The degree of risk involved, attitudes and the ability to achieve objectives in the target markets are important facets in the decision on whether to license, joint venture or get involved in direct investment. When doing business in another country there will likely be a difference in customer preferences that will need to be met, differences in infrastructure, and the way of doing business such as distribution channels. Franchising is optimal when the company brand is already well-known or in cases when the organization's concept is truly exceptional and unique. An example of the institutional arrangements 13 involved is given in table 7. These options vary with cost, risk and the degree of control which can be exercised over them.
This is especially lucrative when your licensee holds a good position in the local market. The link of having distribution channels within nations allows the company to move with products directly from its entry points to the final consumers. Take advantage of competitively important qualities of local workforce with which large multinationalncompany maybe unfamiliar Exporters are disadvantaged when the currency of the country where goods are being manufactured grows stronger relative to the currency of the importing country. They are as follows: International Strategy, Multi-domestic Strategy, Global Strategy, or a Transnational Strategy. Which market entry strategy should you choose? Certainly, the phytosanitary requirements in Europe for horticultural produce sourced in Africa are getting very demanding. These forms of participation: exporting, licensing, joint ventures or ownership, are on a continuum rather than discrete and can take many formats. Hotel companies that wish to enter a foreign market often employ this style of joint venturing.
We have put together this article to give you an overview of different market entry strategy examples and explain what each of them is best for. While this means sharing in the revenue, it involves the least risk. It is also easier for the firms to hire agents or distributors who will take care of exporting and promoting the new product in the new market. Licensing can be done not only for a product but also for a trade name. They then result in giving reduced production incentives and cease to be demand or market orientated, which is detrimental to producers.
In turn, the trader may forfeit a portion of the discount to sell these products for hard currency on the international market. The major disadvantage of joint ventures is that conflicts of interest may occur between the different parties i. In making international marketing decisions on the marketing mix more attention to detail is required than in domestic marketing. All of the products with those stickers are made in China and exported to the United States, either indirectly or directly, depending on the product. After all, you can now fly non-stop from New York to Singapore in 18 hours. Recommendations and conclusions will also be defined for when entering a foreign market, thus expanding operations. This works well for companies that have a reputable fast food chain or Starbucks instant coffee.
Compared with simple barter, clearing accounts offer greater flexibility in the length of time for drawdown on the lines of credit and the types of products exchanged. It can, also, give a basis for reciprocal trade. There are many ways in which a firm can enter a foreign market, but the challenge is to choose the right strategy. Greenfield Investments If there was ever a perfect example of high-risk, high reward adage, greenfield investment could perfectly fit one. Attending trade shows and events specific to your industry in the country can also be helpful. Another way of looking at it is by identifying three basic business strategies: stage one - international, stage two - multinational strategies correspond to ethnocentric and polycentric orientations respectively and stage three - global strategy corresponds with geocentric orientation. First, it needs to be said that outsourcing is not a market entry strategy per se, since the market in question is not necessarily being entered.
The next step is to thoroughly assess the demand and competitive landscape for your product or service; is the product or offering that you have unique in some way, are consumers already aware of your product and do they like it , and if there are competitors, are there barriers to consumers switching or barriers to entry, etc. There are many reasons businesses look for international expansion, but before all of that, you will first need a strong market entry strategy. Additionally, bigger companies can also opt for joint ventures who share risks and profit. Export earnings have tripled from 1981 to 1986 and the added value has been significant- The roots of success can be seen on the supply, demand and institutional sides. This may influence how you will have to package and market your products.
Buyers in the interested foreign country are usually very careful as they perceive transport, currency, quality and quantity problems. Market Entry Strategies As you can see in the diagram, the amount of risk, control, commitment, and profit potential also increases. In this strategy, two companies from two different countries join forces to start a new local business. The biggest mistake of market entry strategies is not having it or assuming that what worked in other markets will work again in a new one. One of the best examples of the joint venture can be considered the one between Sony and Ericsson cell phones.
With your plan, you can now go to a lender for an to make up the difference between your internal resources and what you need to finance your project. Licensing comes with fees and royalty payments that pay for manufacturing processes, trademarks, patents, trade secrets, or any value associated with the items that the company produces. It can be anything, really — you can get a partner in a foreign country to simply help with marketing and receive a cut of profits , or, you can get a partner in a foreign country who is just as invested in all facets of your business as you are. Screen them objectively both for opportunities and risk factors. Distribution support - Funds provision - Raising of capital - Order processing - Export preparation and documentation - Freight forwarding - Insurance - Arbitration 6. Having done all the preparatory planning work no mean task in itself! A company choosing an International Strategy works to 2192 Words 9 Pages Running Head: Strategies for Analyzing and Entering Foreign Markets Strategies for Analyzing and Entering Foreign Markets Strategies for Analyzing and Entering Foreign Markets Table of Contents Page No. Starbucks would still gain a profit from its product but the initial margin would be much less than it is in the United States to accommodate the norms in the foreign country.
Product support - Product sourcing - Match existing products to markets - air, sea, rail, road, freight - New products - Product management - Product testing - Manufacturing specifications - Labelling - Packaging - Production control - Market information 2. Competitive intensity means more and more investment in marketing. Licensing Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the use of a product or service to another firm. Busy Tech is interested in entering a new market, so the company is going to work comparing market entry strategies. Step Three—Plan and execute By this stage, you have arrived at your final decision.
There will be a number of factors that will influence your choice of strategy, including, but not limited to, tariff rates, the degree of adaptation of your product required, marketing and transportation costs. Disadvantages: · limited form or participation, · potential returns from marketing and manufacturing may be lost, · partner develops knowhow and so license is short, · partner becomes competitor, · requires a lot of planning beforehand. Personally, with air travel improvements, and the cost of relocating families, etc. They will know which stores are best suited for your product, what features the audience values and at what price. For example, in the exporting of African horticultural products, the agents and Dutch flower auctions are in a position to dictate to producers. Joint Ownership Finally, the last way for a company to enter into a foreign market using a joint venture strategy is through a joint ownership agreement. Typically in the United States, Starbucks owns its entire line of coffee-bar stores outright with no franchise investments or partnerships.