Entering Foreign Markets Presented by Maxim Simonov
Entering Foreign Markets
Presented byMaxim Simonov
Where to Enter?
Evaluate:• Political factors• Economic factors• Demographic factors• Purchasing power
When to enter?
First Movers
Advantages:• Preempt rivals and
capture demand
Disadvantages:• Pioneering costs
What would be the Scale of Entry?
Big Scale• Commitment• Confidence • Inflexibility
Small Scale• Learning• Flexibility
Exporting
Turnkey Project
Licensing
Franchising
Joint Venture
Subsidiary
Entry Modes
Entry Modes
Exporting
Advantages:• No costs associated
with building manufacturing facilities
Disadvantages:• Transportation costs• Tariffs• Exporting agent who
can also work for a competing firm
Turnkey Project
Advantages:• Less risky than FDI• Good way to earn an
economic return from know-how
Disadvantages:• No long-term interest in
the foreign country• The firm may create a
competitor
Licensing
Advantages:• Bearing no costs
with development and risk
• Royalty paymentsDisadvantages:• Passing control over
manufacturing (RCA)
Franchising
Advantages:• Bearing no costs with
development • Passing control over
manufacturing
Disadvantages:• Using a company’s
brand name puts the company’s reputation at risk
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Joint Venture
Advantages:• Combines one
company’s expertise with the other company’s local knowledge
Disadvantages:• Risks of giving
control of technology
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Wholly Owned Subsidiaries
Advantages:• Gives a firm a 100%
share in the profits• Tight control over
operations• Protection of
technologyDisadvantages:• Costly investment
Questions