Modes of entry into international market ppt. Modes of entry to international business 2022-10-22
Modes of entry into international market ppt Rating:
There are several ways for businesses to enter international markets, and the most appropriate mode of entry will depend on a variety of factors, including the size and resources of the company, the level of risk it is willing to take, the nature of the product or service being offered, and the specific characteristics of the target market. Some of the most common modes of entry into international markets include exporting, licensing and franchising, joint ventures, and direct investment.
Exporting refers to the process of selling goods or services to customers in other countries. This is often the simplest and least risky way for a company to enter international markets, as it involves minimal upfront investment and allows the company to test the waters in a new market before committing significant resources. However, exporting can also be challenging, as it requires companies to navigate complex regulations and customs procedures, as well as deal with currency exchange risks and other logistical issues.
Licensing and franchising involve allowing a foreign company to use the company's brand, intellectual property, or business model in exchange for a fee. This can be a good way for a company to enter international markets without having to invest significant resources upfront, and it can also help the company to build a presence in a new market quickly. However, licensing and franchising can also be risky, as the company is giving up control over how its brand and intellectual property are used in the foreign market.
Joint ventures involve partnering with a foreign company to enter a new market. This can be a good way for a company to share the risk and resources involved in entering a new market, and it can also help the company to tap into the local knowledge and expertise of its partner. However, joint ventures also involve giving up some degree of control and can be challenging to manage due to differences in culture and business practices.
Direct investment involves setting up operations in a foreign market, either through the acquisition of an existing company or by establishing a new business from scratch. This is often the most risky and resource-intensive way to enter international markets, but it can also be the most rewarding, as it allows the company to have complete control over its operations in the foreign market and to capture a larger share of the profits. However, direct investment also requires a significant upfront investment and can be challenging due to regulatory and cultural differences.
Ultimately, the most appropriate mode of entry into international markets will depend on the specific circumstances of the company and the target market. Companies should carefully consider the risks and rewards of each option and choose the mode of entry that best aligns with their goals and resources.
(PPT) International Markets Entry Strategies
Links to an external site. However, it requires a high level of resources and a high degree of commitment. The researcher distributed structured questionnaires to the employees in the top and middle level management of the various branches in the County. Turnkey Projects An investment in foreign country that also brings at least 10% ownership rights is termed as direct investment. It does not lead to the dissolution of a company whose shares are acquired. Advantages Modifications can be made at any point in time It is an easy mode of entry Disadvantages The government policies may not be helpful The return on investment may be low Read More: 6. Most of the costs associated with exporting take the form of marketing expenses.
Magazine publisher Hearst, for example, has joint ventures with companies in several countries. Example: Foxconn Technology Local manufacturer group that supplies products to high profile companies like Microsoft. Indirect exportingy An export entry mode where by a company sells its products in the company's home country to intermediaries who in turn sell the product overseas y Middle man can be used such as export management companies ,trading companies, agents or brokers y These manage distribution operations in Int. The entry strategies which were selected for the study were: licensing strategies, franchising strategies, strategic alliances and foreign direct investment, which formed the basis of the study objectives. Links to an external site. Or does the potential associated with first-mover status justify a bolder move such as entering an alliance, making an acquisition, or even starting a new subsidiary? In the 1990s, laws inadvertently encouraged Russian firms to establish legal headquarters in offshore tax havens, like Cyprus.
You'll not just communicate well but will convince everyone among the audiences with added authority. Walmart, for example, failed several times over nearly a decade to effectively grow its business in Mexico, until it found a strong domestic partner with similar business values. This requires understanding the Foreign Market Entry Modes also known as International Market Entry Methods and following the one which is most appropriate. First, the authors define a concept of international strategy and gives some reasons why do companies go international and how they do it entry strategy. There are certain stages of internationalization which are to be scrutinized under:- Exporting It is the simple mode of internationalizing a domestic business. Links to an external site.
If your currency is strong, you can get a bargain. Some companies purchase their resellers or early partners as Vitrac Egypt did when it bought out the shares that its partner, Vitrac, owned in the equity joint venture. Because little investment on the part of the licensor is required, licensing has the potential to provide a very large return on investment. There are several motivations for companies to consider a partnership as they expand globally, including a facilitating market entry, b risk and reward sharing, c technology sharing, d joint product development, and e conforming to government regulations. Embraer is the largest aircraft maker in Brazil and one of the largest in the world. The more control a company wants, the better off it is establishing or buying a wholly owned subsidiary or, at least, entering via a joint venture with carefully delineated responsibilities and accountabilities between the partner companies.
This entry option has also been a useful way to circumvent regulations governing bribery and corruption, but it can raise ethical questions, particularly for American and Western companies that have a different cultural perspective on gift giving and bribery. Local manufacturers in foreign markets may lose business 8. It will, however, retain control of product design and development and put its own label on the finished product. Links to an external site. Contract Manufacturing and Outsourcing Because of high domestic labor costs, many U. Exporting is the sale of products and services in foreign countries that are sourced from the home country.
Are these success factors transferable to foreign locations? As a rule, licensing strategies inhibit control and produce only moderate returns. Exporting is a traditional and well-established method of reaching foreign markets. This proves beneficial as it saves the organization from the process of exporting to foreign market. The marketing and selling of the product is the responsibility of the international firm. Hence the study concludes that licensing strategies, franchising strategies, strategic alliances and foreign direct investment affects the strategic performance of Equity bank but foreign direct investment through the establishment of subsidiaries contributes to more than 35% of the strategic performance. Ex In auto companies setting up their operations in India and other emerging markets so as to effectively respond to global competition.
International Market Entry Methods PowerPoint Template
This address to those formats which are short term in nature and that do not entail same level of commitment as the previous categories Such alliances crop up frequently and have various forms and degree of alliance They vary from a contract manufacturing agreement that requires the contracting firm to provide raw material and training to the contracting factory in return for production that could last for 2yrs for an exchange of loyalty points between companies y An Indian company can acquire a foreign company and all its resources in a foreign market. Links to an external site. In 2010, Embraer announced the opening of its first subsidiary in China. Partnerships in emerging markets can be used for social good as well. China is a relationship-based society. Contract manufacturing is quite common in the U. It has lesser risk factor than other methods.
Building these relationships may include keeping people in the countries long enough to form good ties, since a deal negotiated with one person may fall apart if that person returns too quickly to headquarters. A firm may first enter the foreign market through exporting, licensing or franchising. A strategic alliance is an agreement between two companies or a company and a nation to pool resources in order to achieve business goals that benefit both partners. Close ad, if any opens 3. You also have the liberty to modify every element as per your needs. To provide the basis of the study, the research used the following theories: eclectic theory, internationalization theory, new trade theory and theory of comparative advantage.
Such property is usually intangible, such as trademarks, patents, and production techniques. In this paper, entry modes will be examined under three main groups; Export modes, Contractual modes and Investment modes. These resources are best for smaller companies. Foreign Direct Investment Entering international market through ownership of assets in host countries. What is more, exporting does not give a company firsthand experience in staking out a competitive position abroad, and it makes it difficult to customize products and services to local tastes and preferences.