Market Entry modes
When a company is looking too expanded or enters a new
marketing, cross boarders or in an international market place. They must
consider what would be the best approach for them to do so. There are a number ways an organisation can
start to sell their products in international markets.
1.
Direct export. The
company produces their products in their home market and then sells them to
customers overseas. Has little risk to the business but no control of products
after exported.
Example of direct exporting is
that of small companies or international sellers on E Bay where either the
small business or user makes or buys products in their home country to sell in
other foreign markets. They do so by advertising online stores or e bay
accounts and shipping directly to the consumer in the foreign market.
2.
Indirect export, the
company sell their products to a third party who then sells it on within the
foreign market. The risk is low and
little control of product after it has entered the market.
Indirect exporting example would
be that of Sony and Samsung who sell their goods in many different foreign and
local markets by the use of export agents and foreign companies like the good
guys.
3.
Licensing another less
risky market entry method here the Licensor will grant a company in the foreign
market a license to produce the product, use the brand name etc. in return that
they will receive a royalty payment. Another low risk entry method, with a little
more control the just exporting as there can be regulations and standards of
use.
Example of licensing is that of video
game industry, such as Activation makes Call of duty games and then sells
licensing to PlayStation and X box to manufacture the games for their game
consoles. Usually used in technology and
music industry so the inventors or artists can sell their ideas to be used by
others.
4.
Franchising is another
form of licensing. Here the company puts together a package of ingredients that
made them a success in their home market and then franchise this package to
overseas investors. A riskier entry method, with a little more control the just
exporting as there can be regulations and standards of use, but can involve
risk to the brand name or image.
Franchising is another way a company can gain entry in to a
market is mostly done in fast food industry; largest franchisees are Mc
Donald’s and KFC.
5.
Joint Venture. To share
the risk of market entry into a foreign market, two companies may come together
to form a company to operate in the host country. The two companies may share
knowledge and expertise to assist them in the development of company; of course
profits will have to be shared out also.
Joint Ventures are way two or more companies can join to
entry new markets, well limiting their risk and not being too exposed. Example
of joint venture is that of Sony-Ericsson mobile phone company that joined
together to enter and compete in mobile industry and markets globally.
6.
Strategic Alliances are
collaboration between companies in various countries to share and exchange
resources and value creating activities.
Strategic alliances are another
for companies to join together to limit risk and entry foreign markets. Usually
would be found in the Airline industry where alliances are form to meet more of
the customers’ needs traveling around the world.
7.
Foreign Direct
investment is where a company well directly invest in a foreign market to gain
entry. This can be done by buying business there, setting new one up in the
market or partnership with a local company.
(Fletcher & Brown, 2008)
A good example of foreign direct investment is that of GM
with Holden and Toyota both opening manufacturing plants in Australia to gain
entry in to our foreign market as well as other that we trade with.
As you can see there are many entry modes a company can
choose to enter a new market, but the company must know what risk and control
they wish to have over that entry in to a new market. The less the control the
easier the entry and more control the company want to keep the harder the
entry, so a company must choose their control and risk levels and how and why
they want to enter a market to gain new foreign market share and obtain their
goal and objectives.
Reference List
Fletcher & Brown, 2008. International
Marketing: An Asia-Pacific Perspective. 4th ed. NSW: Pearson Education.
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