Foreign markets entry mode decision

Government Licensing Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance.

Foreign markets entry mode decision

Strategic Management About Elizabeth King I am an experienced educator and strategy consultant with a business management degree and a Master of Business Administration qualification from Oxford.

Foreign markets entry mode decision

I have taught business management and marketing subjects at universities and I have worked in the private sector as a management consultant helping clients to improve their business processes and grow their business.

I am passionate about research and the application of new knowledge to advance academic theories and business practice. My area of subject expertise includes: Critically discuss the various modes of entry for which an organisation can internationalise their operations.

Is there one mode that is preferred above others?

Foreign Market Entry Modes

Foreign market entry mode decisions are typically influenced by company and target market factors such as: Reasons for internationalising business operations Organisations engage in international business operations for various reasons including globalisation, saturation of home market, lower production costs in the host country, favourable foreign market environment and attractive foreign investment policies, with the ultimate goal of increasing profit, expansion and tackling competition.

Foreign Market Entry Modes The international business and marketing literature classify entry modes for international business operations into the following categories based on the risk-return trade-off, degree of control, and resource commitment: Non-equity foreign market entry modes Exporting: Exporting is the direct or indirect sale of goods and services produced in one country to other countries.

Exporting offers the lowest level of risk and the least market control. It is a non-equity method of international business operations and can be broadly classified into direct exporting, indirect exporting and cooperative exporting Wach, With direct exporting, the exporter makes direct contact with customers in the foreign market and has control over its product and distribution.

Types of direct exporting include: Forms of indirect exports include: Direct exporting and indirect exporting share similar characteristics as both offer relatively low cost and low risk entry modes Arnold, However, direct exporting may incur additional costs, for example, in the set up and operation of representative offices.

There is also the risk of low profitability and barriers to developing in-house local knowledge in indirect exports or when foreign agents are used in direct exporting Wach, Cooperative exporting is particularly favourable to small- and medium-sized firms because of the resource advantages and the accelerated access to markets it offers Wach, With an export consortium, members benefit from joint promotion of products and services and the cost of exporting is spread Wach, Contractual agreements are cooperative modes in which an organisation enters into a contract with foreign partners to deliver its operations abroad.

Examples include international licencing, franchising, subcontracting and assembly operations.

Foreign Market Entry Modes

In international licensing, the licensor enters into a contractual agreement with a foreign entity the licensee that gives the licensee rights to use the assets of the licensor Wach, The licensor typically possesses intangible assets such as technology, trademark, know-how, patents or other intellectual property that it makes available to the licensee.

Licensing is attractive to companies that are new to international business because it can be easily tailored to the needs of both parties.

It also provides entrance into new markets that are not accessible through exporting and it involves relatively low risk and low capital requirement Friesner, International franchising is another form of contractual agreement similar to licensing, in which the franchisor makes its business model or trademark available to the franchisee for the sale of its products or services.A Framework for Foreign Market Entry.

With the decision process of entry, the modes of entry, the internal and external factors governing the decision process and the risks associated well defined, we can now consolidate all this information in a framework which can then be used to formulate the entry decision process.

split, but the foreign market entry mode decision must also be made for each business activity that the entrant undertakes on behalf of the foreign market.

Previous research on the foreign market entry mode decision, however, has centered on the production and distribution functions (Buckley and Casson, ).

Foreign markets entry mode decision

Foreign Market Entry Modes. The decision of how to enter a foreign market can have a significant impact on the results. 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 .

A company well exposed to the dynamics of the international marketing environment would be at ease when making a decision regarding entering into international markets with a highly intensive mode of entry such as Joint ventures and wholly owned subsidiaries.

Entry Modes of Starbucks Tutor: Leif Linnskog Authors: Influential factors contributing to the entry mode decision can have different degrees of impact for each particular country. As a consequence, • Which entry mode strategies did Starbucks use in foreign markets and .

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CHOICE OF FOREIGN MARKET ENTRY MODE: IMPACT OF OWNERSHIP, LOCATION AND INTERNALIZATION FACTORS Sanjeev Agarwal* and Sridhar N. Ramaswami** Iowa State University Abstract. Firms interested in servicing foreign markets face a difficult decision with regards to the choice of an entry mode.

2 Factors Affecting the Selection of International Market Entry Mode