Foreign Market Entry Strategies

Made by: Harshmeet Pal Singh (14013) Hemant Chopra (14014)

Reasons To Enter Foreign Market

To expand sales To acquire resources To minimize risk

Choosing the Target Market

Geographical Factors Country, state, region, Urban/rural location logistical considerations e.g. freight and distribution channels

Economic, Political, and Legal Environmental Factors Regulations including quarantine, Labeling standards, Standards and consumer protection rules, Duties and taxes
.

Choosing the Target Market

Demographic Factors Age and gender, Income and family structure, Occupation, Cultural beliefs, Similar products, Market Characteristics Market size, Availability of domestic manufacturers, Agents, distributors and suppliers

Foreign Entry Strategies

Exporting Licensing Franchising Joint Venture Wholly owned Subsidiaries Contract Manufacturing

Exporting
Exporting is the marketing and direct sale of domestically-produced goods in another country. Exporting is a traditional and wellestablished method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.

Licensing
Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance. Because little investment on the part of the licensor is required, licensing has the potential to provide a very large ROI. However, because the licensee produces and markets the product, potential returns from manufacturing and marketing activities may be lost.

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.

Joint Venture
A joint venture (JV) is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. The two parties feel that it will be beneficial for them to join togather and carry our efficient operations.

Wholly owned subsidiaries

A company can set up a wholly owned subsidiary abroad if they want complete control over the operations. They are of two main types: 1. Greenfield Site: The firm sets a new operation 2. The firm may acquire an exisiting business abroad. This strategy require maximum commitment of resources and involves greater risk.

Contract manufacturing
This strategy implies that the company might outsource the production function to foreign countries. This is generally done to take advantages of cheap and abundant labour, land availability or low taxation policies.

Entry Mode Selection

The selection of entry to be applied for entering into foreign markets rely on three main constraints: 1. STRATEGIC VARIABLES 2. ENVIRONMENTAL VARIABLES 3. TRANSACTION VARIABLES

STRATEGIC VARIABLES
influence the choice of entry mode through the control requirements that they entail. Control is the ability and willingness of a firm to influence decisions, systems, and methods in a foreign market. Different strategies require different degrees of control over the operating of foreign affiliates, and thus lead to different entry modes.

ENVIRONMENTAL VARIABLES
influence the entry mode decision primarily through their influence on the appropriate level of resource commitment. Resource commitments are dedicated assets that cannot be employed for other uses without incurring costs. Resources may be intangible, such as managerial skills, or tangible, such as machines and money.

TRANSACTION VARIABLES
influence the entry mode decision through their influence on dissemination risks and on the appropriate level of control. Risk comes from the chance that a firm's applied knowledge (tangible and/or intangible) can be unintentionally transferred to a local firm creating a new competitor.

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