FOREIGN MARKET ENTRY STRATEGIES

com/ . There are political or other risks of investment in the foreign country. y F. Foreign investment is not permitted by concerned foreign country.y EXPORTING ² Exporting is the process of delivering goods from home country to another country. y C. Other alternatives are not so profitable in comparison to exporting. The volume of foreign business is not large enough to justify production in the foreign market. The foreign market is characterized by production bottlenecks. y It is appropriate strategy in following conditions: y A. y For exporters data refer : http://www. y D. y E. y B. Cost of production in the foreign market is high.infodriveindia.

In this case cash payment of fees or royalty may or may not be paid. trademarks.y LICENSING ² y Under international licensing agreement. copyrights. y The monetary benefit to the licensor is the royalty or fees which license pays. marketing skills or other specific skills. y Licensing e. .g. a firm in one country (the licensor) permits the firm in another country (the licensee) to use its intellectual property (such as patents. technology. y In cross-licensing there is a mutual exchange of patents or technology between two firms.

Coca-Cola supplying Soft drink syrup to its bottlers. ´using its band name. For e. y One of the important form of franchising involves the franchisor supplying an important ingredient to franchisee. y The right can take the form of selling the franchisor·s product. . production and marketing techniques.. Franchising e.g. y Why Licensing & Franchising ² key reason is because it neither requires capital investment nor requires knowledge and marketing strengths in foreign markets. or general business approachesµ.y FRANCHISING ² Franchising is a form of licensing in which a parent company (the franchiser) grants another independent company (the franchisee) the right to do business in a prescribed manner.g.

y CONTRACT MANUFACTURING y Under contract manufacturing . a company doing international marketing contracts with firms in foreign countries to manufacture or assemble the products while retaining the responsibility of marketing the product. y It enables the marketer to get started immediately. No investment risks. y b. if the production capacity in foreign country is well established. y Contract manufacturing has following advantages : y a. . The company does not have to commit resource for setting up production facilities.

. c. Thus acc. b. In some cases. there will be the loss of potential profits from manufacturing Less control over manufacturing process It has risk of developing potential customers. the supplier brings together a package of skills that will provide an integrated service to the client without incurring the risk & benefit of ownership. contracting is a low risk method of getting into a foreign market and it starts yielding income right from the beginning. y MANAGEMENT CONTRACT y Under management contract.y Disadvantages a. to Kotler mgmt.

y TURNKEY CONTRACTS ² y Turnkey contracts are common in international business in the supply. cement etc. steel mills. erection & commissioning of plants as in case of refineries. who will be trained by the seller. . y A turnkey contractor may subcontract different phases/parts of the project. y It is basically an arrangement by the seller to supply a buyer with a facility fully equipped and ready to be operated by the buyer·s personnel.

Licensing/Franchising agreements. y b. Sharing of ownership and management in an enterprise. y c. Contract manufacturing y d. Management contracts. viz.y JOINT VENTURES ² y Joint ventures is a form of association which implies collaboration for more than a transitory period . y The essential feature of s joint venture is that ownership and management are shared b/w a foreign firm and a local firm. y a. .It encompasses many diverse types of joint overseas operations. In some cases there are more than two parties involved.

Taiwanese entrepreneur's found it easy to enter People s Republic of China through bases in Hong Kong. . y THIRD COUNTRY LOCATION y When there are no commercial transactions between two nations because of political reasons or when direct transactions between two nations are difficult due to political reasons or the like.g. y In the past. For e. government of India of India did not permit trade with South Africa and Mauritius.y One important advantage of joint venturing is that it permits a firm with limited resources to enter more foreign markets than might be possible under a policy of forming wholly owned subsidiaries.

depending on whether the acquiree or merging company is or isn't listed in public markets.y MERGERS AND ACQUISITIONS y ACQUISITIONS y An acquisition. the companies cooperate in negotiations. y In the case of a friendly transaction. in the case of a hostile deal. y An acquisition may be private or public. also known as a takeover or a buyout. the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer . is the buying of one company (the target ) by another. An acquisition may be friendly or hostile.

y MERGERy A merger happens when two firms agree to go forward as a single new company rather than remain separately owned and operated. y For example. y The firms are often of about the same size. and a new company. both firms ceased to exist when they merged. . GlaxoSmithKline. Both companies' stocks are surrendered and new company stock is issued in its place. was created. in the 1999 merger of Glaxo Wellcome and SmithKline Beecham. This kind of action is more precisely referred to as a "merger of equals".

.y COUNTERTRADE ² y Countertrade is a form of international trade in which certain export and import transactions are directly linked with each other and in which the import of goods are paid for by export of goods instead of money payments.