THARAKA DIASMBA(USA), BBA(USA), Dip in Mgt, ACIM(UK), FAEA(Dip in AEA-UK),

FinstSMM(UK), CPM(Asia), MSLIM, PM(Sri-Lanka) 1

Differentiate among market entry options—indirect exporting, direct exporting, licensing, franchising, contract manufacturing, assembly, and full-scale integrated manufacturing—and note the conditions under which each is an appropriate strategy.

Explain the role of export management companies, export agents, and export consortiums.

Note the ways in which the Internet has impacted international entry strategies employed by firms.

List the pros and cons of establishing wholly owned subsidiaries and the pros and cons of establishing joint ventures.

Compare and contrast technology-based, production-based, and distribution-based strategic alliances.

Explain when entering a market by acquisition is desirable. Define entry strategy configuration, bundling, and unbundling, and

explain their significance to market entry strategies. Explain why market exit—and possibly re-entry—strategies might be

necessary.2

Exporting as an entry strategy Indirect exporting, direct exporting

Foreign production as an entry strategy Licensing, franchising, local manufacturing

Ownership strategies Wholly owned subsidiaries, JVs, alliances

Entering markets through mergers and acquisitions

Portal or e-business entry strategies Entry strategy configuration Exit strategies

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Indirect - Reaching markets with the use of an intermediary located in the exporter’s home country+ Leverage intermediary’s expertise+ Good for firms with little international

experience- Less profit, less control, do not gain experience

curve effects

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Direct – Reaching markets either yourself or with the use of an intermediary located in the foreign market + More profit, greater control,

able to leverage experience curve effects

- Requires more expertise, management time, and financial resources

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Companies competing against each other in their domestic market may unite to address export markets Governments may encourage and

support cooperation▪ Brazil’s Ministry of Development, Industry, and

Foreign Trade create export consortiums to share logistical and promotion costs of entering foreign markets

SMEs may cooperate for export6

Firms may shift production to foreign markets Gain market position▪ Circumvent import restrictions, communicate

commitment to market Defend market position▪ Response to protectionism, currency fluctuations▪ Follow the customer

Save costs▪ Cheaper production factors, decrease transportation

costs, etc. Reduces currency risk as costs and revenue are

in the same currency7

Franchising – Special type of licensing where company makes total marketing plan available, including brand name, logo, products, and methods of operation.

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Contract Manufacturing – Company arranges to have its products manufactured by an independent local company on a contractual basis

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Other Options Assembly Full-Scale Integrated Production Manufacturing and Inter-firm

Licensing

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Wholly Owned Subsidiaries – Operations fully owned by a foreign parent firm (May involve marketing, assembly, or full-scale integrated production operations)

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Joint Ventures (JVs) – Foreign company invites an outside partner to share stock ownership in a new unit.

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Companies increasingly are entering markets with wholly owned subsidiaries and are buying out their foreign affiliates

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Strategic Alliances – an alliance involving two or more global firms in which each partner brings a particular skill or resource to relationship.

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Opening of financial markets has made acquisition of publicly traded firms much easier

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Through the use of web pages, email, file transfer, and related communication tools, firms have begun to enter markets without establishing a physical presence in the host country

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Circumstances may make companies want to leave a country or market Market Consolidation – rationalizing

overseas operations, abandoning particular markets

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Political Considerations – Political events may change the attractiveness and/or viability of the market

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Several of the markets left by international firms over the past decades have become attractive again, and some companies have reversed their exit decisions and entered those markets a second time

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