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Advantages and Disadvantages of Market Entry Strategies (Disadvantages…
Advantages and Disadvantages of Market Entry Strategies
Disadvantages
Direct Exporting
Low control
Risk that distributor or agent could miss potential opportunities
Risk on will the distributor or agent choose the appropriate sales channels
Liscensing
Low control
Risk cause poor strategy could effect product success
Risk cause poor quality management could lead to damaging product or brand reputation
Franchising
Higher Costs
Usually restrictions on how you can run the business
Franchisor could go out of business
Franchisees could give brand bad reputation
Can be difficult to sell a franchise
Franchisor gets a percentage of sales for all profits
Low flexibility so it may be hard to implement changes
Partnering
Issues/Complications can arise
can cause instability
Shared Control
Liabilities
Joint Ventures
Timely and takes a lot of effort
Partners can have different objectives
Could have poor co-operation and integration from one or both sides
Both sides need a lot of leadership and support in early stages
Buying a Business
Business might need major improvments
Often have to invest a large sum up front
Business may be poorly located or badly managed
External factors like a declining industry or increased competition
Could require many expensive investments
Piggybacking
Complexity
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Turnkey Projects
Limited client involvement
Budget can be higher than needed because budgets are presented before finalization of project, and also because of unpredictable costs such as inflation
Greenfield Investments
Very costly, including entry barriers as well
Tough to overcome the already established competition
May have to wait years just in order to enter the market
Multinational enterprises come across short-term disadvantages with governmental regulations
Advantages
Direct Exporting
Low Cost
Low Risk
High Flexibility
Liscensing
Fast innovation to market
Licensee responsible for costs
Access to new possible markets
Franchising
Established marketshare
Given support
Small businesses can compete with big businesses
Established relationship with suppliers
Usually exclusive rights are given
Partnering
More business opportunities
More Cash and Save on Costs
Access to wider ranges of exports
Potential Tax benefits
Joint Ventures
Access to new market and distribution network
Shared risks and costs
Access to greater resources and a bigger market
Flexibility
Buying a business
Start up work already done
Cash flow immediately
Has a financial history, so we can foresee what is expected
Acquire customers, contacts, goodwill, suppliers, staff, plant, equipment and stock
Market already established
Piggybacking
Is a better use of available channel bandwidth
Turnkey Projects
Less management work
Lower project timelines
Lowers cost overruns
Greenfield Investments
Scope and scale economies are achieved
Entire business can be controlled
Long-term strategy implementation is better
Makes business committed to market
Vendor financing options
Control staff and brand better
Press opportunities with opening up a new but old business