Please enable JavaScript.
Coggle requires JavaScript to display documents.
Entering The International Market - Coggle Diagram
Entering The International Market
Alternative methods for foreign market entry
Production in home market
Indirect export
Export management company
Piggyback
Trading company
Direct export
Agent
Marketing subsidiary
Foreign distributor
Foreign production sources
Assembly
Joint venture
Licensing
Full ownership
Contract manufacture
Transaction cost analysis (TCA)
prescribes international activities based on
economic rationale that firms minimize all costs
associated with the entire value-added chain
TCA has two phases
Pre-trade
Post-trade
Contractual entry modes
Licensing
Advantages
Fast market access
Adequate marketing information
Appealing to small companies
Ability to take advantage of the possession of a patented product
Disadvantages
Licensee may not be committed to this particular product line
Passive interaction with local market
Potential creation of future competitors
Limited flexibility to apply sophisticated tech
Limited profit potential
License agreement package
Quality control procedures
Manufacturing blueprints and manuals
Product and processes specifications
Product manuals and other supporting material
Patents, designs, trademarks, copyrights
Programs and material for technical and commercial staff training.
Minimum performances clauses
Franchising
Disadvantages
Absence of master franchise
Limited control over franchisees' operations
Revenues may not be adequate
Cultural problems
Advantages
High franchise motivation to achieve objectives, to boost profits.
Effective adaptation to local market conditions
Rapid entry and expansion in the foreign market
Efficient trademark or brand name promotion
Foreign manufacturing
Advantages
Savings via taxation, lower cost energy, raw materials, and overheads
Lower political and economic risk
Labor cost advantages
Quicker access to markets
Disadvantages
Environmental protection and labor and fair trade
Issues of quality and production standards
Backlash from company's home market employees
Investment entry modes
Portfolio investments by multinational corps
Foreign Direct Investment
Horizontal
Increases in volume, but maintaining same activities
Vertical
Upstream or downstream operations along with foreign market entry
Joint Ventures
Advantages
Creation of synergy
Quick access to distribution network
Higher rate of return and more control on ops.
Contact with local suppliers and gov officials
Disadvantages
Lack of full control
Susceptibility to mistrust and culturally related conflicts
Conflicts arising over matters
Wholly-owned subsidiaries
Mergers and acquisitions
Greenfield Operations
Strategic Alliances