This document discusses various strategies for entering global markets. It begins by defining a global entry strategy and identifying key considerations such as target markets, goals, and entry modes. It then covers major issues in global entry like political risks. Different rules for selecting entry modes are presented, including naive, pragmatic, and strategic rules. Benefits of going global such as new revenue streams and talent pools are outlined. Finally, factors affecting entry mode selection, examples of modes like exporting, and their advantages/disadvantages are summarized.
International Marketing Management - IntroductionSOMASUNDARAM T
Definition; scope and challenges; difference between international marketing and domestic marketing; the dynamic environment of international trade; transition from domestic to international markets orientation of management and companies; international marketing environment.
International Marketing Management - IntroductionSOMASUNDARAM T
Definition; scope and challenges; difference between international marketing and domestic marketing; the dynamic environment of international trade; transition from domestic to international markets orientation of management and companies; international marketing environment.
INTERNATIONAL BUSINESS, DIVERSIFICATION, COUNTRY SELECTION AND EVALUATION, STEPS REQUIRED IN COUNTRY SELECTION AND EVALUATION, TYPES OF RISKS, COUNTRY COMPARISON TOOLS, NON COMPARATIVE DECISION MAKING, CASE STUDY of Ford
Concept of international business environmentPinki Verma
Presentation on Concept of International Business Environment which includes:
1. Difference between International Business and International Business Environment
2.Difference between Domestic Business and International Business
3.Entry Modes of International Business
4.Nature of International Business
5.Advantages of International Business
6.Classification Of International Business Environment
(a) Micro and Macro Environment
(b) Domestic, Foreign and Global Environment
7.Components Of International Business Environment with examples.
To watch more ppt follow our channel.
Country evaluation and selection - International Business - Manu Melwin Joymanumelwin
Because companies lack the resources to take advantage of all international opportunities they identify, they must determine both the order of country entry as well as the rates of resource allocation across countries.
INTERNATIONAL BUSINESS, DIVERSIFICATION, COUNTRY SELECTION AND EVALUATION, STEPS REQUIRED IN COUNTRY SELECTION AND EVALUATION, TYPES OF RISKS, COUNTRY COMPARISON TOOLS, NON COMPARATIVE DECISION MAKING, CASE STUDY of Ford
Concept of international business environmentPinki Verma
Presentation on Concept of International Business Environment which includes:
1. Difference between International Business and International Business Environment
2.Difference between Domestic Business and International Business
3.Entry Modes of International Business
4.Nature of International Business
5.Advantages of International Business
6.Classification Of International Business Environment
(a) Micro and Macro Environment
(b) Domestic, Foreign and Global Environment
7.Components Of International Business Environment with examples.
To watch more ppt follow our channel.
Country evaluation and selection - International Business - Manu Melwin Joymanumelwin
Because companies lack the resources to take advantage of all international opportunities they identify, they must determine both the order of country entry as well as the rates of resource allocation across countries.
Going international is risky. Selecting the adapted foreign market-entry mode may balance those risks. It is therefore a key success factor for SMEs international business development. Some tips to select the right market-entry mode.
The market-entry technique that offers the lowest level of risk and the least market control is indirect export, in which products are carried abroad by others. The firm is not engaging in international marketing and no special activity is carried on within the firm; the sale is handled like domestic sales
With export entry modes a firm’s products are manufactured in the domestic market or a third country and then transferred either directly or indirectly to the host market. Export is the most common mode for initial entry into international markets. Sometimes an unsolicited order is received from a buyer in a foreign country, or a domestic customer expands internationally and places an order for its international operations. This prompts the firm to consider international markets and to investigate their growth potential.
Exporting is thus typically used in initial entry and gradually evolves towards foreign-based operations. In some cases where there are substantial scale economies or a limited number of buyers in the market worldwide (e.g. for aerospace), production may be concentrated in a single or a limited number of locations, and the goods then exported to other markets.
Exporting can be organized in a variety of ways, depending on the number and type of intermediaries. As in the case of wholesaling, export and import agents vary considerably in the range of functions performed. Some, such as export management companies, are the equivalent of full-service wholesalers and perform all functions relating to export. Others are highly specialized and handle only freight forwarding, billing or clearing goods through customs.
In establishing export channels a firm has to decide which functions will be the responsibility of external agents and which will be handled by the firm itself.While export channels may take many different forms, for the purposes of simplicity three major types may be identified: indirect, direct and cooperative export marketing groups.
Global Marketing
Svend Hollensen
Fifth Edition
A decision-oriented approach
International Business Dynamics module 2 by Nagarjun ReddyPNagarjunReddyReddy
Complete detail of Second Module International Business Dynamics contents, Globalization – Supporting Institutions in International Conflict Resolution
This ppt will be helpful for BBA AND MBA students for their exam and interviews. Also helpful for those who are teaching this international business for MBA students . This is explaining the meaning and scope of international business and approaches to international business in the current period . This is also explaining the performance of Global business and controlling of international business . Different forms of international business and performance evaluation system
Global business
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
According to TechSci Research report, “India Orthopedic Devices Market -Industry Size, Share, Trends, Competition Forecast & Opportunities, 2030”, the India Orthopedic Devices Market stood at USD 1,280.54 Million in 2024 and is anticipated to grow with a CAGR of 7.84% in the forecast period, 2026-2030F. The India Orthopedic Devices Market is being driven by several factors. The most prominent ones include an increase in the elderly population, who are more prone to orthopedic conditions such as osteoporosis and arthritis. Moreover, the rise in sports injuries and road accidents are also contributing to the demand for orthopedic devices. Advances in technology and the introduction of innovative implants and prosthetics have further propelled the market growth. Additionally, government initiatives aimed at improving healthcare infrastructure and the increasing prevalence of lifestyle diseases have led to an upward trend in orthopedic surgeries, thereby fueling the market demand for these devices.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
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1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
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CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
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HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
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The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
2. Content
Global Entry Strategy
Major Issues In Global Entry
Political Issues
Rules Of Entry Mode Selection
Benefits Of Going Global
Factors Affecting Modes Of Entry
Global Market Entry Strategy
2GROUP NO.7
3. Global Entry Strategy
A Global Entry Strategy is the planned method of delivering goods or services to a
new target market and distributing them there. When importing or exporting services,
it refers to establishing and managing contracts in a foreign country.
The need for a solid market entry decision is an integral part of a global market entry
strategy.
Entry decisions will heavily influence the firm’s other marketing-mix decisions.
3GROUP NO.7
4. Major Issues In Going Global
Global marketers have to make a multitude of decisions regarding the entry mode
which may include:
(1) the target product/market
(2) the goals of the target markets
(3) the mode of entry
(4) The time of entry
(5) A marketing-mix plan
(6) A control system to check the performance in the entered market
4GROUP NO.7
5. Political Issues
GROUP NO.7 5
Political Issues
Political issues will be faced mostly by the companies who want to enter a country
that with unsustainable political environment
A political decisions will affect the business environment in a country and affect the
profitability of the business in the country
Organizations with investments in such opaque countries as Zimbabwe, Myanmar,
and Vietnam have long-term experiences about how the political risk affects their
business behaviors
7. GROUP NO.7 7
There are three different rules of entry based on the statement of Hollensen
1. Naïve rule
2. Pragmatic rule
3. Strategy rules
Besides these three rules, managers have their own ways to select entry modes
If the company could not generate a mature market research, the manager tend to
choose the entry modes most suitable for the industry or make decisions by intuition
Rules Of Entry Mode Selection
8. GROUP NO.7 8
1. Naïve rule
The decision maker uses the same entry mode for all foreign markets
The companies use this rule as the entry mode selection ignore the differences of
individual foreign markets
The performance of this selection could not be calculated, because it highly depends
on the luck of the manager
Contd.
9. GROUP NO.7 9
2. Pragmatic rule
The decision maker uses a workable entry mode for each foreign market
which means that the manager use different entry modes depend on the time stage
or the business stage
For example, as the first step to international business, companies tend to use
exporting
Contd.
10. Contd.
GROUP NO.7 10
3. Strategy rules
This approach means that the company systematically compared all of the entry
modes and evaluated the value before any choice is made
This approach is common in large firms, because the research requires resources,
capital and time
It is rarely to see a small or medium-sized company use this approach
Contd.
11. Benefits Of Going Global
More Revenue Streams
A primary motive to become global is to
gain access to new sources of revenue.
Companies that have saturated their
local markets and dried up growth
opportunities close to home can turn to
global expansion to grow their business.
Successful navigation in multiple
national markets provides a much
broader customer base from which you
can generate business.
Resources and Supplies
Global companies can use capital raised in
other markets for further marketing
and expansion. Plus, global companies
also gain access to new materials and
resources and have the ability to form
strategic alliances around the globe.
This leads to synergy as new
relationships and suppliers are used to
strengthen the global brand.
11GROUP NO.7
12. Contd.
Market Development
Globalization also provides business some
level of insulation from slumping
performance in one country or region.
In essence, global customer diversity
spreads business risks across a broader
customer base. This means that if the
economy, supply issues, environment or
government regulations in one country
negatively affect the business, it can still
find success in other countries.
Larger Talent Pool
While creating a strong global work
culture is difficult, global companies
have access to a much greater pool of
talent. Many set up global work
teams where marketing or human
resources employees can collaborate
with colleagues virtually throughout
the company. Having diverse
employees who can interact well
with diverse populations and
business partners is also an
advantage.
12GROUP NO.7
Contd.
13. Factors Affecting Modes Of Entry
External Factors:
1. Market Size: An international marketer has to keep in mind when selecting an entry
mode. Countries with a large market size justify the modes of entry with long-term
commitment requiring higher level of investment
2. Market Growth: Most of the large, established markets, such as the US, Europe, and
Japan, has more or less reached a point of saturation for consumer goods such as
automobiles, consumer electronics. Therefore, the growth of markets in these countries
is showing a declining trend
3. Government Regulations: The selection of a market entry mode is to a great extent
affected by the legislative framework of the overseas market. The governments of most
of the Gulf countries have made it mandatory for foreign firms to have a local partner
GROUP NO.7 13
14. Contd.
4. Level of Competition: Presence of competitors and their level of involvement in an
overseas market is another crucial factor in deciding on an entry mode so as to
effectively respond to competitive market forces
5. Physical Infrastructure: The level of development of physical infrastructure such as
roads, railways, telecommunications, financial institutions, and marketing channels is a
pre-condition for a company to commit more resources to an overseas market
6. Level of Risk: From the point of view of entry mode selection, a firm should evaluate
the following risks:
a) Political Risk: Political instability and turmoil dissuades firms from committing more
resources to a market.
GROUP NO.7 14
15. Contd.
b) Economic Risk: Economic risk may arise due to volatility of exchange rates of the
target market’s currency, upheavals in balance of payments situations that may affect
the cost of other inputs for production, and marketing activities in foreign markets.
International companies find it difficult to manage their operations in markets wherein
the inflation rate is extremely high.
c) Operational Risk: In case the marketing system in an overseas country is similar to
that of the firm’s home country, the firm has a better understanding of operational
problems in the foreign market.
7. Production and Shipping Costs: Markets with substantial cost of shipping as in the
case of low-value high-volume goods may increase the logistics cost.
8. Lower Cost of Production: It may also be one of the key factors in firms deciding to
establish manufacturing operations in foreign countries.
GROUP NO.7 15
16. Contd.
Internal Factors:
1. Company Objectives: Companies operating in domestic markets with limited
aspirations generally enter foreign markets as a result of a reactive approach to
international marketing opportunities
2. Availability of Company Resources: Venturing into international markets needs
substantial commitment of financial and human resources and therefore choice of an
entry mode depends upon the financial strength of a firm.
3. Level of Commitment: In view of the market potential, the willingness of the company
to commit resources in a particular market also determines the entry mode choice.
Companies need to evaluate various investment alternatives for allocating scarce
resources
GROUP NO.7 16
17. Contd..
4. International Experience: A company well exposed to the dynamics of the
international marketing environment would be at ease when making a decision
regarding entering into international markets with a highly intensive mode of entry
5. Flexibility: Companies should also keep in mind exit barriers when entering
international markets. A market which presently appears attractive may not necessarily
continue to be so.
GROUP NO.7 17
18. Global Market Entry Strategies*
Trade Related Contractual Investment Entry
Exporting
Indirect
Piggy-
Backing
Direct
Management
Contracts
Franchising
Turn Key
Projects
Licensing
Contract
Manufacturing
Joint
Venture
Mergers &
Acquisitions
Foreign
Direct
Investment
Over Seas
Assembly
18
GROUP NO.7 *Source: International Business by Rakesh Mohan Joshi(Pg No.443)
Strategic
Alliance
Wholly
Owned
Subsidiaries
Countertr
ade
20. Exporting
Exporting is the most traditional and well established form of operating in foreign markets.
Exporting can be defined as the marketing of goods produced in one country into another. Whilst no
direct manufacturing is required in an overseas country, significant investments in marketing are
required.
The tendency may be not to obtain as much detailed marketing information as compared to
manufacturing in marketing country;
Exporting commonly requires coordination between four players –
Exporter
Importer
Transport provider
Government
20GROUP NO.7
21. Methods of exporting
Direct Exporting
In direct exporting the
organisation may use an
agent, distributor, or
overseas subsidiary, or act
via a Government agency.
The exporter's task is to
choose a market, find a
representative or agent,
set up the physical
distribution and
documentation, promote
and price the product.
Indirect Exporting
Indirect export is the
process of exporting
through domestically
based export
intermediaries. The
exporter has no control
over its products in the
foreign market.
Piggy-Backing
This means using a
company with an
established export
distribution system to sell
your product as well as its
own.
21GROUP NO.7
22. Methods Of Direct Exporting
Agents
A representative that
assists a business in
transporting and/or
selling their products in
a foreign country.
An export agent might
be paid a sales
commission by the
company they represent
or have distribution
rights for a product
within a specified region.
Overseas Distributors
Overseas distributors buy
your goods from you and
then sell them on in an
overseas market.
Distributors may expect
heavy discounts and a long
period of exclusivity, so you
need to research and choose
one with proven experience
in your target market.
GROUP NO.7 22
Foreign Retailers
A company may also sell
directly to a foreign
retailer, although in
such transactions,
products are generally
limited to consumer
lines.. Many large
retailers maintain
overseas buying offices
and use these offices to
sell abroad when
practicable.
23. Contd.
Direct Sales To End Users
A business may sell its products or
services directly to end users in foreign
countries. These buyers can be foreign
governments; institutions such as
hospitals, banks, and schools; or
businesses. Buyers can be identified at
trade shows, through international
publications, or through government
contact.
Counter Trade
Countertrade means exchanging goods or
services which are paid for, in whole or
part, with other goods or services, rather
than with money. A monetary valuation
can however be used in countertrade for
accounting purposes. In dealings between
sovereign states, the term bilateral
trade is used.
GROUP NO.7 23
24. Methods Of Indirect Exporting
Export
Management
Companies (EMCs)
These are similar to
ETCs in the way that
they usually export for
producers. Unlike ETCs,
they rarely take on
export credit risks and
carry one type of
product, not representing
competing ones. Usually,
EMCs trade on behalf of
their suppliers as their
export departments
Export Trading
Companies (ETCs)
These provide support
services of the entire export
process for one or more
suppliers. Attractive to
suppliers that are not
familiar with exporting as
ETCs usually perform all the
necessary work: locate
overseas trading partners,
present the product, quote on
specific enquiries, etc.
GROUP NO.7 24
Export merchants are
wholesale companies that
buy unpackaged
products from
suppliers/manufacturers
for resale overseas under
their own brand names.
The advantage of export
merchants is promotion
Export Merchants
25. Direct exporting
Advantages
Control over selection of foreign
markets and choice of foreign
representative companies
Good information feedback from target
market
Better protection of trademarks,
patents, goodwill, and other intangible
property
Potentially greater sales, and therefore
greater profit
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
25GROUP NO.7
26. Indirect exporting
Advantages
Fast market access
Concentration of resources towards
production
Little or no financial commitment.
Low risk exists for companies who
consider their domestic market to be
more important.
Export management is outsourced,
alleviating pressure from management
team
No direct handle of export processes
Disadvantages
Little or no control over distribution,
sales, marketing, etc. as opposed to
direct exporting
Wrong choice of distributor, and by
effect, market, may lead to inadequate
market feedback
Potentially lower sales as compared to
direct exporting
Export partners that incorrectly select a
specific distributor/market may hinder
a firm's functional ability
26GROUP NO.7
27. Piggy Backing
Advantages
You don’t have to have international
experience yourself
Will gain fast entry to the international
market
Will have little or no increased financial
commitment.
Disadvantages
Having only a low level of control
Choosing the wrong market and the
wrong distributor
Receiving inadequate market feedback
Achieving potentially lower sales
Erosion of your brand.
27GROUP NO.7
29. Contractual Manufacturing
Contractual entry modes are better suited to intangible products
Since some products are intangible, companies can use a variety of
contractual entry modes to market to market highly specialized assets
and skills in international markets
It Includes Licencing, franchising, manufacturing contracts, turnkey
projects etc.
GROUP NO.7 29
30. Methods Of Contractual Manufacturing
Franchising
It is a system in which semi-independent
business owners (franchisees) pay fees and
royalties to a parent company (franchiser)
in return for the right to become
identified with its trademark, to sell its
products or services
Manufacturing
Manufacturing is a contractual mode of
market entry that can give your brand
and company local manufacturing cost
advantages whilst you still retain
marketing, sales and distribution rights
and responsibilities for your brand
GROUP NO.7 30
31. Contd.
Licensing
Licensing is the contractual granting of
intellectual property rights which could be
in the form of technology, patents, or
trademarks to brand usage. It is a low
cost of entry mode and may lead to
possible further direct investment with
licensees down the line
Management contracts
Here, one company provides another
company with managerial expertise for a
specified period of time. Sectors that
commonly use management contracts are
utilities services
GROUP NO.7 31
32. Contd.
Turnkey Projects
A turnkey project refers to a
project when clients pay
contractors to design and construct
new facilities and train personnel.
A turnkey project is a way for a
foreign company to export its
process and technology to other
countries by building a plant in
that country.
Strategic Alliance
• A strategic alliance is an agreement
between two or more parties to pursue a
set of agreed upon objectives needed
while remaining independent
organizations. Partners may provide the
strategic alliance with resources such as
products, distribution channels,
manufacturing capability, project
funding, capital equipment, knowledge,
expertise, or intellectual property.
GROUP NO.7 32
33. Franchising
Advantages
Low political risk
Low cost
Allows simultaneous expansion into
different regions of the world
Well selected partners bring financial
investment as well as managerial
capabilities to the operation
Disadvantages
Maintaining control over franchisee may be
difficult
Conflicts with franchisee are likely, including
legal disputes
Preserving franchisor's image in the foreign
market may be challenging
Requires monitoring and evaluating
performance of franchisees, and providing
ongoing assistance
Franchisees may take advantage of acquired
knowledge and become competitors in the
future
GROUP NO.7 33
34. Manufacturing
Advantages
Saving in capital expenditure
Reduced upfront risk associated
Two-way technology transfer and
learning
Intellectual property around your
product composition or manufacturing
process
Disadvantages
Communication Barriers
Dependence on Suppliers
If suppliers make poor choices, it could
result in higher costs, declining product
quality and inefficient production
practices
The reputation of a company and its
brands can be damaged by sending
production abroad
GROUP NO.7 34
35. Licencing
Advantages
Obtain extra income for technical
know-how and services
Reach new markets not accessible by
export from existing facilities
Quickly expand without much risk and
large capital investment
Pave the way for future investments in
the market
Retain established markets closed by
trade restrictions
Disadvantages
Lower income than in other entry
modes
Loss of control of the licensee
manufacture and marketing operations
and practices leading to loss of quality
Risk of having the trademark and
reputation ruined by an incompetent
partner
The foreign partner can also become a
competitor by selling its production in
places where the parental company is
already in
GROUP NO.7 35
36. Management Contracts
Advantages
Benefit from hiring a contract
management company to handle the
day-to-day details of your company
Responsibilities you can turn over to the
management team
expertise of an entire management team
that usually brings to the table
experience in a number of management
areas, such as employee tax codes,
marketing and accounting.
Disadvantages
Loss of privacy issue and rise of
confidential disputes. These contracts
make the business expose to ethical
breaches, fraud and public exposure
Management contract companies have
the information of the business finance
also. This puts the business in a
vulnerable position
If a country is going through a political
or social turmoil, the managers life is
put at a risk to carry on the business in
such a situation
GROUP NO.7 36
37. Turnkey Projects
Advantages
Possibility for a company to establish a
plant and earn profits in a foreign
country especially in which foreign
direct investment opportunities are
limited and lack of expertise in a
specific area exists
Industrial companies that specialize in
complex production technologies
normally use turnkey projects as an
entry strategy
Disadvantages
Risk of revealing companies secrets to
rivals
Takeover of their plant by the host
country
Entering a market with a turnkey
project can prove that a company has
no long-term interest in the country
GROUP NO.7 37
38. Strategic Alliance
Advantages
The partnerships allow the involved
companies to offset their market
exposure.
Using the partner´s distribution
networks in combination with taking
advantage of a good brand image can
help a company to grow faster
Partnerships can help to lower costs,
especially in non-profit areas like
research & development.
Disadvantages
In a Strategic Alliance the partners
must share resources and profits and
often skills and know-how. This can be
critical if business secrets are included
in this knowledge
Focusing and committing is necessary to
run a Strategic Alliance successfully but
might discourage from taking other
opportunities
Sometimes the decision powers are
distributed very unevenly
GROUP NO.7 38
40. Methods For Investment Entry
Overseas Assembly
The U.S. Bureau of Labor Statistics (BLS)
defines outsourcing as "the movement of
work that was formerly conducted in-
house, by employees paid directly by a
company, to a different company."
Foreign Direct Investment
Broadly, foreign direct investment
includes "mergers and acquisitions,
building new facilities, reinvesting profits
earned from overseas operations and
intra company loans". In a narrow sense,
foreign direct investment refers just to
building new facility, a lasting
management interest (10 percent or more
of voting stock) in an enterprise operating
in an economy other than that of the
investor
40GROUP NO.7
41. Contd..
Mergers & Acquisition
Mergers and acquisitions (M&A) are
transactions in which the ownership
of companies, other business
organizations or their operating units are
transferred or combined.
A merger is a legal consolidation of two
entities into one entity
An acquisition occurs when one entity
takes ownership of another
entity's stock, equity interests or assets.
Joint Venture
A joint venture (JV) is a business entity
created by two or more parties, generally
characterized by shared ownership,
shared returns and risks, and shared
governance. Key elements of a joint
venture's design include: 1) the number of
parties; 2) the geographic, product,
technology and value-chain scope within
which the JV will operate; 3) the
contributions of the parties; 4) the
structural form
41GROUP NO.7
42. Contd.
Wholly Owned Subsidiary
A wholly owned subsidiary includes:
Greenfield investment and Acquisitions
Greenfield investment is high risk due to
the costs of establishing a new business in
a new country.
Acquisition has been increasing because it
is a way to achieve greater market power
GROUP NO.7 42
43. Wholly Owned Subsidiaries
Advantages
Wholly-owned subsidiary reduces risk
over losing control when there is
technological competence.
Give firm tight control over operations
in country- engage in strategic
coordination with profits.
Can realize location & experience curve
economies – centrally determined
decisions
Disadvantages
Most costly method of market Entry.
Risk associated with learning to do
business in a new culture
By applying acquisitions, some
companies significantly increased their
levels of debt which can have negative
effects on the firms
GROUP NO.7 43
44. Overseas Assembly
Advantages
It ensures lower cost because of the
availability of cheap overseas labor ,
land, etc.
Outsourced labor -- especially overseas
labor -- often includes technically
skilled, highly educated and
multilingual workers
Disadvantages
Security is also generally less certain
overseas than in the U.S., sometimes
significantly so. Crime, terrorism,
corruption and political instability can
all cut into your bottom line.
Outsourcing your production,
particularly overseas, usually means
that you cede a certain amount of daily
control to your contractor.
44GROUP NO.7
45. Foreign Direct Investment
Advantages
Foreign direct investment can stimulate
the target country’s economic
development, creating a more conducive
environment
Foreign direct investment creates new
jobs, as investors build new companies
in the target country, create new
opportunities.
One big advantage brought about by
FDI is the development of human
capital resources
Can receive tax incentives
Disadvantages
As it focuses its resources elsewhere other
than the investor’s home country, it can
sometimes hinder domestic invest
Because political issues in other countries
can instantly change, it is very risky.
It can affect exchange rates to the
advantage of one country and the
detriment of another.
Political changes can also lead to
expropriation, which is a scenario where
the government will have control over
your property and assets. 45GROUP NO.7
46. Mergers & Acquisition
Advantages
Obtain control over the acquired firm
such as factories and brand names
Integrate the management of the firm
into its overall international strategy
Another advantage is Synergy, that is
increased value efficiencies of the new
entity
Economies of scale is formed by sharing
the resources and services
Disadvantages
As a result of M&A, employees of the
small merging firm may require
exhaustive re-skilling.
Merging two firms that are doing
similar activities may mean duplication
and over capability within the company
that may need retrenchments.
Increase in costs might result if the right
management of modification and also
the implementation of the merger and
acquisition dealing are delayed.
The merger and acquisition (M&A)
reduces flexibility. 46GROUP NO.7
47. Joint Venture
Advantages
Entering related businesses that
previously presented high barriers to
entry.
Gaining access to expertise without the
need to hire more staff.
Leveraging existing technologies and
patents developed by other companies.
Sharing the risk of high-leverage, but
uncertain ventures.
Establishing a presence in new,
untapped markets, including
international opportunities.
Disadvantages
Setting unrealistic objectives that may
not be completely clear in advance and
not aligned to a common goal.
Coping with differing cultures,
management styles, and working
relationships that prevail in each
company.
Managing communication with senior
managers and employees in both
companies
Making poor tactical decisions
47GROUP NO.7