Selecting and Managing Entry Modes

Three Levels of Entry Modes

Contractual Entry

Direct Entry Modes

Common Entry

Importing

Countertrade

Expoting

Franchising

Licensing

Management Contracts

Turnkey Projects

Joint Ventures

Strategic Alliance

Wholly-owned subsidiaries

Entry Mode

Institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a market.

Why Companies Export?

  1. Expand sales - to achieve economic of scale when the domestic market saturated.
  1. Diversify sales - offset slow sales in one national market another and level off cash flow
  1. Gain experience- low cost, low risk way to gain valuable international experience.

4 steps in develop an export strategy

Step 2: Match needs to abilities = satisfy design/ prod

Step 3: initiate meetings = local distributors & buyers

Step 1: Identify a potential market = market research

Step 4: commit resources = objectives & resources

Degree of export involvement

Direct - rely on either local sales representatives or distributors.

Indirect - use intermediaries such as agent, export management company, and export trading companies

2 basic forms of exporting: direct and indirect

Direct exporting: Practice by which a company sells its products directly to buyers in a target market.

Indirect Exporting: Practice by which a company sells its product to intermediaries who then resell to buyers in a target market.

Agent: tends to focus their promotional efforts on the products of the company paying the highest commission.

Countertrade

Selling goods or services that are paid for, in whole or part with other goods or services.

Provide access to markets that are otherwise off-limits because of a lack of hard currency.

A major benefits is that it conserves foreign currency for cash-strapped nations.

Four Contractual Entry Modes

  1. Licensing, 2. Franchising, 3. Management Contracts, 4. Turnkey Projects

Selecting Partners for Cooperation

  1. Commitment: Each partner must be firmly committed to the stated goals.
  1. Trustworthiness: Each partner must be trustworthy
  1. Cultural knowledge: Each party's managers must be comfortable working with people of other cultures
  1. Valuable contribution: A suitable partner must have something valuable to offer.