POSSIBLE ENTRY MODE NESIAGHO PATIENCE EKENE

2IBMS504701

Classification of market entry modesThere are different entry modes to enter the Netherlands Market . An important criteria is to check if the company engages in equity or non-equity entry modes. Nonequity entry modes often require less financial and organizational resources and capabilities of the organization than equity modes. Also, cost, commitment, risk, return, and control involved is often more limited than in case of equity entry modes .International companies abroad engages in different entry modes, and theyb are divided in four categories; export, contractual agreements, joint ventures and wholly owned subsidiaries. Each category has several subcategories.

Export Exporting can be defined as the marketing of goods produced in one country into another. The main factor of export entry modes is that a company’s product is manufactured outside the target country and subsequently exported to it. For instance,Wind cubes can can manufactured in a different country and supplied to the Netherlands.. It is essential to arrange export agreement with potential customers.Export is divided in two main types; direct export and indirect export.

DIRECT EXPORT-Direct exporting can be defined as selling goods and services directly to your potential customers, This could be Usi green energy selling wind cubes to potential customers in the Netherlands. Selling directly is used my companies to prevent other companies from taking part in the Margin, Although this act requires large commitment of financial resources , it takes times, need high contact and good customer relationship and good understanding of the market.

Advantages of conducting direct marketing is Companies having control over pricing, ability to identify good opportunities, companies have full control of its brand and consumers prefer dealing with companies directly than the producers.Disadvantages of direct marketing are:It takes alot of time, energy, money, and staff resourcesIt may also require local language capability , growth will be slower and distance from potential customers can affect effective marketing.High experience is required in other to solve the problems of how to turn opportunities abroad into profit.

INDIRECT EXPORT-Indirect Export is the selling of goods and services through an intermidiary, It is a relatively cheap and straight forward way of entering a new market. Intermediaries are known as agents or distributors, they are based in ones target export market they sell the products to end users. An example is When USI green energy contracts with Eneco as an agent(Intermidiary) to sell their wind cubes etc.Advantages of using intermidiaries is because of their IN-HOUSE experience, reputation and contact.. Using them can be a fast way of getting your goods and services to the end users , although they generally require alot of support from the overseas marketing.Disadvantages of Intermidiaries is that they take some margin from the profit, they have no direct contact with the end users, You will have less control over the last final transaction, you do not learn

about the foriegn market, which may slow down long tem expansion plans.

Contractual AgreementContractual entry modes are long term non equity agreements between an international company and an entity in a foreign target country that involve the transfer of technology or human skills. Contractual entry modes differ from export modes because they mainly transfer knowledge and skills, although they may also create export opportunities. Contractual entry modes include licensing/franchising, and co-marketing. For instance Usi green energy can establish a contractual aggrement with Eneco to supply wind cubes to them

NETWORKNetworking is very important before entering a new market inorder to know the rule of the game. Usi Green energy can create a network with with important energy suppliers in the Netherlands such as Eneco, Essent etc to overcome the hurdles of being a non-domestic firm. Networking can help to overcome the resource constraints and to be fitted directly into the demands of the foreign market.

Licensing/FranchisingLicensing is the practice of leasing a legally protected property , It is also the business arrangement in which the manufacturer (the licensor) of a product or a firm with proprietary rights over certain technology, trademarks, etcetera, grants Usi green energy can provide permission to another group or individual to manufactures of wind cubes in the Netherlands to make use of their proprietary materials) in return for specified royalties or other payment.Franchising is a specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business.

A disadvantage with theses forms of entry modes is that the licensors/franchisors can loose control over the use of their technology and brand.

JOINT VENTURE

Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control over property rights and operation . This occurs when two parties agree to create a new company together by contributing equity, so they share in profits, losses, and control of the enterprise. Joint venture can be used for a specified project only, or for a continuing business relationship. A joint venture can be divided in three principal forms; minority JVs, 50/50 JVs, and majority JVs. Joint ventures have many advantages. The parties share costs and risks and gain access to the partner’s knowledge about the host country. In return, the local firm benefits from the expertise in technology, capital and management.

BARRIERS OF POSSIBLE ENTRY MODESbarriers of possible entrance mode of a company can be created by internal and external factors.Internal factors are factors of the internal environment, which are controllable forces, variables, within the company. The external factors are part of the external environment,

which are uncontrollable forces outside the company.

The external factors consist of target country market factors, target country environmental factors, target country production factors and home country factors. Environmental factors also influence the country and production factors of the target country.

Target country production factors can be assesd by the factors materials, workforce, energy and economic infrastructure. Their quality, quantity and cost of the target country production factors obviously influence the choice of entry mode. barriers may arise from inadequate attention to such socio-cultural concerns, which include barriers related to behaviour; natural habitats and natural and human heritage

Costs and Pricing There have been lots of deliberation and arguments stating that green energy is more expensive, resulting in cost-driven decisions and policies that avoid renewable energy. In practice, a variety of factors can distort the comparison. it is widely accepted that a true comparison must be made on the basis of total “lifecycle” costs. Lifecycle costs account for initial capital costs, future fuel costs, future operation and maintenance costs.

Transaction costs Renewable energy projects are typically smaller than conventional energy projects. Projects may require additional information not readily available, or may require additional time or attention to financing or permitting because of unfamiliarity with the technologies or uncertainties over performance. For these reasons, the transaction costs of renewable energy projects—including resource assessment, siting, permitting, planning, developing project proposals, assembling financing packages, and negotiating power-purchase contracts with utilities

CERTIFICATIONIn the Netherlands, No certification has be enacted in the market place. World wildlife fund (WWF) does the verification and monitoring of green power products, it has not developed a formal procedure , because stake holders can not reach a formal concession on certification criteria. Due to increase in demand for green power and increasing reliance on foriegn-sources of green power, there may be growing need for national green power certification programme in The Netherlands, Recently, The gorvenment implemented a green certification trading system, which will serve as a means of verifying green energy transaction, alleviating the need for independent auditing and verification.

PUBLIC POLICY SUSTENTION FOR THE GREEN ENERGY MARKET

The huge success of the green energy market of the Netherlands is the facilitated public support measures of the gorvenment.The most important measure is the tax exemption measures for green energy transactions.The ECOTAX, which was introduced in 1997 , has helped in increased demand of green energy substantially , by exempting customers from paying tax, As a result, Green -power has become more cost-competitive with conventional power to the peak point whereby green energy is now cheaper, or as it is marketed today- is offered at the same price and yeilds healthy profit margins for the marketers.The Netherland government has been very supportive of the Green energy dur to Gorvenment

purchases, today, four federal ministries -Including the ministry of the Environment , economic affairs , Education and Foreign affairs -Purchases green energy to meet all their electrical needsas part of gorvenment strategy to achieve carbon neutrality.

STAND POINTGreen electricity in the Netherlands has been very succesful in comparison with other countries.With steady increase of green energy customers and the entrance of several new green marketers, it shows sign of continued growth. The challenges is the ability to meet growing demand of green energy, given that all exixting renewable energies has been sold> Due to the high population in the Netherlands, There are two main options to meet customer demands for green energy; Building offshore wind projects or increasing imports. As for imports, the new rules and regulations of the Netherlands gorvenment regarding issueing certificationfor qualified imports of green energy could lead to a system where Dutch green power customers support the development of new renewable projects in the countries.

REFERENCE LIST

1.Kenneth, E., Richard,C., Sanjit,S., Murray,S, (2001) Direct and Indirect export channel decision: Product and firm characteristics in the U.S wine industry,[Online]. Available at:http://online.sfsu.edu/castaldi/bie/abr.htm 9Accessed 16 Ocotober 2012)

2.Jansen, L.(2010) Market research towards Energy development in Europe. Essay MastersUniversity of Twente student thesis.

3.Sam, C. (2007) Developing an entry strategy for Cargospol. Bachelor Thesis Business Administration. University of Twente.

4.Jusuf, Z.(2011) ,Factors that influence entry mode choice in Foriegn market: European journal of social science, 22(4),pp.576-579