1. Market Entry Methods Exporting/Importing Licensing Franchising
Direct
Indirect
Contractual Entry Modes
Licensing
Franchising
Management Contracts
Turnkey Projects
Investment Entry Modes
Wholly-Owned Subsidiary
Joint Venture
Strategic Alliance

2. Exporting Selling and shipping products across borders
Easiest and most common first step
All size companies use this strategy
Direct exporting: Company actively seeks exporting
Indirect exporting: Casual exporting which uses agents or intermediaries

3. Advantages: Risk of loss minimized because not much is invested
Product can remain unchanged
Can be used to get rid of excess inventory or gain additional sales

4. Disadvantages: Examples: May not make the most of an opportunity
Strongly dependent on exchange rates
Examples:
Producer sells to Wal-Mart which ships overseas
Stora Enso sells paper products to Canada

5. Intermediaries Agents Export Management Company Export Trading Company
Representatives of one or more indirect exporters in a target market
Export Management Company
Exports products on behalf of exporters
Export Trading Company
Provides services to indirect exporters

6. Licensing
Domestic company allows foreign company to use trademarks, patents, copyrights, processes, or technical knowledge for a fee
Establishes foothold in foreign market without a big investment
Favorite strategy of small to medium size companies
Often use in addition to exporting

7. Advantages: Foothold in foreign marketing without big investment
Formal agreement in licensing contract
Avoids import restrictions

8. Disadvantages: Examples: Hard to protect intellectual property
May be least profitable means of entry
Examples:
Nestle makes food products with Disney characters

9. Franchising
Franchisor provides standardized products and management processes while franchisee provides capital, management personnel and knowledge of local markets
Fastest growing market entry strategy
More than 30,000 franchises throughout the world

10. Advantages:
Allows skills to be located with franchisor while operations are spread over franchisees
Expands company quickly with little investment by franchisor
Foreign laws are friendly because of local ownership

11. Disadvantages:
Must share profits
Poor franchisee can ruin image

12. Management Contracting
Company sells management skills and runs a foreign operation
Main advantage is that it’s low risk
Main disadvantage is that there is low profit potential and lack of a long-term presence in market
Example: DBS Asia (Thailand) awarded a contract to Favorlangh Communication (Taiwan) to set up and run digital tv programming in Taiwan

13. Turnkey Operation
One company designs, constructs and tests a production facility for a client firm for a fee
Often used by governments
Ex: Turkey’s government had two consortiums of international firms build four hydroelectric dams

14. Wholly-Owned Subsidiary
Domestic company owns 100% of the stock of another company
Can buy an existing business (easiest method that takes advantages of existing strengths) or start from scratch

15. Advantages: Can take advantage of low cost labor
Avoid high import taxes
Can gain access to raw materials
May cut transportation costs to market

16. Disadvantages: Examples High investment High risk
May suffer backlash from country
Many countries restrict foreign direct investment
Examples
Nike
Stora Enso

17. Joint Ventures
Legal agreements between two or more companies to conduct business together
Separate company is created and jointly owned
Creates an alliance that combines strengths and accomplishes goals more efficiently
2nd most frequently used strategy behind exporting

18. Advantages: Less capital investment required from each partner
Shared risks
Access to skills of partner
With a local partner may allow access to markets which are forbidden to foreigners

19. Disadvantages: Shared control complicates decision making
Agreements require frequent review
Could create competitor
Share revenue

20. Strategic Alliance
Relationship between two companies to cooperate to achieve strategic goals
Similar to joint venture except a new company is not formed

21. Unz & Co. Guide to Exporting http://www.unzco.com/basicguide/toc.html
Small Business Administration Guide

22. Inc. equivalents Canada, Japan, England – Ltd. (limited)
France, Belgium – Sarl
Spain, Mexico, Portugal and Brazil – S.A.
Germany, Switzerland – GmbH
Netherlands – N.V.
Italy – Srl
Denmark – A/S

23. What method of market entry is this??
A company from Singapore is working with businesses in Kenya to help organize and run hospitals

24. A British toy company allows a Japanese company to create clothing and school supplies with one of the British company’s doll characters on the products.

25. An example of this would be Nike making shoes in Asia and Honda producing cars in the United States.

26. A small food-packaging firm cannot afford to sell in other countries, so it asks an export agent to obtain orders for the company.

27. A Vietnamese company decides to obtain assistance from an Israeli company to share production costs and profits of a chemical manufacturing enterprise.

28. An Italian restaurant is planning to allow a company in New Zealand to operate several restaurants using the same name and menu items.

29. A company in Egypt has purchased 51 percent of the stock of a company in Peru.

30. A disadvantage of this entry method is that it is strongly dependent on exchange rates between countries and may not make the most of of an international opportunity.

31. Advantages to this method are that it requires less capital, and risks are shared

32. Which method of entry is the costliest?

33. Which method of entry is the easiest and most common first step for businesses to go international?

34. Which is the fastest growing market entry method with over 30,000 possibilities worldwide?