• One of the important strategic decision in
international business is the mode of entering the
• A market entry strategy is the planned method of
delivering goods or services to a target market and
distributing them there.
• A institutional mechanism by which a firm makes its
products and services available to consumer in
• Franklin Root defines the market entry strategy as “a
comprehensive plan which sets forth the objectives,
goals, resources and polices that guide a company’s
international business operation for sustainable growth
in the world.”
Global Market Entry Modes
Commitment to Export
International Market Involvement
Market Identification & targeting
Entry mode Selection
*Product *Price *Distribution *Promotion
Set new target
Concept of International Market Entry
• Once a firm has decided to establish itself in global
market—it becomes necessary that the Company studies
and analyzes the various options available to enter the
international markets and select the most suitable one.
• This decision is to be taken with ulmost care—Not only is
the financial resources in stake but the extent to which the
company‘s marketing strategy can be employed in the new
market also depends on this decision
• Mode of entry varies from low -risk ,low-control modes
with minimum resource commitment e.g. indirect exports
to high-risk, high control modes with a higher level of
commitment by establishing its own manufacturing
facilities in foreign markets (subsidiaries).
An organization willing to “go international” faces 3
• Marketing: which countries, which segments,
how to manage, how to enter, with what
• Sourcing : whether to obtain products, make or
• Investment & control: joint venture, global
Alternative Entry Method
Production in Home Country Production in Foreign Country
Exports Providing Offshore
Contractual Mode Investment Mode
Joint Venture Wholly
Management Contract International
Production in Home Country:
A firm has two basic options for carrying out export
• Market contacted through a domestically located
intermediary—an approach called Indirect Exporting
• Market can be reached through an intermediary located
in foreign market--an approach termed as Direct
a situation in which a company sells its products to customers in
another country using an intermediary (= a person or
organization that arranges business agreements), or a product
that is sold in this way
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 in this way
Production in foreign country
Licensing is defined as “the method of foreign operation whereby a firm in one
country agrees to permit a country in another country to use the manufacturing,
processing, trademarks, knowhow or some other skill provided by the licensor”
• A company assigns the right to a patent or a trademark to another company for a
• Licenser gives technology, manufacturing right, brand and also marketing right
(unlike contract Manufacturing)
• A special form of licensing in which a home company (Franchiser) makes
a total program of operation available to an overseas company
• It includes the brand name, logo, products and method of operation
• Mc. Donald’s, KFC, Burger King, Holiday INN, Hertz, Carrefour, Benetton,
Coca Cola (trade mark, recipe, and advertising)-independent bottlers
around the world
• It is a transfer of the entire system from one country to another
Difference between Licensing and
Royalty Management Fees
Products are major source of concern Covers all aspects of business including
goodwill, trade marks, IPR etc
15-20 years 5/10 Years – renewable
Licensing tends to be self selecting.
They are often established businesses
and can demonstrate that they are in a
strong position to operate the license in
A licensee can often pass a license to
an associate with little or no reference
back to the original licensor
The franchisee is selected by the
franchiser. Even replacement is
controlled by franchiser.
Concerned with specific
existing products and
Franchisor passes to the
franchisee the benefits of on-going
There is no goodwill attached to
the licensing as it is totally
retained by licensor
Although franchisor does retain
the goodwill, the franchisee
picks up an element of localized
Licensee enjoys substantial
measure of fee negotiation
Standard fee structure. Any
variation will cause confusion
Lesser control Exerts higher control
A management contract is an arrangement under which operational control
of an enterprise is vested by contract in a separate enterprise which performs
the necessary managerial functions in return for a fee
A management contract can involve a wide range of functions, such as
technical operation of a production facility, management of personnel,
accounting, marketing services and training.
International Strategic Alliance
An important mode of doing international business. An alliance
is an inter-firm collaboration over a given economic space and
time for the attainment of the participating companies’ goals.
A contract manufacturer ("CM") is a manufacturer that contracts
with a firm for components or products. It is a form of
• Joint venture can be defined as “an enterprise in which two or
more investors share ownership and control over property
right and operation”.
• It is very common strategy to enter in the foreign market.
• Any firm 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.
Wholly Owned Foreign Subsidiaries
A wholly owned subsidiary is a company that is completely
owned by another company called the parent company or
holding company. The parent company will hold all of the
subsidiary's common stock. Since the parent company owns all
of the subsidiary's stock, it has the right to appoint the
subsidiary's board of directors, which controls the subsidiary.
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