Market entry strategy is influenced by the firm and product characteristics and the domestic and international market characteristics.

1. Entry Strategies
International Business

2. Prepared By
Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
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3. Entry Strategies
• Market entry
strategy is
influenced by the
firm and product
characteristics and
the domestic and
international market
characteristics.

4. Foreign Market Entry and Operations Strategies
Exporting
• Direct Exporting.
• Indirect Exporting.
Contractual Agreement
• Licensing & Franchising.
• Strategic Alliance.
• Contract Manufacturing.
Production facility in foreign
market.
• Assembly Operations.
• Wholly owned
manufacturing facility.
• Joint Ventures.
Mergers and Acquisitions

5. Direct exporting
In direct exporting,
the firm becomes
directly involved in
marketing its
products in foreign
markets, because the
firm itself performs
the export task
(rather than
delegating it to
others).

6. Direct exporting
To implement a direct exporting
strategy, the firm must have
representation in the foreign
markets. This can be achieved in a
number of ways:
– Sending international sales
representatives into the foreign
market.
– Selecting local representatives or
agents to prospect the market.
– Using independent local distributors
who will buy the products to resell
them in the local market.
– Creating a fully owned commercial
subsidiary to have a greater control
over foreign operations.

7. Indirect exporting
The market-entry
technique that offers the
lowest level of risk and the
least market control is
indirect export, in which
products are carried
abroad by others. The firm
is not engaging in
international marketing
and no special activity is
carried on within the firm;
the sale is handled like
domestic sales

8. Indirect exporting
There are several different
methods of indirect
exporting:
– The simplest method is to deal
with foreign sales through the
domestic sales organisation.
– A second form of indirect
exporting is the use of
international trading
companies with local offices
all over the world.
– A third form of indirect
exporting is the export
management company
located in the same country as
the producing firm and which
plays the role of an export
department.

9. Example
The mumbai based
American Dry Fruits
(ADF) which began
selling a range of
packaged foods liked
Chutneys, Spices,
Canned vegetables,
ready to eat dals, etc
under different brand
names later moved to
other countries with
large Indian population.

10. Licensing & Franchising
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(
Patents, trade marks
etc).

11. Licensing & Franchising
Franchising is a business model
in which many different
owners share a single brand
name. A parent company
allows entrepreneurs to use
the company's strategies and
trademarks; in exchange, the
franchisee pays an initial fee
and royalties based on
revenues. The parent company
also provides the franchisee
with support, including
advertising and training, as
part of the franchising
agreement.

12. Licensing & Franchising
Licensing is similar to
franchising except that
the franchising
organisation tends to be
more directly involved in
the development and
control of the marketing
programme.

13. Licensing & Franchising
The major drawback of
licensing is the problem of
controlling the licensee
due to the absence of
direct commitment from
the international firm
granting the licence. After
few years, once the know-how
is transferred, there is
a risk that the foreign firm
may begin to act on its
own and the international
firm may therefore lose
that market.

14. Example
ITC Hotels and ITT
Sheraton corporation had
an agreement under which
ITC Hotel’s Welcom group
franchised two of its hotels
in Bangkok and Hong kong
to ITT Sheraton holding, in
exchange, the franchise for
Sheraton in India. Later,
partners decided to set up
a joint venture with
Sheraton having major
stake to manage all new
ITC hotel projects in India.

15. Strategic Alliance
It is an arrangement
between two companies
that have decided to share
resources to undertake a
specific, mutually
beneficial project. A
strategic alliance is less
involved and less
permanent than a joint
venture, in which two
companies typically pool
resources to create a
separate business entity.

16. Strategic Alliance
In a strategic alliance,
each company maintains
its autonomy while
gaining a new
opportunity. A strategic
alliance could help a
company develop a more
effective process, expand
into a new market or
develop an advantage
over a competitor,
among other
possibilities.

17. Example
An oil and natural gas
company might form a
strategic alliance with a
research laboratory to
develop more commercially
viable recovery processes. A
clothing retailer might form
a strategic alliance with a
single clothing
manufacturer to ensure
consistent quality and
sizing. A major website
could form a strategic
alliance with an analytics
company to improve its
marketing efforts.

18. Contract Manufacturing
In contract
manufacturing, the firm’s
product is produced in
the foreign market by
local producer under
contract with the firm.
Because the contract
covers only
manufacturing, marketing
is handled by a sales
subsidiary of the firm
which keeps the market
control.

19. Contract Manufacturing
Contract manufacturing
obviates the need for plant
investment, transportation
costs and custom tariffs and
the firm gets the advantage
of advertising its product as
locally made. Contract
manufacturing also enables
the firm to avoid labour and
other problems that may
arise from its lack of
familiarity with the local
economy and culture.

20. Example
Balsara’s private label
manufacturing activity is
focused on the supply of
children’s toothpaste
formulations. Balsara’s
empahsis on Private lable
products and contract
manufacturing has
resulted in increased
business from North
American and European
Markets.

21. Assembly Operations
Assembling is a
compromise between
exporting and foreign
manufacturing. The firm
produces domestically all
or most of the
components or
ingredients of its product
and ships them to foreign
markets to be put
together as a finished
product.

22. Assembly Operations
By shipping CKD
(completely knocked
down), the firm is saving on
transportation costs and
also on custom tariffs which
are generally lower on
unassembled equipment
than on finished products.
Another benefit is the use
of local employment which
facilitates the integration of
the firm in the foreign
market.

23. Example
Notable examples of
foreign assembly are the
automobile and farm
equipment industries. In
similar fashion, Coca-Cola
ships its syrup to foreign
markets where local bottle
plants add the water and
the container.

24. Wholly owned manufacturing facility.
Companies with long term
and substantial interest in
the foreign market normally
establish wholly owned
manufacturing facilities
there. A number of factors
like trade barriers,
difference in the production
and other costs encourage
the establishment of
production facilities in the
foreign markets.

25. Joint Ventures
Foreign joint ventures have
much in common with
licensing. The major
difference is that in joint
ventures, the international
firm has an equity position
and a management voice in
the foreign firm. A
partnership between host-and
home-country firms is
formed, usually resulting in
the creation of a third firm.

26. Mergers and Acquisitions
From a legal point of view,
a merger is a legal
consolidation of two
companies into one
entity, whereas an
acquisition occurs when
one company takes over
another and completely
establishes itself as the
new owner