What are the major ways of entering a foreign market?

Direct exportsIndirect and

Five modes of entry into foreign markets

Indirect Export

• Domestic based export merchants• Domestic based export agents• Cooperative Organizations• Export management companies

Indirect Export advantages

Less investment

Less r isk

Direct Export

• Domestic based export departments or divisions

• Overseas sales branch or subsidiary

• Travel ing export sales representative• Foreign-based distr ibutors or

agents

“Test the waters” before building a

plant

Licensing

Licensing

• Licensor issues a license to a foreign company to use manufacturing process,TM, patent etc for a fee or royalty

• License gains production expertise or brand name

• Licensor has less control over the licensee than over its production and sales

• Risk of creating a competition

Licensing

• Management contracts Manage businesses for free• Contract manufacturing: Hires local manufacturers to produce the product• Franchising : Offers complete brand concept and operating system

Joint ventures

Share ownership and control

License     

The foreign firms might lack the financial, physical, or managerial resources to undertake the venture alone

Partners may disagree over investment, marketing, or other policies.

Can prevent international company from carrying out specific manufacturing and marketing policies

Direct Investment

A foreign company can:

License     

buy part or full interest in a local company

build its own manufacturing or service facilities

Advantages

• The firm secures cost economics• The firm strengthens its image in the

host country• The firm deepens its relationship• The firm retains its full control over its

investment• The firm assures itself of access to the

market

Image Creditsflickr users

Ken ApplebaumVetal 888