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International market entry modes

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International market entry modes

Published in: Leadership & Management

International market entry modes

  1. 1. Modes of International market entry or expansion Do not put all eggs in one basket. ― Warren Buffet
  2. 2. “Creative Crew” group identification Crew number Crew name ID # Crew 1 Rahat Ahmed Chowdhury 131-116-051 # Crew 2 Shufia Befum Shuly 131-116-066 # Crew 3 Koyray Alahe Tuhin 131-116-060 # Crew 4 Md. Abdul Matin 131-116-070 # Crew 5 Sonchita Rani Nath 131-116-054 # Crew 6 Sourov Badiya 131-116-259
  3. 3. Acknowledgment Preparing this assignment appeared to be a great experience to us. It added a lot to our knowledge. This assignment is one of our memorable experiences in student life. We also would like to give a lot of thanks to our honorable course teacher, Md. Saidur Rahman a.k.a Polash sir for giving us a wonderful opportunity to make such an interesting and valuable assignment and giving us a clear concept about the assignment.
  4. 4. International market entry  Once a firm has decided to establish itself in global market—it becomes necessary that the company studies and analyzes the various options available to enter the international markets and select the most suitable one.  In order to succeed in international markets, the decision to select an appropriate entry mode is a crucial and integral part of a firm’s international marketing strategy.
  5. 5. Why firms goes international??? Major reasons for firms going international are:  Profitability  Growth  Economies of scale  Access to resources  Marketing opportunities  USP of product & services
  6. 6. Modes of entry
  7. 7. Exporting Exporting is frequently employed mode of internationalization. It is one of the simplest and most common approaches adopted by firms in their endeavor to enter foreign markets. Simply we can define it as, “Exporting is marketing and sale of domestically produced goods in another country. “
  8. 8. Exporting classified Direct export: Producer sells directly to the importer. This mode gives the company a greater degree of control over its distribution channels. Indirect export: Indirect exporting is the process of exporting through domestically based export intermediaries.
  9. 9. Classification of export continues….. Intra corporate transfer: It is a process of exporting which includes, sale of goods by a firm in one country to an affiliated firm in another. Piggybacking: In piggybacking exports, overseas distribution channels of another firm are used by the company to make its product available in the overseas market. Exporting company know as ‘Rider’, uses a foreign company which has an established distribution network in foreign market, known as ‘Carrier’.
  10. 10. Pros & Cons of Exporting E x p o r t i n g Relatively low financial exposure Permit gradual market entry Acquire knowledge about local market Avoid restrictions on foreign investment Vulnerability to tariffs and NTBs Logistical complexities Potential conflicts with distributors
  11. 11. Providing offshore services A company of a country can provide offshore services to overseas clients with the help of information and telecommunication technology. Offshore services is similar to outsourcing. But offshore activities can’t be termed similar with outsourcing. Business sectors which provide opportunities for offshore services include: Insurance, Banking & Finance, Airlines, Telecom, Automotive, Transportation etc. ‘Gartner’ one of the world’s famous offshore power.
  12. 12. Offshore services The work is done overseas Outsourcing Someone else does the work for us V/ S Offshore services versus Outsourcing Operations decision Outsourcing? Off shoring? A UK based firm sets up its own call centre in Bangladesh to serve the UK customers No Yes A UK based firm hands over its payroll processing activities to a specialist supplier in Bangladesh Yes No
  13. 13. International Licensing Under a licensing agreement the licensor, leases the right to use its intellectual property—technology, work methods, patents, formulas, inventions, designs, copyrights, brand names, or trademarks—to licensee, in return for a fee.
  14. 14. Pros & Cons of International Licensing • Low financial risks • Low-cost way to assess market potential • Avoid tariffs, NTBs, restrictions on foreign investment • Licensee provides knowledge of local markets • Limited market opportunities/profits • Dependence on licensee • Potential conflicts with licensee • Possibility of creating future competitor
  15. 15. International Franchising Under franchising, an independent organization called the franchisee operates the business under the name of another company called the franchisor. Franchising is a form of Licensing but the Franchisor can exercise more control over the Franchisee as compared to that in Licensing
  16. 16. Pros & Cons of International Franchising Pros • Proven products & Services • Proven Trade Mark • Reduced Risk of Failure Cons • Does not provide experiential knowledge in foreign markets • High potential for opportunism • High monitoring costs
  17. 17. Licensing  Operations can be done by own way  Licensee has to pay royalty fee and it is comparatively low  Products are major source of concern  Life cycle: 15-20 years  Licensee enjoys substantial measure of fee negotiation  Licensor exercise less control over licensee FranchisingV/ S Licensing versus Franchising  Operations is done by following licensor’s rule  Franchisee has to pay management fee and it is very high  Covers all aspects of business including goodwill, trade marks, IPR etc  Life cycle: 5-10 years  Standard fee structure  Franchisor exerts greater control over franchisee
  18. 18. Turnkey project(B.O.T) A turnkey project is a contract under which a firm agrees to fully design, construct and equip a manufacturing/business/service facility and turn the project over to the purchaser when it is ready for operation, for remuneration The company hires a contractor in the desired country that they want to create an operation. At the completion of the contract, the foreign company gives the “key” to the project and it is ready for operation.
  19. 19. Pros & Cons of Turnkey project •Focus firm’s resources on its area of expertise •Avoid all long-term operational risks •Financial risks •Cost overruns •Construction risks •Problems with suppliers
  20. 20. Contract manufacturing Contract manufacturing is a process that establishes a working agreement between two companies. As part of the agreement, one company produces parts or other materials on behalf of their client. Simply it can be defined as the process of outsourcing entire or part of a company’s manufacturing operations. A number of global companies outsource their manufacturing activities to low-cost locations.
  21. 21. Pros & Cons of Contract manufacturing Low financial risks Minimize resources devoted to manufacturing Focus firm’s resources on other elements of the value chain Reduced control (may affect quality, delivery schedules, etc.) Reduce learning potential Potential public relations problems
  22. 22. Management contract A management contract is an agreement between two companies whereby one company provides managerial assistance, technical expertise and specialized services to the second company for a certain period of time in return for monetary compensation. Most management contracts provide for training of local personnel who will eventually take over the management responsibilities.
  23. 23. Pros & Cons of Management contract Pros • Focus firm’s resources on its area of contracts • Minimal financial exposure Cons • Potential returns limited by contract expertise • May unintentionally transfer proprietary knowledge and techniques to contractee
  24. 24. Specialized entry modes Management contract, Turnkey projects, & Contract manufacturing are known as specialized entry modes. Previously we have discussed about them. Now we will know: Why they are called specialized entry modes? These entry modes are called ‘special’ because the activities included on them contains short term investment, less litigation risks, less exposure to financial risks, compared to other sorts of entry modes
  25. 25. Thank You!!!
  26. 26. If You have any question

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