Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 13 Selecting and Managing Entry Modes
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Exports to the United States
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Step 1Step 2 Identify a potential market Match needs to abilities Step 3 Initiate meetings Developing an Export Strategy Step 4 Commit resources
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Degree of Export Involvement Direct exporting (sell to buyers) Indirect exporting (sell to intermediary) Sales representative Distributor Sales representative Distributor Agent Export management company Export trading company Agent Export management company Export trading company
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Avoiding Export Blunders Conduct market research Obtain export advice Hire a freight forwarder
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Forms of Countertrade Barter Counterpurchase Offset agreement Switch trading Buyback Direct exchange without money Sale to a nation in return for promise of future purchase from that nation Offset a hard-currency sale to a nation with future hard-currency purchase Sale by a company of an obligation to purchase from a country Export of industrial equipment in return for products that the equipment produces
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Export/Import Financing
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall High Risk Methods Exporter bills importer after merchandise ships Importer pays exporter before merchandise ships Open accountAdvance payment
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Documentary Collection Bank acts as intermediary without accepting financial risk Draft (bill of exchange) Document that orders an importer to pay an exporter a specific sum of money at a specific time Bill of lading Contract between an exporter and shipper specifying destination and shipping costs for merchandise
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Documentary Collection Process
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Letter of Credit Importer’s bank issues a document stating that the bank will pay the exporter when exporter fulfills document’s terms Irrevocable Revocable Confirmed
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Letter of Credit Process
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Licensing Advantages + Finance expansion + Reduce risks + Reduce counterfeits + Upgrade technologies – Restrict licensor’s activities – Reduce global consistency – Lend strategic property Disadvantages Company owning intangible property (licensor) grants another firm (licensee) the right to use it for a specific time
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Franchising Advantages + Low cost and low risk + Rapid expansion + Local knowledge – Cumbersome – Lost flexibility Disadvantages Company (franchiser) supplies another (franchisee) with intangible property over an extended period
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Management Contract Company supplies another with managerial expertise for a specific period of time Advantages + Few assets risked + Nations finance projects + Develops local workforce Disadvantages – Personnel at risk – Create competitor
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Turnkey Project Advantages + Firms specialize in competency + Nations obtain infrastructure – Politicized process – Create competitor Disadvantages Company designs, constructs, and tests a production facility for a client
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Wholly Owned Subsidiary Facility entirely owned and controlled by a single parent company Advantages + Day-to-day control + Coordinate subsidiaries Disadvantages – Expensive – High risk
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Joint Venture Company created and jointly owned by two or more entities to achieve a common objective Advantages Reduce risk level Penetrate markets Access channels Disadvantages Partner conflict Lose control
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Joint Venture Configurations
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Strategic Alliance Disadvantages Partner conflict Create competitor Advantages Share project cost Tap competitors’ strengths Gain channel access Entities cooperate (but do not form a separate company) to achieve strategic goals of each
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Selecting Partners Commitment Trustworthiness Cultural knowledge Valuable contribution
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Strategic Factors Cultural environment Political/Legal environments Market size Production and shipping costs International experience