Beyond importing, international expansion is achieved through exporting, licensing arrangements, partnering and strategic alliances an international entry mode involving a contractual agreement between two or more enterprises stipulating that the involved. The study also recommends that the management to evaluate the factors to consider when choosing an entry strategy thoroughly so as to make sure they know the market very well and that the management to evaluate the factors influencing the choice of market entry modes. Choosing the best market entry strategy for emerging markets the key element of successfully entering a new region is choosing the best market entry strategy. Pdf international market entry strategies of emerging.
Heres how to enter a foreign market through licensing. A firm seeking to enter a foreign market must make an important strategic decision on which entry mode to use for that market. When importing or exporting services, it refers to establishing and managing contracts in a foreign country. Global market entry strategies explained wolters world. Market entry modes for international businesses chapter 7. Piggybacking as a method of international market entry. Beyond importing, international expansion is achieved through exporting, licensing arrangements, partnering and strategic alliances an international entry mode involving a contractual agreement between two or more enterprises. Evaluation of franchising as a mode of entry by analyzing.
May 29, 20 you should think of examples in different categories. There are a variety of entry modes for foreign markets, ranging from exporting to licensing, partnering to acquisition and franchising to a turnkeygreenfield solution. The choice of market entry strategy depends on the. Pdf market entry modes for international businesses. The keys to implementing a successful licensing strategy. Alternative marketentry strategies exporting contractual agreements strategic alliances, and direct foreign investment fdi import regulations may be imposed to protect health, conserve foreign exchange, serve as economic reprisals, protect home industry, or provide revenue in the. The intellectual property can include patented manufacturing processes, trademarked products, s and technical assistance. Licensing, investment, and strategic alliances global marketing chapter 9 91 global marketing schrage 9 trade barriers are falling around the world companies need to have a strategy to enter world markets starbucks has used direct ownership, licensing, and franchising for shops and products 92.
Market entry export entry contractual entry investment entry indirect direct export houses agents commission agent exporters agent abroadassemblycontract manufacturinglicensingfranchisingcoproduction agreementmanagement contract joint venture wholly owned subsidiary major minor 50. When considering international entry strategies, companies must consider three things. A theoretical approach to the methods introduction to. Microsoft word licensing is it a good strategy for expanding business overseas author. First, mature products in a domestic market might find new growth opportunities overseas. Heres a look at what licensing is and what are the benefits of licensing. Japanese firms in general aim at building market share rather than early profits. Market entry and growth 21 observations recommendations 1. It is a particularly useful strategy if the purchaser of the license has a relatively large market share in the market you want to enter. Here the licensor will grant an organisation in the foreign market a license to produce the product, use the brand name etc. Oct 28, 2019 when considering international entry strategies, companies must consider three things. Licensing is it a good strategy for expanding business overseas. The strategy should be based on establishing an agent, representative, or authorized distributor for products and services in mexico or opening a representative office.
Market entry mode strategies are influenced by both firm and country level factors and a firm must take into consideration these factors in choosing an appropriate entry mode. The four most common modes of foreign market entry are exporting,1 licensing, joint venture, and sole venture. The results from the interviews showed that finnish small and medium sized enterprises sme producing foodstuff products usually start their expansion into the south korean market through indirect export using a local importer. To conclude the term paper, the theory and the practical example is summarized in order to outline whether subway enters new markets efficiently and how franchising as a market entry mode influences the expansion of the company against the backdrop of the example. The purpose of this study is to describe factors that need to be considered when entering indian market. In this section, we will explore the traditional internationalexpansion entry modes.
Another less risky market entry method is licensing. From a licensee standpoint, there are fewer risks in product development, market testing, manufacturing, and distribution. Oct 25, 2012 global market entry strategies explained wolters world. Sales can be made directly between you and endusers, or they can be made through local sales representatives who promote your product andor service without taking ownership. A licence agreement can also provide a means for the licensor to gain rights in improvements, knowhow and related products that will be developed by the licensee during the term of the contract. There are many different opportunities for doing so, from foreign direct investment to indirect methods like using a distributor or licensing. The company licensed out the brand in order to protect against other companies launching cocacola branded products in other categories. Nov 19, 2014 question as you plan your international business growth strategy is the how to enter new markets. Entry strategies in global markets principles of marketing. Entering a new market is always a risky business, with a big potential of failure. Because all of these modes involve resource commitments.
Market entry export entry contractual entry investment entry indirect direct export houses agents commission agent exporters agent abroadassemblycontract manufacturing licensing franchisingcoproduction agreementmanagement contract joint venture wholly owned subsidiary major minor 50. From a licensor standpoint, there are fewer risks in the selling and service of what is being offered. After that the market entry into the chinese market and its challenges is explained. International market entry strategies of emerging market mnes. Generalizes on the best strategy to enter the market, e. Market entry strategies exporting indirect direct joint venturing licensing franchising contract manufacturing management contracting joint ownership direct investment assembly manufacturing amount of commitment, risk, control, profit potential. For coca cola, licensing started for brand protection. It then goes on to describe the different forms of entry strategy, both direct and indirect exporting and foreign production, and the advantages and disadvantages connected with each method. Exporting means sending goods produced in one country to sell them in another country.
A market entry strategy is the method in which an organization enters a new market. Data availability and reliability are important considerations for any market study into china. An organization willing to go internationalfaces 3 major issues. A business, which has developed a productservice with a trademark, patent or possibly trade secrets produce and sell the product or deliver the service. How to enter new marketscontractual modes of entry. It involves a company known as the licensor granting permission to a company in another country to use its intellectual property for a defined time period. The basic purpose is to gain a deep knowledge about the critical factors in selecting an optimal international market entry mode strategy to. Following on from our how to enterexport blog post we now turn our attention to common contractual modes of market entry and examples highlighting the pros and cons of each entry mode. In general, your strategy should be based on establishing an agent, representative, or authorized distributor for your products and services in mexico or opening a representative office. Licensing is a contractual arrangement whereby the firm, the licensor, offers proprietary assets to a foreign company, the licensee, in exchange for royalty fees. Licensing licensing is a contractual transaction where the firm the licensor offers some proprietary assets to foreign. Licensing is it a good strategy for expanding business. Foreign market entry strategy is an important strategic decision for international business units. The five common internationalexpansion entry modes.
Licensing is designed to reduce the risks involved in doing business for everyone involved. Busy tech quickly realizes that they have several options, each fit for a variety of business scenarios. Successful market entry into mexico is not entirely different from establishing sales channels in the united states. Licensing, investment, and strategic alliances 2011 pearson education, inc.
The government of israel encourages both joint ventures and licensing. Licensing is a transferrelated market entry strategy. You should think of examples in different categories. The chapter begins by looking at the concept of market entry strategies within the control of a chosen marketing mix. Sometimes low price is the result of predatory pricing strategy. For example, in a study of the international operations of service firms in the united.
The international market of education has changed during the last years, and in sweden we just had one big change when the introduction of tutoring fees was determined. You will need to identify the intellectual property that you will make available for licensing will. A market entry strategy is the planned method of delivering goods or services to a target market and distributing them there. The future growth of international business unit depends upon the right mode of entry into foreign market. When you sell directly to endusers, you eliminate the middlemen making it easier to customise your market entry strategy to reflect the market conditions you may face. International market entry strategies, organizational. Exporting is a lowrisk strategy that businesses find attractive for several reasons. By granting the licensee the right to market and distribute the product, the licensor can penetrate markets it could not otherwise hope to serve. The companies has seen the opportunity to broaden their market to the international market this has led to an increasing competition for the customers at almost all markets in the world. Market entry strategy indonesia market entry strategy generalizes on the best strategy to enter the market, e. Market entry strategy international trade administration.
Licensing is a great way to penetrate a new foreign market. To research the options of entry strategy can help in determine which strategy to use. Internationalization, market entry mode, south korean. The most common market entry strategies are outlined below. Sep, 2019 licensing is a great way to penetrate a new foreign market. This is a practice of temporarily selling at prices below cost with the. It can be a revenue in new markets but depends on good intellectual in the export. Question as you plan your international business growth strategy is the how to enter new markets. Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the use of a product or service to another firm. Israel market entry strategyisrael market entry strategy generalizes on the best strategy to enter the market, e.
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