Blog, Business. Exporting A strategy strongly favoured by the majority of SMEs and start-ups, exporting is regarded as low risk and allows rapid entry into a new market. There are 3 major market entry strategies: Indirect Exporting is when a company exports their goods and services indirectly using the services of agents, such as international distributors. We will write a custom Assessment on International Marketing: Market Entry Plan specifically for you. When choosing a foreign market entry strategy the firm must consider its goals and objectives, the degree of control they are after, the firm's resources and capabilities, and the risks they face by taking on a foreign venture. For example, export agents will take care of the physical and clerical tasks associated with exporting. Expanding into new markets puts extra demand on your existing production capabilities. In indirect exporting, instead of keeping the above-mentioned activities in-house, you partner with other intermediary businesses that specialise in the export field. 2. Having a subsidiary may be important for a variety of tax and tariff reasons. The French, the Spanish, the Portuguese, and German like beer with their burgers and are welcome to have some in their local McDonalds. In addition, Mexican consumers were far less nutritionally aware than their northern counterparts, who encountered extensive nutritional information on all food products by law (Arnold 2003). 1. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); Translate your documents, books, and websites immediately. Was this article helpful? Choose skilled expert on your subject and get original paper with free plagiarism The advantage these subsidiaries bring is that the company image can be projected in whatever ways the company intends to. . However, you will require careful preparation andadequate financing, as well as capable staff to handle the increased demands put upon your organisation. Creating a daughter firm in this manner can be a very costly endeavour particularly in a foreign market but it is often preferable in sensitive sectors where you need highly-skilled staff and close attention to clients. In countries that do not have the technical and engineering expertise for such projects, overseas contractors are usually given preference. The parties share profits, risks and assets. Market Structure and Entry Strategy It is one of the contributions of this paper to introduce market structure issues into the modelling of . The important thing is that, however you choose to access your potential new customer base, you choose your destination wisely and ensure that you are operating on a sound legal and regulatory basis. Entering foreign market has many advantages including earning foreign currency, achieving economy of scale, gaining global customers, and distributing risks. Article. The licensor can enter the foreign market with little to no capital overlay. Expansion into foreign markets can be achieved via the following four mechanisms: Exporting Licensing Joint Venture Direct Investment Exporting Exporting is the marketing and direct sale of domestically-produced goods in another country. Market entry strategies provide a framework to address: International trade agreements, tariffs, and barriers for physical products. 2. Market Entry Strategies range from direct exporting to wholly owned production facilities based in that foreign market. Another reason may be to preserve the brand and identity of the firm. The franchiser maintains a considerable degree of control over the operations and processes used by the franchisee (unlike a licensor) but also helps with things like branding and marketing support that aid the franchise. match. Market entry strategy is the planned expansion into a new market, typically meaning a city, state or province, nation, or even continent. This basically means that in terms of market entry strategies, even though the agency has a significant influence on . Others reach a bigger consumer base by establishing their brand internationally, with branches abroad serving in the foreign country. The first step is to decide on what you want to achieve with your exporting project and some basics about how you'll do so. The study researches factors that have influenced the choice of market entry modes for Multinational corporations in China's automobile industry. assume youre on board with our, A Study on Market Potential of Jotun Paints, https://graduateway.com/foreign-market-entry-strategies/, David Arnold 2003 strategies for entering and developing international markets, S. Schifferes Cracking chinas car market BBC news 2007. 8 International Market Entry Strategies: How to Enter a Foreign Market Learn how to set your company up for success internationally by leveraging the eight most effective foreign market entry strategies. The licensor can receive payments from the licensee in various forms: Licensing is an interestingmarket entry strategy for both parties. Multinational enterprises invest overseas to expand their profit amongst several other reasons. Direct exports are a popular way of launching a product in a foreign country. As domestic markets mature and competitive activity intensifies, foreign business expansion is becoming an increasingly important component of most business enterprises across the world (Miller, 1998). International expansion requires relevant preparation. As distributors take the credit risk, they might be reluctant to test the waters for new products. In both cases, instead of marketing your business directly to consumers, you market it to current and prospective business owners. If you decide to go with a partner, JMC can help you during . There can be also difficulty communicating complex, subtle technologies from one language to another, or across cultures. An unfamiliar or politically volatile market may discourage a firm from entering a new market on its own, licensing budges that risk onto the licensee just like franchising too. This essay was written by a fellow student. The disadvantages of exporting include high transportation costs, exchange rate fluctuations, and possible tariffs placed on imports into the local country. In general, Indirect Exporting is cheap, but it doesnt grant the company any control over their international expansion, while Direct Exporting gives greater control, but the cost and risk to take consideration is significantly higher. There are several ways by which a firm can expand its horizons. This means that you will need to add app localization into the equation, as it will be a crucial factor for your success online. Direct Exporting. Exporting is one way to diversify the consumer base; there are 5 more ways to enter a foreign market when exporting is not as attractive. We use cookies to give you the best experience possible. These approaches are fairly low-risk and often don't require a large investment in setting up legal entities and offices in the country you are targeting. These all fall under the umbrella of Export Houses. Based on these main foreign market entry modes, Driscoll (1995) also analyzed characteristics of these modes following five assessment . I will be comparing these in my essay and will provide some real-world examples. GM entered China in 1997, forming a joint venture with the state-owned Shanghai Automotive Industry Corporation (SAIC). This limits future overseas expansion. Theres no right and wrong strategies. Export Merchants profit comes from the difference between their buying and selling price. This process can be a bit tricky, so you should definitely invest time and resources in developing the right localization strategy for your business. us: [emailprotected]. Exporting is a traditional and well-established method of reaching foreign markets. Even if they happen to find one, the piggyback partner still wont put the product on the top of their priority list. Exporting is a low-risk strategy that businesses find attractive for several reasons. Joint ventures involve the establishment of a firm that is jointly owned by two or more otherwise independent firms. One of the most popular international market entry strategies is the franchising process. Designing the International Marketing Plan 171 The International Marketing Plan 171 Segmenting the Target Country Market 175 Pricing for International Market Entry 179 Deciding on an International Promotion Strategy 187 A Note to the Reader 198 Summary 198. You may refer to cases discussed in seminars and also provide new examples. Here are five tried and tested market entry strategies for businesses looking at overseas expansion. We've discussed four common market entry strategies for your global expansion and the key benefits of all four is that they can help you achieve business growth - so choose the strategy that will suit your business best when growing global. There are many choices or alternatives or scenarios for market entry. The risk here is passed on to the buyer of the operation and is common with chemical and pharmaceutical companies. As these companies deal with many firms at the same time, they have the advantage of economies of scale in management and transportation costs. Download Citation | On Aug 28, 2015, Kenneth Shaw published Foreign Market Entry Strategies | Find, read and cite all the research you need on ResearchGate. For the exporter, piggybacking is a low-risk, simple foreign market entry strategy. Some strategies are more risk-averse than others, it all depends on what product is on offer and if the world wants to buy it. In franchising, you allow foreign business owners to open their own branches of your business, called franchises. This is a form of licensing in which the franchisor sells intangible property and requires the franchisee agree to abide by strict contract rules as to how it does business. Feel free to share your thoughts and experience on international expansion in the comment section. If you have a viable product and strong demand in a foreign market for that product, anything is possible. Get original paper in 3 hours and nail the task. Overseas Subsidiaries is a great market entry strategy if suitable agents are not available, or hard to find. The exporter might have a hard time find a suitable piggyback partner. The Phrase Localization Suite brings all of your translatable materials into one place, making it easy for translators, proofreaders, project managers, and others to collaborate on them. Keep in mind, however, that not all of these options will be viable for every business and every market. We provide excellent language services for those in need at a competitive price., You can follow pTranslate on Facebook and Linkedin, difficulty communicating complex, subtle technologies from one language to another, or across cultures, Website and Software Localization Service, The Art Of Translating Financial Statements, 5 Reasons You Should Localize Your eLearning Content, 9 Strategies for Marketing International Brands to Chinese Customers, The marketing, distribution, and service cost is high, and the overseas partner can carry this cost for the domestic partner, The products complement each other, which gives the foreign partner a competitive edge in the foreign market, while the exporter can still sell their goods effectively, The marketing requirements are sophisticated, and the exporter doesnt have strong experience in the field, Overseas customers have a need for the products that the exporter has, There is an opportunity for lowering unit distribution cost, That foreign market offers decent-quality, low-cost labor. Explore how bad translation can damage a global business and how you can avoid making the same mistakes when addressing international markets. Licensing is similar to franchising, but its better suited to product-oriented businesses. An International Trading Company (ITC) is a large-scale manufacturer and merchant that are involved in wholesale and retail distribution. Similar to Contract Manufacturing, Licensing gives away your companys trade secret and creates a future competitor. Foreign Market Assembly is more labor-intensive than capital-intensive. It enables a firm to reach a potentially large number of new clients and substantially expand However, it is not always easy to find a manufacturer that meets the technical standards that the firm requires, especially high-tech or engineering firms with complex manufacturing processes. It also may not work in all business sectors due to lower profit margins, while you are essentially putting faith in your franchisees (whose failures can and will reflect poorly on your brand). These licenses are usually non-exclusive, which means they can be sold to multiple competing companies serving the same market. There are many approaches to export indirectly, including Export Houses, Export Management Company, International Trading Company, and Piggybacking. The licensor (or the exporter) grants a license to the licensee (or the foreign company). utilized in an examination of foreign market entry by Bakema, Bell and Pennings (1996), and a "cultural learn-ing process" is invoked by Benito and Gripsrud (1994) to help explain the expansion of FDI. Credit card payments collected by DeltaQuest Media (Ireland) Ltd, Company No IE548227, Registered address: The Black Church, St. Marys Place, Dublin 7, Ireland. For example, if you want to sell to Japan, you get your product into the appropriate Japanese stores and see how it does. Understanding government regulations and legal requirements when operating in a new country. The foreign distributor generally provides support and service for the product, thus relieving the manufacturer of these responsibilities. Licensing: This kind of arrangement occurs when "a licensor grants the . At one end of the scale you have strategic alliances, which can be as simple as a temporary collaboration between two companies, at the other there are mergers (two companies joining forces permanently . Moreover, the export merchants sometimes take on too many products at a time, and if unfortunately, your companys products may be ignored when there are more profitable options to the merchants. Adapting to local market taste/culture is not always easy. This method has several advantages; it is a very inexpensive way of entering a foreign market, as the brunt of the investment is borne by the franchisee. There two types of exporting, the direct and indirect exporting. When looking at international market entry strategies, you need to think about how you will market your products or services, your sourcing intentions, and what level of control you will have over your foreign operations. There are plenty of advantages to buying an existing company in a foreign country: among other benefits, your purchase comes with a share of the market, a brand, a customer base, and employees. The agent can even guide the company through the complexities of entering their market. Franchising is a particular form of licensing. Keep reading to find out more about the major modes of entry into a foreign market and how to tackle any potential challenges. Acquiring a Japanese company. The downside is that other businesses already control a share of the market. of these new technologies and the changing global business environment to understand how relational approaches to international market entry (IME) are changing in light of macro developments.