Evaluate the advantages and disadvantages of export as a mode of international operation. Internationalization can hence be defined as a step-by-step process of the development of international business wherein the company becomes extensively involved in pursuing international business operations and increasingly committed to these operations involving specific products in pre determined markets. Albaum et al posit that the choices made by the global marketer with regards to the degree of standardization or adaptation lie on a continuum. At the one end of the continuum is the global corporation often defined as a company that operates with such severe consistency and at a comparatively lower cost that one could be lead to believe that the world were a single entity Levitt,
Krzysztof Wach 7 Suggested citation: Market Entry Modes for International Business chapter 7. Within and Beyond Visegrad Borders.
Chapter Market entry modes for international businesses Learning objectives After studying this chapter you should be able to: Understand differences between exporting, contractual and investment modes.
Distinguish between direct and indirect exporting modes. Describe and understand four main entry modes of indirect exporting, four main forms of direct exporting, and two main modes of cooperative exporting and main contractual and investment modes of entry.
Discuss the advantages and disadvantages of the main entry modes. Multi language Visegrad version is the best example how to create standardized product that fits the needs of regional Visegrad market. The choice of entry modes internationalization methods, forms, instruments or ways depends on both endogenous factors mainly business potential as well as exogenous factors describing the business position in the target market or the industry in which the firm operates.
The maturity for internationalization of activities plays a crucial role while considering the entry mode. In the literature, there are different models explaining the internationalization of the firm and the entry modes.
The different forms of entry into foreign markets have different efficiency, but also a variety of input costs. It seems that the most common taxonomy distinguishes three fundamental groups, namely: Import of raw materials from abroad, is usually preliminary to export of products abroad.
This phase is associated with low risk. The firm only realizes foreign orders as they are received. In most cases this is the only form of engagement especially SMEs in international activities. This phase is a natural consequence of growth and occurs when the firm after reaching all its capabilities in the domestic market and achieving an appropriate volume of production, as well as surplus production, aims to expand its market and start exporting.
The In indirect export modes motive of entering foreign markets is the ability to make profits in these markets, as the manufacturer uses the firm gains more and more profits in the domestic market.
Exporting activities independent export can take various forms, including: While implementing While implementing direct exporting, exporters take on the duties of direct exporting, intermediaries and make direct contact with customers in the foreign market.
Direct exporters take on the exporting can be performed in several ways, most commonly by Hirsch, ; Stone duties of intermediaries and McCall, A national sales representative can be formed in three ways as: Agents and distributors generally obtain territorial exclusivity to sell the goods, usually limited to one foreign market exclusive importer.
A foreign agent can also work on an exclusive basis exclusive agentbut there are also semi-exclusive agents, who serve at the same time some exporters, but offering uncompetitive goods Hollensen, Cooperative exporting is recommended entry mode especially for small and medium-sized firms, due to their resource constraints mainly financial and human.
They are two basic modes of cooperative exporting, namely export grouping export consortium and piggybacking. Export consortia tend to be most often defined as the voluntary alliances companies tied to foreign joint promotion of products and services of its members Green, Russo and Papi, They can be formalized or based on a loose cooperation between enterprises, especially of micro, small and medium size.
Their largest advantage is spreading the cost of export activity for members of the consortium, which allows SMEs to overcome one of the main barriers to internationalization, which is their limited financial resources.
Piggybacking Hollensen, ; Terpstra and Chwo-Ming, is the entry mode where the contract parties are two entities, known as a rider and a carrier. The first one is usually a small entrepreneur, and the other one is of large size. A carrier carries out business in foreign markets offering to a rider its own distribution network.
For the access it charges a commission from the firm planning to start export activities. The products offered by the cooperating firms should be complementary. This form of export is beneficial to both parties, but carries certain risks.
A carrier can thus complement its product line, but also lower maintenance costs borne by its own distribution network abroad by sharing them with a rider. Risk of low quality products of his co-operator, which may jeopardize his reputation, but also timely delivery, may be potential drawbacks to a carrier.
The largest advantage for a rider is the access to the foreign distribution network, and the disadvantage is the loss of control over the distribution of its products. This mode is particularly recommended for micro and small businesses who are not able to make their own foreign investment.
These modes include inter alia cooperative relations international licensing, international franchising, international subcontracting, buy implemented through also various assembly operations. Turnkey operations contain an element of co-operation, however they are carried out as de facto export of services, but their main feature is contractility.
Very often, these investments are overseen by the staff of the importer Onkvist and Shaw, Start studying international business chapter 12 modes of entry.
Learn vocabulary, terms, and more with flashcards, games, and other study tools. but at the same time many of these countries lack petroleum refining technologies-> they gain it by entering into turnkey project with foreign firms greenfield venture pros and cons.
Modes of entry into an international market are the channels which your organization employs to gain entry to a new international market. This lesson considers a number of key alternatives, but recognizes that alternatives are many and diverse.
1. the firm entering a turnkey deal will have no long-term interest in the foreign country 2. the firm may inadvertently create a competitor 3. if a firm's process technology is a source of competitive advantage, then selling this technology through a turnkey project is also selling competitive advantage to a .
Nov 19, · Before considering contractual modes of entry our advice is to talk to professional services organisations with experience in this field and others in your industry at home to get a good understanding of the risks and rewards and how to mitigate risks and maximise the success criteria.
The decision to venture abroad involves the evaluation of alternative entry modes, bearing in mind the degree of risk and the suitability of the business environment in a potential host country or region. Choose a market entry strategy Contractual entry modes Licensing.
Pros Cons; Can reduce risk and be an effective way to finance international expansion. Your licensing agreement may restrict any future activities, or reveal information to .