Project on

Different Modes of Entry in International

Marketing
In partial fulfillment of requirement for the
Award of Degree of M.Com
Subject:

INTERNATIONAL MARKETING
Submitted By:
Miss. SEEMA TALREJA
Roll No. 750
M.Com. Part II, Semester 3
Under the Guidance of:
Prof. PRAKASH MULCHANDANI
SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE
ULHASNAGAR 421003
UNIVERSITY OF MUMBAI
2016-17

Department of Commerce

Certificate
Thisistocertifythat,Ms.SEEMA.M.TALREJAofM.Com.II,Sem.III(Roll
No.750),hassuccessfullycompletedtheprojecttitledDifferentModesofEntry
inInternationalMarketing undermyguidanceforthe AcademicYear2016
17.Theinformationsubmittedistrueandoriginalaspermyknowledge.

Prof.PrakashMulchandani
(ProjectGuide)

Prof.GopiShamnani Dr.PadmaV.Deshmukh
(Coordinator,M.ComCourse)
(I/CPrincipal)

EXTRENALEXAMINER
2

DECLARATION
I Seema.M.Talreja, studying in Smt. Chandibai Himatmal Mansukhani college of
Arts,science, Commerce, Ulhasnanagr 421003, Student of M.Com Part 1, Hereby
declare that I have completed my project on Different Modes Of Entry In International
Market the academic year 2016-2017.The information submitted by me is true and original
to the best of my knowledge.

SEEMA TALRJEA

ACKNOWLEGEMENT
To list who all have helped me is difficult because they
are so numerous and the depth is so enormous.
I would like to acknowledge the following as being
idealistic channels and fresh dimensions in the
completion of this project
I take this opportunity to thank the University of
Mumbai forgiving me chance to do this project.
I would like thank my Principal,
Dr.Padma.V.Deshmukh for providing the necessary
facilities required for completion of this project.
I would also like to express my sincere gratitude towards
my project guide Prof. Mr. Prakash Mulchandani
whose guidance and care made the project successful.
I would like to thank my college library, for having
provided various reference books and magazines related
to my project.
Last but not the least, I would like to thank almighty God, my parents,
and my friends who helped me gather these data and have sat with me
for hours discussing about the project

0bjective of the Study

To understand the concept of International Marketing.
To understand the role of International marketing in India.
To understand the risk associated with International Marketing.
To understand the entry modes.
To know the companies gain profit while entering in international markets.
Ho will became an entrepreneur in such a competitive world.
To understand their position of companies who are involved in International business.
To gain knowledge on the concept of my project.
To understand the reasons that why companies go for International Business.
To understand the trends and techniques adopted by companies to enter in international
marketing.

Methodology of study

Data for the project is obtained in two ways primary source

and secondary source
Primary sourceThe primary data is collected from those who sale products
outside India. Mr. Vicky & Komal Talreja export duppatas from
Ulhasnagar to Yaman who gave me best of his knowledge
relating with the supply of goods and payment term.

Secondary sourceSecondary data was used for this study as the research design is descriptive in
nature so we tried to collect the data available through other sources on the
subject. Sometimes, primary data is also collected through observation method to
facilitate the research work.
Sources of data
The following sources are used for collecting the data for this study:
Books
internet
Journals
News papers
Personal source

SR.
NO
1
2

TOPICS
WHAT IS INTERNATIONAL MARKETING
BENEFITS OF INTERNATIONAL MARKETING

PG.N
O
8
9

REASONS TO GO INTERNATIONAL MARKETING

11

TYPES OF RISK IN INTERNATIONAL MARKETING

15

CHALLENGES IN INTERNATIONAL MARKETINHG

19

ENTRY MODES IN INTERNATIONAL MARKETING

A. Joint Ventures
B. Contract Manufacturing
C. Licensing
D. Franchising
E. Exporting
22
7

6 COUNTRIES BEATING FOREIGH COUNTRIES

CONCLUSION

BIBLIOGRAPHY

38
45

What is International Marketing?

7

"International marketing", which is a set of strategies by which the marketer makes to get the
good or service to overseas markets and which is aimed at a population specific.
On many occasions, this is a gradual process,which has to do with the abilities of the company
and the performance that you purchased within its market of reference, to subsequently embark
on the conquest of new markets, new cultures, both in the way of doing business and features
that consumers in other locations have to face. That is why, requires a comprehensive plan that
could exploit the advantages offered by the external market, and in any event minimize the risks
of an investment.It is the marketing applied to other cultures or different realities alien to our
environment, and should therefore take into account multiple factors in development and
introduction of products. The producer should try to design and produce consumer goods that
meet the needs of the consumer. In order to discover what these are used knowledge of
marketing. Marketing has many more functions that must comply with before starting the
process of production; among these, it market research, design, development and testing of the
final product
Meaning of International Marketing
Marketing, also known as marketing or marketing, is the discipline dedicated to elaborate
strategies for the commercial management of the companies, seeking to stimulate demand. The
tasks of marketing include the analysis of the behavior of consumers and the market.
International, for its part, is an adjective that refers to belonging or relating to two or more
Nations. The term can also appoint to countries other than their own and that which has
transcended national borders.What is, therefore, the international marketing? It is of
theapplication of marketing strategies in an environment different from their own. The specialist
must interact with cultures and realities that are alien to their usual environment and force it to
pay special attention to certain factors that keys to the introduction of products will result in the
market.One of the responsibilities of the marketing is loyalty to the consumer, for which the
product in question should meet your needs. In international marketing, it is important that the
expert has clear what these needs are and how the product that aims to commercialize can satisfy

The benefits of international trade

Exports in the UK are growing. The major catalyst was sterlings weakness which meant that the
demand for UK goods and services expanded greatly. What is interesting though, is the benefits
are not just price driven. Earlier this year, we attended International Giftware which fills all 20
halls at the NEC Exhibition Centre just outside of Birmingham. We found international buyers
purchasing UK goods because of the quality and innovation as well as the price. We then decided
to talk to our clients about the benefits and the risks of trading internationally and the key points
they highlighted are discussed below:

Top five benefits:

1 Grow your business
When trading internationally the universe of potential clients and suppliers will increase
significantly. Just imagine increasing the number of potential clients by 100 percent each time
you start selling in a new country. In all likelihood, this will probably be much easier than trying
to expand your market place in your home country.
2 Diversify risk
The idea that a business relies solely on one market and directs all its resources into a single
currency may prove to be more risky than it may first seem. Just look at the number of
unprecedented global disasters (financial meltdown, earthquakes and unrest in the Middle
East) over the last few years and the drastic impacts these have had on markets. Your home
market could contract or even disappear, but your business may be saved by the revenue it
generates overseas.
3 Better margins
As well as seeing increased sales, you may well enjoy better margins. Sterling which is currently
weak may give you a head start when exporting. Pricing pressure could be less and it could also
reduce seasonal market fluctuations.

4 Earlier payments
When working with companies overseas, both you and your customer will want to execute the
transaction in the safest and most efficient manner possible. One of the many advantages when
trading internationally is that overseas payers often pay upfront. This reduces payment risk and
may well help your working capital.
5 Less competition
The ability to stand out amongst competitors is a crucial factor in business. When there are fewer
competitors, this task is made easier. Your business, which may be viewed as comparable to
others in the UK, may, when placed in a larger and more diverse environment, turn out to be a
unique product or service not to be missed. By making the product or service available to
worldwide buyers, you instantly create another life line for the business by being in less
competition and increasing the possibility of standing out. This will in turn boost sales potential
and allow your business to flourish.

10

10 Reasons to go International
If you are pondering whether to go global, recognize the fact that you are global, in that you
very likely have global competitors.
You are in a competitive global marketplace now.

Objectives of Market Entry

Companies decide to go global and enter international markets for a variety of reasons, and these
different objectives at the time of entry should produce different strategies, performance goals,
and even forms of market participation. However, companies often follow a standard market
entry and development strategy. The most common is sometimes referred to as the increasing
commitment method of market development, in which market entry is done via an independent
local partner. As business and confidence grows, a switch to a directly controlled subsidiary is
often enacted. This internationalization approach results from a desire to build a business in the
country- market as quickly as possible and by an initial desire to minimize risk coupled with the
need to learn about the country and market from a low base of knowledge. A few of the more
wide-spread reasons are provided below:Reasons to enter the international marketplace and how to enjoy new export opportunities

1. Increase sales.
If your business is succeeding in the U.S., expanding globally will likely improve overall
revenue. Approximately 96% of the worlds population lives outside of the U.S. and 90%
of the worlds population does not speak English this suggests customers are global and
that if your company looks beyond the shores of the domestic market, you have some real
upside potential. If your company has a unique product or technological advantage not
available to international competitors then this advantage should result in major business
success abroad. For example, if you run a software company and add a French and
German language version, you are extending your total market by nearly 200 million.

2. Improve profits.
11

Many export markets are not as competitive as the U.S. and therefore price pressures are
far less ever wonder why a Jaguar car made in Coventry, England costs more in
Coventry than California? It is common practice for U.S. products to be sold at a higher
price (and margin) in many export markets software translated into German is much
appreciated by users in Germany and they will become loyal customers and pay a
premium. A U.S. company will often enjoy a far less competitive landscape if it goes to
the trouble of localizing.

3. Short-term security.
Your business will be less vulnerable to periodic fluctuations and downturns in the U.S.
economy and marketplace.
4. Long-term security.
The U.S. is a large, mature market with intense competition from domestic and foreign
competitors. Additionally, the U.S. currently has excess capacity so international business
trade may become a necessity if you want to keep up in an increasingly global
marketplace and enjoy the potential for cost savings.

5. Increase innovation
. Extending your customer base internationally can help you finance new product
development.

6. Exclusivity.
Your companys management may have exclusive market information about foreign
customers/prospects, marketplaces or market situations that are not known to others.
7. Economies of scale.
Exporting is an excellent way to expand your business with products that are more widely
accepted around the world. In many manufacturing industries, for example,
internationalization can help companies achieve greater scales of economy, especially for
companies from smaller domestic markets. In other cases, a company may seek to exploit
a unique and differentiating advantage (intellectual property), such as a brand, service
model, or patented product. The emphasis should be on more of the same, with
relatively little adjustment to local markets, which would undermine scale economies.
Although the fundamental reason for entering the Global Marketplace is to increase potential
demand, frequently other factors can drive international market investment and performance
measurement decisions. These include:

12

8. Education.
Under certain circumstances, a company might undertake an international market entry
not solely for financial reasons, but to learn. For example, the consumer products division
of Koc, the Turkish conglomerate, entered Germany, regarded as the worlds leading
market for dishwashers, refrigerators, freezers, and washing machines in terms of
consumer sophistication and product specification. In doing so, it recognized that its
unknown brand would struggle to gain much market share in this fiercely competitive
market. However, Koc took the view that, as an aspiring global company, it would
undoubtedly benefit from participating in the worlds toughest market and that its own
product design and marketing would improve and enable it to perform better around the
world. In most sectors, participation in the lead market would be a prerequisite for
qualifying as a global leader, even if profits in that market were low. Lead markets
include:United States for software, Japan for consumer electronics, Italy for fashion,
Germany for automobiles and so on. It should be noted that if a company is to maximize
learning from a lead market, it should probably participate with its own subsidiary.
Learning indirectly, via a local distributor or partner, is obviously less effective and will
contribute less to the companys development as a global player.

9. Competitive Strike.
Market entry can prompt not by the positive characteristics of the country identified in a
market assessment project, but as a reaction to a competitors moves. A common scenario
is market entry as a follower move, where a company enters the market because a major
competitor has done so. This is obviously driven by the belief that the competitor would
gain a significant advantage if it were allowed to operate alone in that market.Another
frequent scenario is offense as defense, in which a company enters the home market of
a competitorusually in retaliation for an earlier entry into its own domestic market. In
this case, the objective is also to force the competitor to allocate increased resources to an
intensified level of competition.
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10. Government Incentives (i.e., cash).

It is common for governments toincentivize their countrys companies to export. This often
results in many companies entering markets they would otherwise not have tackled. The U.S.
government offers a wealth of help when a company decides to begin exporting. Export
assistance centers provide a one-stop resource and can be found in over 100 U.S. Cities. The
Small Business Administration (SBA) offers Export Working
Capital Programs that include guaranteed loans of $50,000 to
$100,000 to help exporters grow their business.

TYPES OF RISK IN INTERNATIONAL BUSINESS

Doing business internationally can involve different risks from those encountered domestically
and will be influenced by the country you intend to export to. Here are some of the major risks
firms doing business internationally can face.

Political risk
Major political instability at your export destination can either disrupt or in some cases prevent
completion of export contracts. This type of sovereign risk might include defaults on payments,
exchange transfer blockages, nationalisation of foreign assets, confiscation of property, changes
14

in government policies or, in extreme instances, revolution and

civil war. Some factors to consider are:
Trade embargos enforced by governments and the international
community affect the flow of goods and services and could
affect your delivery of goods and getting paid.
Civil disorder may affect personal security of company staff and contractors.
Political upheaval may occur due to economic factors, natural disasters, civil disorder or
revolution
Whether the local country complies with international law requirements, for example, human
rights, trade sanctions, recognition of personal property rights etc.
Some types of exports may be prohibited under local laws or due to trade embargoes or other
international resolutions
There may be no legal recourse for default in the local country or it becomes uneconomic to
pursue your legal right

Legal risk
There can be major differences in Australian law and the law of the country you are exporting to.
You need to understand what these differences are and how they could affect your ability to
successfully export your products or services. It is important not to assume that legal processes
will be the same as in Australia, particularly when entering into contractual arrangements.
Some examples of situations where legal issues can create problems for exporters include:
The differences between legal systems for example,common law systems as compared to
civil law systems.
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 Differences in contract law between countries means

tailored advice on contract terms is important to ensure they
are binding and enforceable. As discussed further below, the
use of internationally recognized contracts may alleviate
some of these problems.
The question of which laws will apply in disputes.
Patent registration and other Intellectual Property issues.
Product liability laws and any implied consumer warranties.
For exporters of services, occupational health and safety and employment laws may apply
Access to courts and dispute resolution mechanisms. Some countries may not permit local
litigation or place restrictions on the types of claims which can be made.
Taxation and revenue laws
Negligence and misrepresentation law
Bribery, graft and corruption risk
Bribery, graft and corruption are illegal in most countries around the world. It is a criminal
offence to offer a benefit which is not legitimately due with the intention of influencing a foreign
public official. A benefit is not restricted solely to monetary payments and can take other forms.
Further, it is not necessary to prove any direct benefit to the foreign official - use of an
intermediary is sufficient to make out the offence.
Many other countries also have extraterritorial laws outlawing bribery, including the USA, UK
and other EU nations. Therefore, the risk for anyone engaging in bribery or corruption arises not
only under law, but also the law of the host country and potentially laws of other nations. It also

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places an exporter at risk of litigation by those who are affected by

illegal conduct, as demonstrated by recent successful class actions.
Quarantine compliance risk
Most countries have strict quarantine requirements. Before
exporting, you need to be aware of what is and what is not allowed under the relevant quarantine
laws of your export destination.
There may also be import restrictions on certain goods and services and you need to ensure that
any proposed exports are permitted under the laws of the local country. Failure to do so can
result in forfeiture or destruction of goods, fines and restrictions on the exporter.

Exchange rate risk

Exchange rate risk can occur because of fluctuations in the value of a currency. Unfortunately,
many exporters have had their profit margins eroded or have even lost money due to exchange
rate fluctuations.
There are a number of ways in which you can protect yourself against this risk, including quoting
your prices in dollars (but many customers do not like this and you may adversely affect the
number of new customers you attract) or hedging against currency fluctuations.
Non-payment risk

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The risk of not being paid for your goods or services is a very serious one for exporters,
regardless of the country you are trading with. In order to mitigate this risk, the payment option
you choose should match the level of the risk.
To protect yourself against payment default it is prudent, at least initially, to use payment
methods which provide you with some security such as pre-payment or an Irrevocable Letter of
Credit even for customers in wealthy markets. (bank will be able to provide advice on various
payment options.) There are a number of relatively simple things that can be done to lower the
risk of not being paid. For example, be careful about offering credit terms to customers, and look
into getting credit insurance.

What Are Some Challenges That Firms Face for International Marketing?
Companies have identified huge markets internationally for their products and services. The
markets are huge in terms of population, in countries such as China and India. The purchasing
power of consumers and businesses in many countries is also significant enough for American
18

firms to want to compete in these markets. However, international marketing is not without
pitfalls, and U.S. companies have made costly mistakes by not adequately researching
international markets before they commit resources there.
Identifying a True Market Need
A key to success in business is offering products and services for which customers have a
compelling need. The customer has a problem that needs to be solved, and the product or service
provides the solution in such an effective way that its benefits are not difficult to communicate.
Identifying the true needs of large numbers of people in a foreign country is not easy. Not having
lived in their culture experiencing their day-to-day lives, American marketing executives can err
by assuming that what people in other countries want or need exactly matches the wants and
needs of American consumers.
Dilution of Brand-Name Power
Due to the Internet, movies and other forms of entertainment, American culture and the corporate
symbols of that culture--brand names--are well known across the globe. This does not mean the
American companies ’products will be popular when introduced in other countries.
Being aware of a brand name isn’t the same as preferring it. It can be a long and
expensive process to gain the trust of consumers who have used their own local
companies’ products for years or even generations. The American companies can be
perceived as attempting to take over the position long held by local companies, causing
resentment.
Cultural Nuance
Consumers are influenced to purchase products by marketing messages delivered through the
media, including print media such as magazines. Humor is often used in commercial messages to
get the consumer to pay attention. But what is considered extremely funny in one culture can be
perceived as confusing or insulting in another. To produce effective advertising requires more
than accurate translation of the message from one language to another. It requires a deep

19

understanding of the culture, customs, morals and even religious views that predominate in that
country. What motivates consumers to buy products varies from country to country.
Communication Style
Business executives from different countries can encounter several barriers to effective
communication besides obvious language differences. The traditional pace of business
negotiations can be different. Americans sometimes want to hurry negotiations along,
whereas in some other countries emphasis is placed on building relationships before a
business deal is seriously considered. Executives from other countries may place a higher
value on things such as facial expression instead of just the words that are being said.
Distance and Time
Even with technologies such as video conferencing, executives in other countries may prefer to
establish relationships on a personal level. For a smaller American company, this can mean a
significant investment in travel costs and having key executives out of the office for extended
periods. Time zone differences can make it difficult to coordinate projects where collaboration is
required. Executives on the West Coast of the U.S. are just getting to work in the morning when
their European counterparts are winding down for the day.
Finding Reliable Partners
American firms often establish relationships with distributors located in the countries whose
markets they are seeking to enter. They hire sales reps based in those countries. They may
engage local marketing and public relations firms to assist them. Because the American firm
might have no prior experience in that country, finding people who are trustworthy and
competent can be a challenge.

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21

ENTRY METHODS
Introduction
In todays global economy, what is the best way for a company to go global, go beyond its shores
and enter untested territories on foreign shores? What is the safest way? What is the most
profitable way? What is the most practical way? These are some of the questions every company
has to answer when it makes globalization as its goal. These are also the issues that every
company has to tackle when it puts its strategy to enter a new market.
In this article, we have short listed a few entry methods that are most often used. Along with
these strategies are the brief descriptions, the advantages and the disadvantages associated with
them. Entry methods or strategies can be broadly classified into two categories:
1) Strategic alliances
2) Standalone entries
In many cases, no company would like to share businesses or profits that it visualizes or expects
in any markets. Often, companies are forced to form strategic alliances while entering new
markets, or for that matter to continue servicing its current markets. This is the result of just one
cause inadequacy, inadequacy related to different resources required to successfully service the
markets and derive profits from it. Some of the important inadequacies that force a company to
consider or even welcome an alliance are:
Capital / capability to take risk
Knowledge/experience about technology
Knowledge/experience about the market
Knowledge/experience about the environment

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The nature of the strategic alliance usually depends on what complimentary resources the foreign
company is looking for in its local partner. Strategic alliances can be broken down into the
following types:
1) Joint Ventures
2) Contract Manufacturing
3) Licensing
4) Franchising
5) Exporting

Standalone entries are done by companies which perceive themselves to have adequate
capability in taking capital risk and are ready to gain the knowledge associated with the new
markets over time. Companies that enter new markets on their own have to realize and accept the
risk in not depending on others to gain experience about the new markets.

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Joint Venture
The term Joint Venture applies to those strategic alliances where there is equity participation
from both the foreign entrant and the local collaborator. The equity participation can be of
different ratios, ranging from a minority stake, equal stake to a controlling stake or a more
predominant majority stake. From the perspective of the foreign entrant,
A joint venture has the following advantages:
Decrease the capital risk involved.
Leverage the local companys facilities, in manufacturing,
distribution and retailing.
Leverage the local companys managerial capability in the local
environment.
Leverage the local companys contacts with the government to get green signals.
Many companies avoid having joint venture due to the complexity involved in coordinating
policies, decisions and execution with a different company. There are instances when companies
which have the ability to take the risk involved in entering a new market still enter into joint
venture. This is often a result of the policies laid out by governments in many emerging markets.
For example, China has a policy wherein foreign companies have to enter joint collaboration
with state owned companies to even set up shop there. As in India, the government has policies
which prevent foreign companies from having full ownership in certain industries. In such cases,
foreign companies end up having to enter into joint venture to take advantage of the low cost of
manufacturing and the large size of the markets. Still, the disadvantages or hurdles stay which a
foreign company has to deal with to make its venture successful.

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Some of disadvantages of joint venture are:

Difference in culture.
Difference in managerial styles.
Differences in the motivation behind the participation.
Communication problems.
Selection of the right partner.
Other than the above stated hurdles, there are also risks associated with entering in joint venture.
One of the risks is the complication at the time of exit, i.e. when a foreign entrant decides to
leave the market and hence, the joint venture. A very important aspect of an entry strategy is to
have an exit strategy also. The nature of this entry method often results in a very complicated
exit strategy and this is not even under the complete control of the foreign company. The second
major risk is associated with the safety of a companys intellectual property (IP). It is definitely
more difficult to control the access to ones technology when one is not the only entity in charge.
Furthermore, the theft of IP by the local partner is also an issue to deal with, especially in
countries rife with piracy, like China. This probably explains why the majority of companies
which enter markets where wholly owned subsidiaries are allowed, prefer that route over joint
venture.

Contract Manufacturing

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Contract manufacturing has a limited role as an entry strategy and is more often used as a
compliment to other entry strategies. It is used in conjunction with strategies like wholly owned
subsidiaries or franchising. Contract Manufacturing is also often used when a company enters a
new market and has an activity that is required but is not a core nor is proprietary in nature, like
the manufacturing of clothes, or simple goods like clothing irons and other consumer goods. In
most of the industries where contract manufacturing is resorted to, the core activities of the
company lie more in marketing and research and development rather than in manufacturing.
Below are the lists of advantages and disadvantages in resorting to contract manufacturing as an
entry method.
Advantages:
Less capital required.
Low managerial risk.
Focus on core activities.
Less complicated exit problems.
Less complicated division of responsibility.
Disadvantages:
Chance for a lack of control on certain product parameters.
Differences in quality standards.
Scalability of problems.
Selection of vendors.
A company that seeks to employ contract manufacturing as an entry method needs to carefully
select its contract manufactures/vendors. A wrong decision regarding the selection of a vendor
can result in a bull whip effect along its supply chain in its new market. Such an outcome could

26

result in a very negative initial experience for the companys customers as well as for the
company itself.

Licensing
Licensing is a common method of international market entry for companies with a distinctive
and legally protected asset, which is a key differentiating element in their
marketing offer. It involves a contractual arrangement whereby a company
licenses the rights to certain technological know-how, design, patents, trademarks
and intellectual property to a foreign company in return for royalties or other
kinds of payment. For example, Disney's mode of entry in Japan had been
licensing. 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.
Here are several conditions where licensing is favorable over other entry methods:
Import and investment barriers.
Legal protection possible in target environment.
Low sales potential in target country.
Large cultural distance.
Licensee lacks ability to become a competitor.
Licensing offers businesses many advantages, such as rapid entry into foreign markets and
virtually no capital requirements to establish manufacturing operations abroad. Returns are
usually realized more quickly than for manufacturing ventures. The other major advantage of
licensing is that, despite the low level of local involvement required of the international licensor,
the business is essentially local and is in the shape of the local business that holds the license. As
a result, import barriers such as regulation or tariffs do not apply.
27

On the other hand, the disadvantages of licensing are that control over use of assets may be lost
over manufacturing and marketing. The licensee usually has to obtain approval from the
international vendor for product design and specification. This is because the licensee is not a
representative of the international vendor and, compared to adistributor or franchisee, is much
more of an independent business that licenses only one specific and closely defined aspect of the
marketing offer. Perhaps, the most important disadvantage of licensing is to run the risk of
creating future local competitors. This is particularly true in technology businesses, in which a
design or process is licensed to a local business, thus revealing secrets, in the shape of
intellectual property that would otherwise not be available to that local business. In the worst
case scenario, the local licensee can end up breaking away from the international licensor and
quite deliberately stealing or imitating the technology. Even in a best case scenario, the local
licensee will certainly benefit from accelerated learning related to the technology or product
category. Participation in international markets via licensing is therefore best suited to firms with
a continuous stream of technological innovation because those corporations will be able to move
on to new products or services that retain a competitive advantage over imitator ex-licensees.
Licensing to a foreign company requires a carefully crafted licensing agreement. A great care
must be taken to protect trademarks and intellectual property. One way to help ensure that
intellectual property is protected is to secure proper patent and trademark registration. In the
interim before a patent is filed, a potential licensee will be asked to sign a confidentiality and
non-disclosure agreement barring the licensee from manufacturing the product itself, or having it
manufactured through third parties. Also, such agreements should not be in violation of laws in
the host country because rules on licensing vary from country to country.

Following are the main advantages and reasons to use an international licensing for
expanding internationally:
28

Obtain extra income for technical know-how and services

Reach new markets not accessible by export from existing facilities

Quickly expand without much risk and large capital investment

Pave the way for future investments in the market

Retain established markets closed by trade restrictions

Political risk is minimized as the licensee is usually 100% locally owned

Is highly attractive for companies that are new in international business.

On the other hand, international licensing is a foreign market entry mode that presents
some disadvantages and reasons why companies should not use it as:

Lower income than in other entry modes

Loss of control of the licensee manufacture and marketing operations and practices
leading to loss of quality

Risk of having the trademark and reputation ruined by an incompetent partner

The foreign partner can also become a competitor by selling its production in places
where the parental company is already in.

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Franchising
Franchising is one of the entry modes that has been widely used
as a rapid method of international expansion, most notably by
fast food chains, consumer service businesses such as hotel or
car rental, and business services. A franchise is an ongoing
business relationship where one party ('the franchisor') grants to another ('the franchisee') the
right to distribute goods or services using the franchisors brand and system in exchange for a
fee. Franchising enables rapid market expansion using the intellectual property of the franchisor,
and the capital and enthusiasm of a network of owner operators. More sophisticated franchise
arrangements specify a precise business format under which the franchisee is expected to carry
on business and ensuring a common customer experience throughout the network such as
McDonalds.
Some of the common, but not essential, features of franchised businesses are as follows:
Group purchasing arrangements.
An exclusive territory for each franchisee.
Group advertising programs.
Initial and ongoing training and support from the franchisor.
Assistance from the franchisor with equipment specification, site selection and premises fit-out
and signage.
Franchising is suitable for replication of a business model or format, such as a fast-food retail
format and menu. Since the business format and the operating models and guidelines are fixed,
franchising is limited in its ability to adapt, a key consideration in employing this entry mode
when entering new country-markets. There are two arguments to counter this. First, the major
franchisers are increasingly demonstrating an ability to adapt their offering to suit local tastes.
McDonalds, for example, is far from being a global seller of American-style burgers, but it
offers considerably different menus in different countries and even different regions of countries.
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In such cases, the format and perhaps the brand is internationally consistent, but certain
customer-facing elements such as service personnel or individual menu choices can be tailored to
local tastes. Secondly, it must be recognized that there are product-markets in which customer
tastes are quite similar across countries. It is also important to note that in such businesses, the
local service personnel are a vital differentiating factor, and these will obviously still be local in
orientation even if they operate within an internationally consistent business format.
Advantages of the international franchising mode:

Low political risk

Low cost

Allows simultaneous expansion into different regions of the world

Well selected partners bring financial investment as well as managerial capabilities to the
operation.

Disadvantages of franchising to the franchisor:

Maintaining control over franchisee may be difficult

Conflicts with franchisee are likely, including legal disputes

Preserving franchisor's image in the foreign market may be challenging

Requires monitoring and evaluating performance of franchisees, and providing ongoing

assistance

Franchisees may take advantage of acquired knowledge and become competitors in the
future

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Exporting
Exporting is one of the methods that organizations
can use to enter foreign markets. In this entry
method, products produced in one country are
marketed in another country through marketing and
distribution channels. Thus, it requires a significant
investment in marketing strategies. In reality, exporting is the most traditional and wellestablished form of operating in foreign markets.
It can be further categorized into direct or indirect export.
Direct Export: the organization uses an agent, distributor, or overseas subsidiary, or acts via a
Government agency. Usually, companies export through local agents or distributors mainly
because they have local knowledge that is important in conducting the business; they speak the
language, understand the local business, and know who the customers are and how to reach
them.
Indirect Export: products are exported through trading companies (common for commodities
like cotton and cocoa), export management companies, piggybacking and counter-trade. The
main advantage of indirect exporting is that the manufacturer/exporter does not need too much
expertise and can count on trading companies and/or export management companies knowledge.
In the counter-trade method there are two separate contracts involved, one for the delivery and
payment for the goods supplied and the other for the purchase and payment for the goods
imported. The seller, in fact, accepts products and services from the importing country in partial
or total payment for his exports. Thismethod is suited for situations where competition is low and
currency exchange is difficult.
Another option for exporters is to sell products direct to foreign end-users. This option does not
incur intermediary costs and exporters have higher control over price and profits. However, it is
more practical for markets where potential buyers are limited in number or easily identified and
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reached. Mail order sales and web-based B2C and B2B sales are the most common forms of
selling direct to end-users.
Additionally, there is a distinction from passive and aggressive exporters. The last relies heavily
in marketing strategies to build awareness and sell its products to foreign markets. In contrast,
passive exporters wait for foreign orders, basically not making additional efforts to generate
sales/export.
As an entry method, exporting has several advantages. Comparing to other methods, exporting is
fairly simple and with low costs/investments and risks. Consequently, it is usually the first entry
method used by organizations in order to obtain knowledge of the foreign market. According to
the exporting results, companies can further decide on entering the market using another method
such as acquisitions, joint ventures, licensing, etc. Other advantages of exporting are increased
utilization of the domestic plant, thus using idle capacity and reducing unit costs through
economies of scale. Exporting also helps in diversifying markets, which reduces the companys
exposure to domestic demand instability.
On the other hand, the disadvantages of exporting include high transport costs, trade barriers,
tariffs, and problems with local agents. In addition, exporters have lower control of distribution
and local agents, face the risk of exchange rate fluctuations, and
are subject to custom duties and taxes in the importing counties. Although exporting costs are
relatively low compared with the other entry methods, to enter and develop these markets
exporters usually incur costs to gain exposure, set up sales and distribution networks, and attract
customers. Furthermore, products might need to be modified or redesigned, including packaging,
in order to meet local requirements or customer preferences. Similarly, linguistic, demographic
and environmental differences demand special attention to ensure exporting success.

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Advantages of Direct Export

Control over selection of foreign markets and choice of foreign representative companies

Good information feedback from target market, developing better relationships with the
buyers

Better protection of trademarks, patents, goodwill, and other intangible property

Potentially greater sales, and therefore greater profit, than with indirect exporting.

Disadvantages of Direct Export

Higher start-up costs and higher risks as opposed to indirect exporting

Requires higher investments of time, resources and personnel and also organizational
changes

Greater information requirements

Longer time-to-market as opposed to indirect exporting.

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Wholly Owned Subsidiaries

Many organizations prefer to establish their presence in foreign markets with 100% ownership
through wholly owned subsidiaries. Under this method, organizations obtain greater control over
operations and higher profits since there is no ownership split agreement. However, such entry
method requires large investments and faces higher risks, especially in the political, legal and
economical arenas. There are two approaches for the wholly owned subsidiaries entry method;
one is through acquisition and the other through greenfield investments.
Greenfield investment means using funds to build an entirely new facility. Even though such
approach entails full control and no risk of cultural conflicts, its costs are extremely high, and
returns on investment are obtained in the long-run due to the extent of time required to build the
facility, start operations, and attain economies of scale and the experience-curve.
In contrast, acquisition allows organizations to get to the foreign market faster. Organizations
taking the acquisition approach use its funds to buy existing facilities and operations. This is
done by acquiring the equity of the firm that previously owned the facility.
Acquisition as an entry method is preferable in the following situations:
When speed of entry is important for the business success.
When barriers to entry (i.e. high economies of scale of local competitors) can be overcome by
acquisition of a firm in the industry targeted.
When the entering firm lacks competencies important in the new business area.
Since the organization buys an existing firm, it can take advantage of well- established brands
and existing economies of scale to increase its competitiveness in the new market. However, in
order to be successful, the organization must properly identify potential companies in the
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targeted market and conduct a thorough evaluation of the to-be acquired company. The
evaluation process should prevent the organization of overestimating the economic benefits of
the acquisition, as well as underestimating its costs. After the acquisition, the success depends on
how well the integration of both organizations is done. Synergy is essential in this case.
Three different rules of entry mode selection
The following introductions were based on the statement of Hollensen:[39]
1. Nave rule. The decision maker uses the same entry mode for all foreign markets. The
companies use this rule as the entry mode selection ignore the differences of individual
foreign markets. The performance of this selection could not be calculated, because it
highly depends on the luck of the manager.
2. Pragmatic rule. The decision maker uses a workable entry mode for each foreign market,
which means that the manager use different entry modes depend on the time stage or the
business stage. For example, as the first step to international business, companies tend to
use exporting.
3. Strategy rules. This approach means that the company systematically compared all of the
entry modes and evaluated the value before any choice is made. This approach is
common in large firms, because the research requires resources, capital and time. It is
rarely to see a small or medium-sized company use this approach.
Besides these three rules, managers have their own ways to select entry modes. If the company
could not generate a mature market research, the manager tend to choose the entry modes most
suitable for the industry or make decisions by intuition.

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6 Indian Companies Who Are Beating Foreign

Competitors

1. Micromax
37

Here're the ongoing battles where India is winning.

Indian budget smartphone maker Micromax leapfrogged South Korea's Samsung Electronics Co
Ltd to become the leading supplier in India's booming smartphone market for the first time in the
fourth quarter, research firm Canalys said. Micromax accounted for 22 percent of smartphone
sales in India, ahead of Samsung's 20%. In total, 21.6 million smartphones were sold in India in
the period, a 90% surge from a year earlier.
India, which has the world's second-highest number of mobile phone accounts after China, is the
third-biggest market by number of smartphones sold. Low-priced smartphones are the top sellers
in a country where many buyers are upgrading from feature phones

2. Haldiram

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Bhelpuri beats burgers

Just as comprehensively as farsan beats fries. Hadrians revenues, at Rs 3,500 crore, is more
than the combined revenue of Domino's (Rs 1,733 crore) and McDonald's (Rs 1,390 crore)
adding top lines of the two separate operations in India. Or take that popular two-minute snack,
Maggi, which netted a revenue of Rs 1,200 crore; Haldiram is almost three times bigger
These figures for 2015-16, the latest available in official records, when combined with the fact
that Haldiram's commands 40% of the Rs 5,500-crore traditional snacks business, conclusively
demonstrates one thing. Whether in fast food or munchies, and despite the profusion of MNC
brands with high cool quotient in both categories, good old-fashioned Indian offerings from
Haldiram's still dominate the market.

39

4. Royal Enfield

Chennai-based Royal Enfield (RE), which sold a shade over 3 lakh bikes in 2015, overtaking
Harley's global sales of 2.67 lakh units, now wants to capture the global market. When asked
whether he would like his products to be called the 'Harleys of India', Lal said: "I don't want to
be a clone."

40

4. Flipkart

Last year, e-commerce major Flipkart was on schedule to clock annual sales of $3 billion. Just
the Big Billion Day sale saw it register $100 million in sales as shoppers bought 20 lakh products
from the site. and they're already prepping for another such event that will be "many times
bigger". Amazon, while among India's leading e-commerce sites, is still seen as a newcomer in
comparison to established players like Flipkart and Myntra

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5. Titan Watches

Titan has 60% share of the total Indian market, and is also sold in about 32 countries.

42

6. Parle G

The glucose biscuit brand is the first Indian FMCG brand to cross the Rs 5,000-crore mark in
retail sales in a year. It is considered the world's biggest-selling biscuit by volume. According to
Nielsen Holdings, it's the world's largest selling brand of biscuits with about a 140 billion
biscuits sold per year.

CONCLUSION
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Companies in general prefer to enter International markets that rank high in attractiveness, low
market risk and where they can enjoy a competitive advantage. But as literature review reveals
the fact, that International marketing is a much wider concept and it differs from domestic
marketing. However core principal of marketing remains significantly satisfying global customer
need. In order to reach out to the customer need, organizations adopt strong efficient range of
entry strategies to meet the demand market place. Organizations with their incredible managerial
know-how and resource capabilities apply these business literature theories to explore the
markets. By and large these theories do assist firms a right approach and to certain extent
minimize the risk involved. But as analyzed earlier every strategy has its own loop holes,
advantages and disadvantages. Therefore it can be hypothesized that there is no perfect black and
white workable mode of strategy which can be accepted and implemented by an organisation to
secure success. franchising, which involved low investment and higher control over the
distributor. In 3rd example: Subway has always been using the Nave rule in contractual strategy
of only Franchising to expand internationally. Which involves higher exporting of in house
material and assets from America, and higher importing tax levied in foreign country. It can be
suggested that Subway can choose the investment mode such as acquisition of foreign local
sandwich factory possibly in any free trade zones and enjoy the tax free or low tax benefits on
their import and export activities.

BIBLIOGRAPHY
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 www.marketing-schools.org/
www.marketingteacher.com
www.reference.com
www.boundless.com
www.businessplannigeria.com
www.yourarticlelibrary.com
www.google.com
https://en.wikipedia.org

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