Description
Describes different ways to enter enter foreign market like exporting, contractual agreements, strategic alliances, direct foreign investment
Foreign Market-Entry Strategies
When a company makes the commitment to go international, it must choose an entry strategy
The choice of entry strategy depends on:
• market characteristics (such as potential sales, strategic importance, cultural differences, and country restrictions) company capabilities and characteristics, including the degree of market knowledge, marketing involvement, and commitment that management is prepared to make
•
•
Alternative Market-Entry Strategies
• Import regulations may be imposed to protect health, conserve foreign exchange, protect home industry, or provide revenue in the form of tariffs A company has four different modes of foreign market entry from which to select:
•
• • • •
exporting contractual agreements strategic alliances, and direct foreign investment
Exporting
• • • Exporting can be either direct or indirect In direct exporting the company sells to a customer in another country In contrast, indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product The Internet is becoming increasingly important as a foreign market entry method
•
Contractual Agreements
Contractual agreements are long-term, non-equity associations between a company and another in a foreign market
•
•
Contractual agreements generally involve the transfer of technology, processes, trademarks, or human skills Contractual forms of market entry include:
(1) Licensing: A means of establishing a foothold in foreign markets without large capital outlays wherein patent rights, trademark rights and the rights to use technological processes are granted. (2) Franchising: A contract in which franchisor provides a standard package of products, systems and management systems and franchisee provides market knowledge, capital and personal involvement.
Strategic International Alliances
• Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management
•
A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective
SIAs are sought as a way to shore up weaknesses and increase competitive strengths SIAs offer opportunities for rapid expansion into new markets, access to new technology, more efficient production and marketing costs An example of SIAs in the airlines industry is that of the alliance partners made up of American Airlines, Cathay Pacific, British Airways
• •
•
International Joint Ventures
• • • • International joint ventures (IJVs) have been increasingly used since 1970s a means of lessening political and economic risks by the amount of the partner’s contribution to the venture a less risky way to enter markets A joint venture is different from strategic alliances or collaborative relationships in that a joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity
International Joint Ventures (contd.)
• Four factors are associated with joint ventures: 1. 2. 3. JVs are established, separate, legal entities; they acknowledge intent by the partners to share in the management of the JV; they are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between individuals; equity positions are held by each of the partners
4.
Consortia
• Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:
(1) They typically involve a large number of participants, and (2) They frequently operate in a country or market in which none of the participants is currently active
• Consortia are developed to pool financial and managerial resources and to lessen risks.
Direct Foreign Investment
•
A fourth means of foreign market development and entry is direct foreign investment Companies may manufacture locally to capitalize on low-cost labor, to avoid high import taxes, to reduce the high costs of transportation to market, to gain access to raw materials, or as a means of gaining market entry. Firms may either invest in or buy local companies or establish new operations facilities
•
•
doc_836757718.ppt
Describes different ways to enter enter foreign market like exporting, contractual agreements, strategic alliances, direct foreign investment
Foreign Market-Entry Strategies
When a company makes the commitment to go international, it must choose an entry strategy
The choice of entry strategy depends on:
• market characteristics (such as potential sales, strategic importance, cultural differences, and country restrictions) company capabilities and characteristics, including the degree of market knowledge, marketing involvement, and commitment that management is prepared to make
•
•
Alternative Market-Entry Strategies
• Import regulations may be imposed to protect health, conserve foreign exchange, protect home industry, or provide revenue in the form of tariffs A company has four different modes of foreign market entry from which to select:
•
• • • •
exporting contractual agreements strategic alliances, and direct foreign investment
Exporting
• • • Exporting can be either direct or indirect In direct exporting the company sells to a customer in another country In contrast, indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product The Internet is becoming increasingly important as a foreign market entry method
•
Contractual Agreements
Contractual agreements are long-term, non-equity associations between a company and another in a foreign market
•
•
Contractual agreements generally involve the transfer of technology, processes, trademarks, or human skills Contractual forms of market entry include:
(1) Licensing: A means of establishing a foothold in foreign markets without large capital outlays wherein patent rights, trademark rights and the rights to use technological processes are granted. (2) Franchising: A contract in which franchisor provides a standard package of products, systems and management systems and franchisee provides market knowledge, capital and personal involvement.
Strategic International Alliances
• Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management
•
A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective
SIAs are sought as a way to shore up weaknesses and increase competitive strengths SIAs offer opportunities for rapid expansion into new markets, access to new technology, more efficient production and marketing costs An example of SIAs in the airlines industry is that of the alliance partners made up of American Airlines, Cathay Pacific, British Airways
• •
•
International Joint Ventures
• • • • International joint ventures (IJVs) have been increasingly used since 1970s a means of lessening political and economic risks by the amount of the partner’s contribution to the venture a less risky way to enter markets A joint venture is different from strategic alliances or collaborative relationships in that a joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity
International Joint Ventures (contd.)
• Four factors are associated with joint ventures: 1. 2. 3. JVs are established, separate, legal entities; they acknowledge intent by the partners to share in the management of the JV; they are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between individuals; equity positions are held by each of the partners
4.
Consortia
• Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:
(1) They typically involve a large number of participants, and (2) They frequently operate in a country or market in which none of the participants is currently active
• Consortia are developed to pool financial and managerial resources and to lessen risks.
Direct Foreign Investment
•
A fourth means of foreign market development and entry is direct foreign investment Companies may manufacture locally to capitalize on low-cost labor, to avoid high import taxes, to reduce the high costs of transportation to market, to gain access to raw materials, or as a means of gaining market entry. Firms may either invest in or buy local companies or establish new operations facilities
•
•
doc_836757718.ppt