...Foreign Market Entry Modes Expansion into foreign markets can be achieved via the following mechanisms: Exporting is the process of selling of goods and services produced in one country to other countries. There are two types of exporting: direct and indirect. Direct exports Direct exports represent the most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. Types Sales representatives Sales representatives represent foreign suppliers/manufacturers in their local markets for an established commission on sales. Provide support services to a manufacturer regarding local advertising, local sales presentations, customs clearance formalities, legal requirements. Manufacturers of highly technical services or products such as production machinery, benefit the most form sales representation. Importing distributors Importing distributors purchase product in their own right and resell it in their local markets to wholesalers, retailers, or both. Importing distributors are a good market entry strategy for products that are carried in inventory, such as toys, appliances, prepared food. Advantages • Control over selection of foreign markets and choice of foreign representative companies • Good information feedback from target market • Better...
Words: 533 - Pages: 3
...Foreign Market Entry Modes International Business and Institutions 1 Modes of Foreign Market Entry • • • • • Exporting Licensing/Franchising Management Focus: Tata Group: Foreign Entry Strategies pp.443-444 Joint Ventures Wholly Owned Subsidiaries Mergers & Acquisitions (M&A) 2 Exporting • Advantages – Avoids the substantial costs of establishing operations in the host country – Achieve experience curve and location economies • Disadvantages – High transportation costs, esp. for bulk products – Tariffs – Divided loyalties of local agents 3 Licensing • An arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specific period, in return, the licensor receives a royalty fee from the licensee. • Intangible property: patents, inventions, formulas, processes, designs, copyrights, and trademarks • Advantages – Licensing firm does not need to bear the development costs and risks – Make use of intangible property that a firm possesses that they do not want to develop itself 4 • Disadvantages – Does not give a firm tight control – Limits a firm’s ability to coordinate strategic moves across countries – Difficult to control its technological know-how— Opportunistic Behaviour of Licensee 5 Franchising • Similar to licensing, but franchising involves longer term commitment and insisting strict rules on licensees • Franchiser assists...
Words: 456 - Pages: 2
...M0414102 Foreign market entry modes 1. Exporting: Exporting is the process of selling of goods and services produced in one country to other countries. There are two types of exporting: direct and indirect. * Direct Exports The most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. The main characteristic of direct exports entry model is that there are no intermediaries. Advantages: * Control over selection of foreign markets and choice of foreign representative companies * Good information feedback from target market, developing better relationships with the buyers * Better protection of trademarks, patents, goodwill, and other intangible property * Potentially greater sales, and therefore greater profit, than with indirect exporting. Disadvantages: * Higher start-up costs and higher risks as opposed to indirect exporting * Requires higher investments of time, resources and personnel and also organizational changes * Greater information requirements * Longer time-to-market as opposed to indirect exporting * Indirect exports Indirect export is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign market. Types:...
Words: 1200 - Pages: 5
...Business and Global Barriers to Entry Caitlin Long Follow this and additional works at: http://commons.emich.edu/honors Recommended Citation Long, Caitlin, "U.S. Business and Global Barriers to Entry" (2009). Senior Honors Theses. Paper 167. This Open Access Senior Honors Thesis is brought to you for free and open access by the Honors College at DigitalCommons@EMU. It has been accepted for inclusion in Senior Honors Theses by an authorized administrator of DigitalCommons@EMU. For more information, please contact libir@emich.edu. U.S. Business and Global Barriers to Entry Abstract An exploratory view of barriers to entry in countries of significance to U.S. companies, this thesis provides a comprehensive overview of prevalent business strategies of U.S. trading partners as well as a forecast of their international business policies. Diverse macro-environmental variables, such as economy, culture, and regulations result in varying barriers to entry for U.S. based firms to conduct business in U.S trading partners’ countries. This thesis will determine how these macro-environmental factors foster or stunt growth and strategies governments employ to attract businesses. Degree Type Open Access Senior Honors Thesis Department Marketing First Advisor Harash Sachdev Keywords International trade, Foreign trade regulation, Investments, Foreign China, Investments, Foreign India, Investments, Foreign Hungary, United States Foreign economic relations Subject Categories ...
Words: 8533 - Pages: 35
...Running head: FOREIGN MARKET ENTRY AND DIVERSIFICATION Foreign Market Entry and Diversification Assignment #3 Corona Beer Strayer University BUS599016VA016-1116-001 Strategic Management August 7, 2011 Abstract This paper examines the trends in the global beer market. The paper will also examine the international expansions that were made through strategic partnerships with distributors in local markets. Foreign Market Entry and Diversification Assignment #3 Corona Beer Grupo Modelo’s corporate mission is, “To produce, distribute and sell quality beer, at a competitive price, optimizing resources and surpassing customer expectations, in order to contributeto the economic and social development of Mexico.” Corona Extra brand has become the fifth best selling beer worldwide and the number one imported beer in the United States. Corona is commonly served with a wedge of citrus fruit in the United States, Canada, Australia, and the United Kingdom. Today, Modelo products are available in more than one hundred and forty countries (http://findarticles.com/p/articles/mi_m0BEK/is_7_7/ai_55012912/). Identify and discuss the trends in the global beer markets. The world of beer is changing and evolving. The most interesting tend is happening in Germany. When most people think of beer they think of Germany. Beer production in Germany dropped 1.7% from 2009 to 2010. Beer consumption dropped 3% in Germany because many German consumers would drink coffee or...
Words: 1428 - Pages: 6
...ntry Foreign Market Entry and Diversification Question # 1-Create an argument for diversification of your business that will be presented to the board of directors or business investors. A diversified company is no longer a single-business enterprise. A diversified company is a collection of different and individual businesses. This collection of businesses, whether related or unrelated, will cause the strategy- making and decision-making tasks for these collection and/ or groups of businesses to be even more complicated, important, and crucial than ever before (Thompson, Strickland, & Gamble, 2010). There is a greater need for strategy and decision making because the diversified company is venturing out into other [outside] industries. "But in a diversified company, the strategy -making challenge involves assessing multiple industry environments and developing a set of business strategies, one for each industry arena in which the diversified company operates" (Thompson, et al., 2010, p. 239). For these reasons alone, there needs to be extensive research and knowledge done into the arenas of anticipated diversifications. Diversification is a very important and vital move for any business or company. A business must only know the need to diversify. It must also be aware of when to diversify. As stated by Arthur Thompson, A.J. Strickland, and John Gamble (2010): So long as a company has its hands full trying to capitalize on profitable growth opportunities...
Words: 3214 - Pages: 13
...Foreign market Entry and Diversification Dr. Sarita Wesley BUS 599- Strategic Management November 12, 2011 Global beer market trends Over the past decade, the global beer market has undergone a lot of change. Developments and improvements in the quality and appeal of beer brands have resulted in a strong organic growth in the beer category. Brewers have responded to the declining beer consumption trends in developed markets. The decline of beer consumption in developed markets is due to high unemployment rates, high fuel prices, and reduced consumer spending. Industry consolidation has continued and the four largest brewers-Anheuser-Busch InBev, SABMiller, Heineken, and Carlsberg- produce almost half of all industry volume and generate up to 70 percent of industry profits. The beer consumption in countries like Africa, Asia, and South American continue to rise. This is primarily driven by the growth in population and incomes. Improvements in beer quality and appearance have also lead to the rise of beer consumption. Consumers have begun to shift from informal and unregulated forms of alcohol to attractively branded and safer commercial beers. Modelo’s international expansion Grupo Modelo’s international expansion began with the United States. As Modelo continued to produce beer domestically, they entered into distribution contracts with companies that possessed local knowledge of the beer market and gave them the freedom to market the product appropriately, yet maintain...
Words: 1155 - Pages: 5
...Assignment 3: Foreign Market Entry and Diversification Strayer University BUS599 Create An Argument For Diversification Of Your Business That Will Be Presented To The Board Of Directors Or Business Investors. Diversification is going to be the key to the longevity of our label. Our smallest competitors, Simply Fashion and Cato, offer shoes and accessories; while our largest competitors, Lane Bryant and Avenue have begun to offer minimal exercise wear. “…diversifying entrants pose a bigger threat in increasing rivalry and challenging incumbents’ market share…” (Klein & Lien, 2009, p. 299). Right now, Lane Bryant is the leader in diversified product lines, although our competitors offer a variety of products in plus size fashion. Our company will improve on quality in order to become a threat to the competitors. If we do not diversify, we will quickly become irrelevant in the market, like our smaller competitors. If we plan to succeed and increase longevity we must diversify and improve upon what our competitors offer. Develop A Strategy For Diversification Indicating The Products And Industries For The Diversification And How Synergies May Be Gained From The Diversified Activity. As a way to increase popularity and customer base loyalty, marketing, research and development will work with designers and distributors on a costume accessories line for plus size women. Currently plus size women are hard pressed to find bracelets for the larger wrist, rings for...
Words: 1459 - Pages: 6
...Assignment 3: Foreign Market Entry and Diversification Sharon Temple Dr. Joseph Kurrie BUS 599 February 12, 2011 1. Identify and discuss the trends in the global beer markets. Most companies started out on a local or regional level and changed the company’s focus to incorporate a multinational or global perspective. The global beer market has gone through a process of rapid change. In many emerging and developing markets, economic and societal developments and transformative improvements in the quality and appeal of beer brands have resulted in strong organic growth in the beer category. Developed markets have also undergone change as brewers responded to constrained or declining beer consumptions trends. There are several trends in the global beer market that accounts for the potentials seen throughout the industry. One of the trends is growth rate. Surpassing the United States in 2003, China is dominating the global beer industry. The global beer industry approximated $385.5 in 2005 and $376.7 in 2004 and were expected to increase at a steady pace. This indicates a growth rate of 2.3% during the year 2005. The consumers demand for beer has been hampered by adverse global economic conditions in which the growth of the industry is at a slow recovery. Grupo Modelo with its Corona brand is the No. 1 premium imported beer in Canada and the growth rate continues to accelerate. Another global beer markets trends is consolidation. Consolidation would be considered...
Words: 1759 - Pages: 8
...j This paper will identify the trends in the global beer markets. A discussion on Modelo’s international expansion and its success with strategic partnerships will be performed. A review of the next foreign market that Modelo should enter and the accompanying strategy will be conducted. Additionally, given Modelo’s competitor, InBev, the strategic responses available to Modelo will be identified along with the opportunities and threats facing the firm. Finally, the paper will address whether or not Modelo should diversify its business and if so, what business should it consider and why. Industry trends, Domestic & Global The U.S. brewing industry has experienced considerable consolidation (Baker & Bresnahan, 1985; Elzinga & Swisher, 2005; Gisser, 1999) in response to the threats which the industry has experienced. In order to mitigate eroding market share: given the growth of beer imports, competition from specialty-craft brewers, a decline in sales of the leading domestic premium brands, and competition from new products and marketing methods, the leading breweries actively acquire successful micro-breweries and add its label to their portfolio of beverages (Aaker, 1996; Arens & Bovee, 1982; Belch & Belch, 2001; Elzinga, 2004). Similarly, the industry leaders utilize extensive advertising strategies to save market share and simultaneously attempt to alter their positioning and public perception (Assmus, Farley & Lehmann, 1984; Baker &...
Words: 1513 - Pages: 7
...Management * Major Elements Affecting International Business * International Business Environment * The international business environment can be defined as the environment in different sovereign countries, with factors exogenous to the home environment of the organization, which influences decision-making on resource use and capabilities. * It involves three environments such as domestic, foreign and international. * Domestic environment * composed of all the uncontrollable forces originating in the home country that influence the firm’s life and development. * Foreign environment * composed of all the uncontrollable forces originating outside the home country that influence the firm. * the kinds of forces are the same as those in the domestic environment but their values often differ and changes in the values of foreign forces are at time more difficult so assess. * International Environment * interactions between the domestic environmental forces and the foreign environmental forces AND * interactions between the foreign environmental forces of two countries when an affiliate in one country does business with customers in another. * The Forces: * environment: all the forces surrounding and influencing life and development of the firm; they can be external or internal * uncontrollable (external) forces: external forces over which management has no direct control, although it can exert an influence * controllable...
Words: 883 - Pages: 4
...report on Modes of Entry into Foreign Markets. Sir, It’s been pleasure for me to submit my report on “Modes of Entry into Foreign Market”. This report contains the structure and material as instructed by you. I have tried hard to do my best and fulfill your expectation. The assigned work and the information gathering process involved with it gave me access to the areas, which I didn’t know before. However it is needless to say that, there may be some mistake in my organization, presentation and style. In completing the report I have tried my best in imparting ever available details of the, “Modes of Entry into Foreign Market” avoiding unnecessary amplification of the report. Thanking you, Yours faithfully Md.RazibulMatin ID. No: 801414091 EMBA Program Department of International Business University Of Dhaka. Table of Content SL NO. | TOPIC NAME | PAGE NO | | Letter of Transmittal | 1 | | Executive summary | 3-4 | Chapter-1 | Introduction | | 1.1 | Problem of Modes of Foreign Markets Entry | 5-6 | 1.2 | Rationale for Modes of Foreign Markets Entry | 6 | 1.3 | Scope and Objectives of the study | 6-7 | 1.4 | Methodology of the Study | 7 | 1.5 | Limitation of The Study | 7 | Chapter-2 | Literature Review | 8 | Chapter-3 | Modes of Entry into Foreign Market | | 3.1 | Market entry strategy | 9 | 3.2 | Market Entry Modes | 10 | 3.2.1-3.2.7 | Different Markets Entry Modes | 11-16...
Words: 7614 - Pages: 31
...48 Foreign-Market Entry Strategies in the European Union Kyle Stiegert, Archie Amir Ardalan, and Thomas Marsh This study utilized intra-firm, socio-cultural, geographical-proximity, and political-stability variables to explain bimodal foreign direct investment (FDI) patterns by agri-food and beverage multinational companies into and within the European Union. A logit framework incorporated a unique-count database of firm-level investment patterns from 1987–1998. The results showed the 1992 structural changes under the Maastricht Treaty increased the probability of wholly owned FDI modes such as greenfields and buyouts. The model also found that past modal strategies of firms, language barriers, and exchange-rate volatility all correctly explained modal investment patterns. The results provide important contributions toward understanding modal investment strategies including the role of macroeconomic changes within a custom union. A popular way for a firm to secure a business presence in a foreign nation is through foreign direct investment (FDI) in production, marketing, and/or distribution facilities. Formally defined, FDI is an investment in which a multinational enterprise (MNE) acquires a substantial controlling interest in a foreign firm or in some other manner establishes fixed assets on foreign soil. Prior to 1970, multinational operations were often characterized as an exclusively American institution (Erdilek 1985). However, during the 1970s the U.S. shifted from...
Words: 7034 - Pages: 29
...The Strategic Decision of Foreign Market Entry by Service Firms Name Institution Table of Contents Abstract 4 Chapter One: Introduction 5 Research Question 9 CHAPTER 2 – Literature review 10 Literature review 10 Definition of Terms 11 Motives for Foreign Market Entry 11 External Forces 11 Internal Forces 13 Entry Modes 16 CHAPTER 3 – Methodology 17 The Research approach and hypothesis 18 Sampling 19 Procedure 21 Focus groups 21 Interviews 22 Analysis plan 22 Validity and reliability 24 Assumptions 25 Scope and Limitations 27 Chapter 5: Conclusion and Recommendations 32 References 36 Summary This research aims to study and clearly express why firms joins foreign markets. In addition, the paper also shows the whole process of entry. This is whereby firms have to make strategies before they join these foreign markets. The paper shows how firms can survive after they finally make this decision. To expound on this, it is of great importance that firms regularly explore and join foreign markets. This helps them with significant number of benefits, among them coping with stiff competition. In addition, firms gain more knowledge based on these strategies on the survival means in the new markets. This makes it important for firms to speculate on how to make entries to foreign markets. In addition, the paper expounds further on this whole procedure. Abstract This research paper aims to find out more about the operations of a service firm. This mostly...
Words: 11027 - Pages: 45
...“Assess the merits and demerits of international licensing as a mode of entry into new markets” Disney does not have to produce t-shirts, USB sticks and even waffles with Mickey Mouse’s happy face on it. Instead, it can license the right to use its famous character to different companies around the globe and enjoy the hefty royalties, which in 2010 totaled 28.6 billion dollars (Rorie, 2011). Does it then mean that licensing as a mode of entry into foreign markets is the best option available? Not necessarily so. Given a multitude of foreign market entry methods, all of them being used in practice in some contexts, it is crucial to determine under which circumstances licensing will pay off. The decision factors include the specifics of the foreign market; ownership, location and internalization advantages; resources and capabilities; and the general global strategy of a company. This essay will attempt to analyse what kind of environment would be favourable for the introduction of licensing and use this analysis as a context to assess the pros and cons of this mode of foreign market entry. It is useful to start with the detailed definition of the subject matter. According to Daniels, 2003, “under a licensing agreement, a company (the licensor) grants rights to intangible property to another company (the licensee) to use in a specified geographic area for a specified period in exchange for a fee” (called royalty). The “intangible property” might encompass patents, designs...
Words: 1896 - Pages: 8
