Académique Documents
Professionnel Documents
Culture Documents
Global Markets
Objectives
Understand different factors
influencing choice of particular mode
of entry into a global market
Describe various modes of entry into
international market
Internationalization
Decisions
How to Enter?(Entry mode selection)
Basic Entry
Decisions
Contd.
When to Enter those market?
-Are we the first ones to enter those
market; FIRST MOVER ADVANTAGE Grab larger share in market
Untapped market
Develop brand loyalty
Different modes of
entry to IB
EXPORTING
LICENSING/
CONTRACT
MANAGEMENT
TURNKEY
MERGERS
STRATEGIC
FOREIGN
DIRECT
CONTRACTS
AND
MANUFACTURING
ALLIANCE
FRANCHISING
CONTRACTING
ACQUITIONS
INVESTMENT(WITH ALLIANCES)
INDIRECT EXPORTS
EXPORTING
It is the marketing and direct sale of
domestically produced goods in
another country.
It is a traditional and most common
mode of entry.
Small firms with limited financial and
other resources find exports most
suitable form of expansion
DIRECT EXPORTING
It is selling the products in a foreign
country directly through its
distribution arrangements or through
a host countrys company.
Firm is directly involved in marketing
its products in foreign markets.
To implement direct exporting a firm
must have representations in foreign
market
direct exporting
includes:
Market Contact
Market Research
Physical Distribution
Export documentation
Pricing
INDIRECT
EXPORTING
Exporting
ADVANTAGES
DISADVANTAGES
LICENSING
LICENSING
Licensing may be attractive when
host countries restrict imports or FDI
or when the market is small.
LICENSING
LICENSING
ADVANTAGES
DISADVANTAGES
FRANCHISING
Franchising is a form of licensing.
Under franchising, an independent
organisation called the franchisee
operates the business under the
name of another company called the
franchisor.
Franchisor can exercise more control
over franchisee than licensing.
FRANCHISING
Under this agreement franchisee
pays a fee to the franchisor.
Franchisor provides following
services to the franchisee:
- Trademarks
- Operating systems
- Product reputations
FRANCHISING
ADVANTAGES
DISADVANTAGES
CONTRACT
MANUFACTURING
CONTRACT
MANUFACTURING
ADVANATGES
DISADVANTAGES
Small and medium industrial units Host country companies may not
in host country can also develop
strictly adhere to production
as most of production activities
design, quality, design problems
take in these units.
It reduces cost of production as
host country companies with their
relatives cost advantage produce
at low cost.
MANAGEMENT
CONTRACTS
It is an agreement between 2
companies, whereby one company
provides managerial assistance,
technical expertise and specialised
services to the second company of
the agreement for a certain agreed
period in return for monetary
compensation.
MANAGEMENT
CONTRACTS
MANAGEMENT
CONTRACTS
MANAGEMENT
CONTRACTS
ADVANATGES
DISADVANATGES
TURNKEY PROJECT
Turning the key when plant is fully
operational.
It is a contract under which a firm
agrees to fully design, construct and
equip a manufacturing/
business/service facility and turn the
project over to purchaser when it is
ready for operation for a
remuneration.
TURNKEY PROJECT
In this agreement seller provides a
ready to use facility to the buyer in a
foreign country.
In other words, seller firm constructs
a facility, starts operations, trains
local personnel, and then transfers
the facility to foreign owner.
TURNKEY PROJECT
Forms of remuneration- A fixed price(firm plans to implement
project below this price)
- Payment on cost+basis (total
cost+profit)
TURNKEY PROJECT
Recent approach to turnkey projects
is BOT(Build-Operate-Transfer)
Mega projects like International
turnkey project include nuclear
power plants, air ports, oil refinery,
national highways, railways lines.
They are large and multi year
projects
TURNKEY PROJECT
ADVANTAGES
DISADVANATGES
JOINT VENTURE
2 or more firms join together to
create a new business entity which is
legally separate from its parent
company
In this form of entry a firm enters
into a partnership agreement with
one or more local companies in the
target country or with firms either
from third country or home country.
JOINT VENTURE
Partnership agreement includes:
Sharing of equity
Market know how
Technology skills
An imp feature of this form is contracting
firm maintain their separate and
independent legal entities. This is
welcomed by countries where
restrictions on investment are imposed
JOINT VENTURE
ADVANTAGES
DISADVANTAGES
MERGERS AND
ACQUISITIONS
MERGERS AND
ACQUISITIONS
ADVANTAGES
DISADVANTAGES
STRATEGIC
ALLIANCE
Motive behind
strategic alliance
ADVANTAGES
STRATEGIC
ALLIANCE
DISADVANTAGES
COUNTER-TRADE
In this mode of entry, firms do away
with currency transactions. On the
contrary, they export certain items in
return of items imported (of same
value) from the same country.
COUNTER-TRADE
It can be any of the following forms:
Barter- goods exchanged for goods
Buyback- supplier of plant & machinery agrees
to buy goods manufactured with that P&M
Compensation deal- part payment in cash and
rest in products
Counter purchase- seller initially receives full
payment in cash, but agrees to spend an
amount in that country within the stipulated
time period.
COUNTER-TRADE
ADVANTAGES
DISADVANTAGES
FOREIGN DIRECT
INVESTMENT(FDI)
FOREIGN DIRECT
INVESTMENT(FDI)
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