Modes of global entry

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Information about Modes of global entry
Business & Mgmt

Published on March 15, 2014

Author: lsuryavanshi

Source: slideshare.net

Description

This presentation describes modes of entry in International Market for businesses. Various types of modes has been explained from International business expansion point of view.

Modes of Global Market entry Sub: International Marketing By- Lovekshitij Suryavanshi

3 Rules • A company aims to enter in foreign Market must have a concrete strategy • Naïve Rule – Company uses same entry mode for all foreign markets • Pragmatic rule - Company uses a workable entry mode for each market. These kinds of companies start with low risk entry modes. • Strategy Rule – Alternative decision modes are compared and evaluated before decision is made.

Types of Entry Mode - Export Mode • Products of company are manufactured in the domestic market or a third country and then transferred directly or indirectly to the host market. • While establishing export channels company decides role and functions. • Major Export Types - Indirect Export - Direct Export - Co-operativite Export

Indirect Export • Product Manufacturing company do not export products directly. • Domestic Export House or Trading Company export products manufactured by company. INDIA Company AManufacturer Export House / TC USA Host Company

Direct Export • Product Manufacturing company export products directly without any third party. • Involved in documentation, delivery, pricing etc. • Manages agents and distributers.

Co-operative Export • Two or more companies involve in collaborative agreements to produce products to export. • Small firms do not achieve sufficient scale economies in manufacturing because of size of local market or inadequacy of management. • E.g: Bulk export, research, joint manufacturing etc

Types of entry mode - Intermediate Entry Mode • No full ownership involved • Ownership shared between parent company and local partner • Types of Intermediate entry mode - Licensing - Franchising - Contract Manufacturing - Joint Ventures

Licensing • It is an arrangement wherein the licensor gives something of value to the licensee in exchange for certain performance and payments from the licensee. • A formal permission or right offered to a firm or agent located in host country to use a home firm’s proprietary technology resource in return for payment. • Another way for firm to establish local production in foreign markets without capital investment.

• Licensing may include - Patent for product or process - Technical advice and assistance - Marketing advice and assistance - Use of Trademark and name • E.g: GSK, biocon, Quick Heal

Franchising • An independent organization operates the business under the name of another company • Franchisee pays fee to the franchisor • Franchisee owns right to use trade marks, systems, operating function, employee training etc .

Types of Franchising • Product & Trade Name Franchising - Dealer use Trade Name & Trade Mark e.g: Dominos (Jubilant Food Works ) • Business Format Franchising - Franchisor transfer package - Package contains Trade marks/name, copyright, designs, patents, trade secret etc. e.g: Who Wants to be Millionaire -> KBC

• Advantages - low risk, low entry cost - Quick development in International Market - Precursor to FDI in foreign market • Disadvantages - High cost of creating international brand -Problem with local legislation - Risk of International reputation

Contract Manufacturing • Company do business in foreign market with responsibility for production to local firm • e.g: IKEA, Danone • Advantages: - low risk - no huge investment in foreign market - avoids transfer-pricing problems • Disadvantages - hard to find reliable manufacturer - contractor could become competitor - Quality control become difficult

Joint Venture • Two or more firms join together • Legally separate new business entity • Shared ownership e.g: Sistema Shyam TeleServices (MTS) Alcatel – Lucent Bharati Walmart • Advantages: - less costly than acquisitions - shared risk of failure • Disadvantages: - Large investments of resources - cultural differences may result in management differences

Types of Entry Mode - Hierarchical • Company completely owns & control foreign entry • Investment mode • New set-up in host country is fully own subsidiary by parent company. • 2 Types - Merger or Acquisition - Green Field

Merger or Acquisition • Domestic company merge with foreign company to enter in Int’l market • Domestic company may acquire/purchase foreign company • e.g: Nokia (Fin)- Siemens (Ger) data n/w & telecommunication division • Advantages: - Immediate grab of market share - Less time & quick to execute • Disadvantages: - tedious task (bankers, lawyers from both countries)

Green Field Strategy • Set-up operations in foreign market from zero • Purchase local property & man power • e.g.: Mercedes – Benz production in Pune Volkswagen India • Advantages: - Control of operations - No risk of loosing technical competence to competitor • Disadvantages: - Lengthy process from scratch - Pre research is time consuming

Thank You!! Email: lovesuryavanshi@gmail.com

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