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Entering the International Market - Coggle Diagram
Entering the International Market
Introduction to Foreign Market Entry
Types of foreign market entry
contractual (licensing and franchising)
Investment
Wholly-ownder subsidiaries
Joint ventures
Mergers and acquisitions
Reasons for foreign market entry
To increase sales and profits
Diversify customer base
Gain access to new resources and technologies
Protect home market from foreign competition
Enhance global brand image
Factors to consider when choosing a foreign market entry mode
Risk and resource commitment
Degree of control over operations
Potential for synergies
Need to adapt products and services
Regulatory environment
Contractual Entry Modes
Licensing
licensor grants licensee the right to use an asset (e.g., patent, trademark, know-how) in exchange for a royalty fee
Franchising
franchisor grants franchisee the right to use a business system (e.g., trademark, brand name, know-how, operating procedures) in exchange for a royalty fee and an initial franchise fee
Advantages of contractual entry modes
ow risk and capital commitment, fast market access, and ability to circumvent barriers to foreign entry
Disadvantages of contractual entry modes
Potential creation of future competitors, limited control over operations, and difficulty in policing the implementation of the contract
Investment Entry Modes
Wholly-owned subsidiaries (WOS)
foreign subsidiary that is 100% owned and controlled by the parent company
Mergers and acquisitions (M&A)
process by which a firm acquires or merges with an existing firm in the foreign market
Greenfield operations
foreign subsidiary that is built from scratch
Advantages of investment entry modes
High degree of control over operations, ability to transfer technology and skills, and potential for higher returns
Disadvantages of investment entry modes
high risk and capital commitment, need to comply with local laws and regulations, and potential for conflict with local partners
Strategic Alliances
Contractual arrangements between two or more firms to cooperate in achieving a common goal
Types of strategic alliances
market access
operations
research and development
Benefits of strategic alliances
pooling of resources and expertise
sharing of risks
access to new markets and technologies
Risks of strategic alliances
conflict and mistrust
difficulty in coordinating activities
risk of opportunistic behavior by partners
International Logistics and Transportation Issues
Importance of logistics and transportation for foreign market entry
to ensure that products and services are delivered to customers on time and in good condition
Factors to consider when selecting a foreign distributor
market coverage
infrastructure
IT integration
key infrastructure
personnel quality
Impact of distribution firms on the mode of foreign market entry
firms may choose to invest in their own distribution networks if suitable distribution firms do not exist in the foreign market
Importance of modern supply chains and management for foreign market entry
to reduce costs
improve customer service
deliver products and services to customers on time and in good condition