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Modes of Global Market entry
Sub: International Marketing
By-
Lovekshitij Suryavanshi
3 Rules
• A company aims to enter in foreign Market must
have a concrete strategy
• Naïve Rule – Company uses same entry mode for
all foreign markets
• Pragmatic rule - Company uses a workable entry
mode for each market.
These kinds of companies start with low risk entry
modes.
• Strategy Rule – Alternative decision modes are
compared and evaluated before decision is made.
Types of Entry Mode - Export Mode
• Products of company are manufactured in the
domestic market or a third country and then
transferred directly or indirectly to the host
market.
• While establishing export channels company
decides role and functions.
• Major Export Types
- Indirect Export
- Direct Export
- Co-operativite Export
Indirect Export
• Product Manufacturing company do not
export products directly.
• Domestic Export House or Trading Company
export products manufactured by company.
INDIA
Company AManufacturer
Export House / TC
USA
Host Company
Direct Export
• Product Manufacturing company export
products directly without any third party.
• Involved in documentation, delivery, pricing etc.
• Manages agents and distributers.
Co-operative Export
• Two or more companies involve in collaborative
agreements to produce products to export.
• Small firms do not achieve sufficient scale
economies in manufacturing because of size of
local market or inadequacy of management.
• E.g: Bulk export, research, joint manufacturing
etc
Types of entry mode - Intermediate
Entry Mode
• No full ownership involved
• Ownership shared between parent company
and local partner
• Types of Intermediate entry mode
- Licensing
- Franchising
- Contract Manufacturing
- Joint Ventures
Licensing
• It is an arrangement wherein the licensor gives
something of value to the licensee in exchange
for certain performance and payments from the
licensee.
• A formal permission or right offered to a firm or
agent located in host country to use a home
firm’s proprietary technology resource in return
for payment.
• Another way for firm to establish local production
in foreign markets without capital investment.
• Licensing may include
- Patent for product or process
- Technical advice and assistance
- Marketing advice and assistance
- Use of Trademark and name
• E.g: GSK, biocon, Quick Heal
Franchising
• An independent organization operates the
business under the name of another company
• Franchisee pays fee to the franchisor
• Franchisee owns right to use trade marks,
systems, operating function, employee
training etc .
Types of Franchising
• Product & Trade Name Franchising
- Dealer use Trade Name & Trade Mark
e.g: Dominos (Jubilant Food Works )
• Business Format Franchising
- Franchisor transfer package
- Package contains Trade marks/name,
copyright, designs, patents, trade secret etc.
e.g: Who Wants to be Millionaire -> KBC
• Advantages
- low risk, low entry cost
- Quick development in International Market
- Precursor to FDI in foreign market
• Disadvantages
- High cost of creating international brand
-Problem with local legislation
- Risk of International reputation
Contract Manufacturing
• Company do business in foreign market with
responsibility for production to local firm
• e.g: IKEA, Danone
• Advantages:
- low risk
- no huge investment in foreign market
- avoids transfer-pricing problems
• Disadvantages
- hard to find reliable manufacturer
- contractor could become competitor
- Quality control become difficult
Joint Venture
• Two or more firms join together
• Legally separate new business entity
• Shared ownership
e.g: Sistema Shyam TeleServices (MTS)
Alcatel – Lucent
Bharati Walmart
• Advantages:
- less costly than acquisitions
- shared risk of failure
• Disadvantages:
- Large investments of resources
- cultural differences may result in management
differences
Types of Entry Mode - Hierarchical
• Company completely owns & control foreign
entry
• Investment mode
• New set-up in host country is fully own
subsidiary by parent company.
• 2 Types
- Merger or Acquisition
- Green Field
Merger or Acquisition
• Domestic company merge with foreign company to
enter in Int’l market
• Domestic company may acquire/purchase foreign
company
• e.g: Nokia (Fin)- Siemens (Ger)
data n/w & telecommunication division
• Advantages:
- Immediate grab of market share
- Less time & quick to execute
• Disadvantages:
- tedious task (bankers, lawyers from both countries)
Green Field Strategy
• Set-up operations in foreign market from zero
• Purchase local property & man power
• e.g.: Mercedes – Benz production in Pune
Volkswagen India
• Advantages:
- Control of operations
- No risk of loosing technical competence to
competitor
• Disadvantages:
- Lengthy process from scratch
- Pre research is time consuming
Thank You!!
Email: lovesuryavanshi@gmail.com

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Modes of global entry

  • 1. Modes of Global Market entry Sub: International Marketing By- Lovekshitij Suryavanshi
  • 2. 3 Rules • A company aims to enter in foreign Market must have a concrete strategy • Naïve Rule – Company uses same entry mode for all foreign markets • Pragmatic rule - Company uses a workable entry mode for each market. These kinds of companies start with low risk entry modes. • Strategy Rule – Alternative decision modes are compared and evaluated before decision is made.
  • 3. Types of Entry Mode - Export Mode • Products of company are manufactured in the domestic market or a third country and then transferred directly or indirectly to the host market. • While establishing export channels company decides role and functions. • Major Export Types - Indirect Export - Direct Export - Co-operativite Export
  • 4. Indirect Export • Product Manufacturing company do not export products directly. • Domestic Export House or Trading Company export products manufactured by company. INDIA Company AManufacturer Export House / TC USA Host Company
  • 5. Direct Export • Product Manufacturing company export products directly without any third party. • Involved in documentation, delivery, pricing etc. • Manages agents and distributers.
  • 6. Co-operative Export • Two or more companies involve in collaborative agreements to produce products to export. • Small firms do not achieve sufficient scale economies in manufacturing because of size of local market or inadequacy of management. • E.g: Bulk export, research, joint manufacturing etc
  • 7. Types of entry mode - Intermediate Entry Mode • No full ownership involved • Ownership shared between parent company and local partner • Types of Intermediate entry mode - Licensing - Franchising - Contract Manufacturing - Joint Ventures
  • 8. Licensing • It is an arrangement wherein the licensor gives something of value to the licensee in exchange for certain performance and payments from the licensee. • A formal permission or right offered to a firm or agent located in host country to use a home firm’s proprietary technology resource in return for payment. • Another way for firm to establish local production in foreign markets without capital investment.
  • 9. • Licensing may include - Patent for product or process - Technical advice and assistance - Marketing advice and assistance - Use of Trademark and name • E.g: GSK, biocon, Quick Heal
  • 10. Franchising • An independent organization operates the business under the name of another company • Franchisee pays fee to the franchisor • Franchisee owns right to use trade marks, systems, operating function, employee training etc .
  • 11. Types of Franchising • Product & Trade Name Franchising - Dealer use Trade Name & Trade Mark e.g: Dominos (Jubilant Food Works ) • Business Format Franchising - Franchisor transfer package - Package contains Trade marks/name, copyright, designs, patents, trade secret etc. e.g: Who Wants to be Millionaire -> KBC
  • 12. • Advantages - low risk, low entry cost - Quick development in International Market - Precursor to FDI in foreign market • Disadvantages - High cost of creating international brand -Problem with local legislation - Risk of International reputation
  • 13. Contract Manufacturing • Company do business in foreign market with responsibility for production to local firm • e.g: IKEA, Danone • Advantages: - low risk - no huge investment in foreign market - avoids transfer-pricing problems • Disadvantages - hard to find reliable manufacturer - contractor could become competitor - Quality control become difficult
  • 14. Joint Venture • Two or more firms join together • Legally separate new business entity • Shared ownership e.g: Sistema Shyam TeleServices (MTS) Alcatel – Lucent Bharati Walmart • Advantages: - less costly than acquisitions - shared risk of failure • Disadvantages: - Large investments of resources - cultural differences may result in management differences
  • 15. Types of Entry Mode - Hierarchical • Company completely owns & control foreign entry • Investment mode • New set-up in host country is fully own subsidiary by parent company. • 2 Types - Merger or Acquisition - Green Field
  • 16. Merger or Acquisition • Domestic company merge with foreign company to enter in Int’l market • Domestic company may acquire/purchase foreign company • e.g: Nokia (Fin)- Siemens (Ger) data n/w & telecommunication division • Advantages: - Immediate grab of market share - Less time & quick to execute • Disadvantages: - tedious task (bankers, lawyers from both countries)
  • 17. Green Field Strategy • Set-up operations in foreign market from zero • Purchase local property & man power • e.g.: Mercedes – Benz production in Pune Volkswagen India • Advantages: - Control of operations - No risk of loosing technical competence to competitor • Disadvantages: - Lengthy process from scratch - Pre research is time consuming