Foreign market entry alternatives

1. Foreign market entry alternatives • Exporting • Contractual Agreements • Direct Foreign Investment • Strategic Alliances

2. Exporting • Direct - selling to a customer in another country • Indirect - selling to a domestic or foreign company (i.e., distributor) who resells in another country • How? • Trade shows, country visits, internet

3. International Exporting Alternatives Foreign Intermediaries Domestic Intermediaries Internet Direct exporting Foreign consumer U.S. Company

4. International Exporting Alternatives Foreign Intermediaries Domestic Intermediaries Internet Direct exporting Foreign consumer U.S. Company Foreign Retailer Distributor Agent/ Broker Importer Manufacturer’s Rep

5. Philip Morris Amer Tobacco (Finland) Contractual Agreements generally involve the transfer of technology, processes, trademarks, or human skills • Licensing -- one company (licensor) makes an asset available to another company (licensee) in exchange for royalties, fees or other compensation

6. Contractual Agreements Franchising – A contract that allows a franchisee to operate a business developed by the franchisor in return for a fee & adherence to franchise-wide practices UK

7. Contractual Agreements • Pros –little investment required; avoid tariffs, quotas & other export barriers • Cons –little control over licensee, licensees become competitors after agreement expires

8. Joint Ventures • Forming a new business entity with a partner in the target country • difference from strategic alliances or collaborative relationships… • joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity Joint ventures also different from minority holdings by an MNC in a local firm.

9. Joint Ventures Pros – • shared risk, • learn about new market, • combine strengths, • permit entry by means otherwise not possible Cons – • partners share rewards as well as risk, • potential for conflict between partners, • partner is self-interested (wants technology, expertise, know-how)

10. align with other companies in foreign markets to give customers access to those markets established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective Strategic alliances

11. operate manufacturing facilities and/or sales offices in the host country Direct foreign investment • Firms may either invest in or buy local companies or establish new operations facilities • Pros – • capitalize on low-cost labor • avoid high import taxes • reduce the high transportation • gain access to raw materials • a means of gaining market entry Africa, Asia-Pacific, Middle East, Europe, North America, Latin America

12. Direct foreign investment Domestic Intermediaries Foreign Market X owns/operates its own mftg and/or sales office Internet Direct marketing or Foreign consumer U.S. Company Foreign distributor Foreign Retailer Capital intensive!

13. Foreign Market-Entry Strategies Exporting Contractual Agreements Direct Foreign Investment • market characteristics (e.g., potential sales, strategic importance, cultural differences, and country restrictions) • company capabilities and characteristics, and • level of commitment that management is prepared to make The choice of a entry strategy depends on:

14. Infrequent Foreign Marketing No Direct Foreign Marketing International Marketing Regular Foreign Marketing Global Marketing Stages of International Marketing Involvement In general, firms go through five different phases in going international: