Direct exporting is a way to provide better control over distribution and capitalize on economies of scale in production 1. In this foreign market entry mode, a licensor in the home country makes limited rights or resources available to the licensee in the host country. Linking market orientation to international market selection and international performance. Merchant exporters ate well versed in studying market conditions. Olam has lowered its processing and shipping costs by 25 percent while greatly reducing carbon emissions. The tendency may be not to obtain as much detailed marketing information as compared to manufacturing in marketing country; however, this does not negate the need for a detailed marketing strategy. The strategy or entry alternatives must ensure that the necessary value chain activities are performed and integrated.
Certainly, the phytosanitary requirements in Europe for horticultural produce sourced in Africa are getting very demanding. Concentration on production in indirect exporting: Merchant exporters are frequently approached by resident or visiting buyers. Risks include reliance on the contract for enforcement and remuneration and the possible limited time span. The foreign companies will either purchase the license outright, pay a regular licensing fee or pay a percentage of their revenue over time in the form of royalties. New entry is the act of launching a new venture, either by a start-up firm, through an existing firm, or via internal corporate venturing. They distinguished between firms whose marketing efforts were characterized by no activity, minor activity and aggressive activity. It provides immediate access to international manufacturing facilities and marketing network.
Piggybacking Piggybacking is a particularly unique way of entering the international arena. While these factors may well increase your costs it is expected the increase in sales will offset these costs. It built a large freezing plant for vegetables but found itself without a contract. Inventory support - Inventory management - Warehousing - Distribution - Parts supply - Credit authorisation 5. Amusing Anecdotes One common factor in exporting is the need to translate something about a product or service into the language of the target country. With direct exporting, the exporter makes direct contact with customers in the foreign market and has control over its product and distribution. Exporting There are direct and indirect approaches to exporting to other nations.
Put simply, agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country. Likewise, entry modes vary in the degree of risk, control, resource commitment and reward. Closed end barter deals are modifications of straight barter in that a buyer is found for goods taken in barter before the contract is signed by the two trading parties. This is typical of the horticultural industry of Kenya and Zimbabwe. Countertrade can take many forms. Direct Exporting Direct exporting is selling directly into the market you have chosen using in the first instance you own resources. Essentially, Strategic Alliances are non-equity based agreements i.
The licensor earnings usually take forms of one time payments, technical fees and royalty payments usually calculated as a percentage of sales. Enforcement of contracts may be costly and weak legal integration between countries makes things difficult. But policies and trademark will be implemented from the Parent body. In overall, acquisition is attractive if there are well established firms already in operations or competitors want to enter the region. However, it acts more like a distributor that is owned by your own company. Direct ownership provides a high degree of control in the operations and the ability to better know the consumers and competitive environment.
It requires substantial resources, so the exposure to risk is high. In addition it may be hard to create and grow any brand equity or awareness in the case of some contract management services. Advantages of this approach are that it forces managers to take a wider, global view of operations. But, the organization has little control over technology and marketing. The following are the examples of political issues: 1. To create a successful global strategy, managers first must understand the nature of global industries and the dynamics of global competition, international strategy i.
Good examples of this include the building of port facilities or food processing or freezing facilities. On the other hand, if you were to employ a home country agency i. However, they are expensive, which in the past had put them out of reach as a strategy for companies in the undeveloped world to pursue. Greenfield ventures give the firm the best opportunity to retain full control of operations, gain local market knowledge, and be seen as an insider that employs locals. Joint Venture One of the most popular modes of entry is the establishment of a joint venture, in which two businesses combine resources to sell products or services. Alternatively, some foreign companies regularly send buying teams to India.
Environmental factors also play a significant role in this entry mode. Foreign production Besides exporting, other market entry strategies include licensing, joint ventures, contract manufacture, ownership and participation in export processing zones or free trade zones. Zimbabwe's imports of Namibian mackerel were the result of such a Government negotiated deal. Conclusion Based on the argument presented above, the author is of the opinion that there is no one market entry mode that is to be preferred above all others. Licensing Licensing is the contractual granting of intellectual property rights which could be in the form of technology, patents, or trademarks to brand usage with some common examples from the technology field being Intel or Dolby or in the field of brand trademarks Disney or Barbie.
It is usually for a longer term than contract manufacturing and involves more responsibilities for the national firm. Ma Joad also teaches her children compassion. Although joint ventures provide foreign companies with a partner experienced in the foreign market, these partnerships can be difficult to manage and require a splitting of profits. This requirement is common in many Middle Eastern countries. Advantages for licensing are the rapid diffusion of technology or brand awareness for relatively low capital investment. New entry can be accomplished by entering new or established markets with new or existing goods or services.