Activity

Today’s era is of globalization this also globalization has boosted up international trade with a great extent. Every company, whether large or small, would like to spread its reach to global markets to ensure a large client base. There are several strategies to getting into an overseas market. A firm which really wants to enter in the foreign market has to find the mode of entry very wisely which could provide it the most output.

Modes of Entry

Exporting

Exporting refers to selling of merchandise or services produces in a single country into another country. Exports are viewed to be the basic most mode of entry into foreign market. It takes least investment and also the risk associated is lowest.

A company might be a manufacturer exporter or even a merchant exporter. A producer exporter manufactures a unique goods and exports it, whereas a merchant exporter procures goods from a manufacturer and exports it under a unique name. Exports are a fantastic way to obtain foreign earnings of your country.

A merchant exporter can select exporting items itself or hire a representative for the similar. Should the exporter exports the goods without agent, it is termed as direct exports. The direct exports provide better treatments for goods, market and feedback mechanism for the exporter. On the other hand when the exports are made with the channel of your agent, it is referred to as indirect exports. Even though it is preferred for first time exporters to select indirect exporting, but direct exporting provides better returns in long-term.

Licensing

Look at a company which holds a patent for a particular product. The organization may sell or give on rent its license of production with an overseas company. Parents company which can be situated in home country gets a rent or royalty for the sales created by the overseas company inside the foreign market. Licensing is an easy way of earning more money without having to put in high efforts. The license may be provided to the foreign company either on rent to get a specified period or on percentage royalty for total amount of sales. The major disadvantages of licensing include probability of reputation being spoiled with the licensee and lower income as compared with other modes of entry.

Franchising

Franchising is known as an advanced system of licensing. On this system, the owner of a business which referred to as franchiser allows an organization called franchisee to sell its products on the name with the parent company. Parents company earns royalty for the sales made. The franchisee must utilize company name and standards from the parent company for being a part of this technique. Put simply, the franchisee runs his business much the same way since the franchiser does. The threat to this particular strategy is that the franchisee gets to be a potential future competitor to the franchiser.

Joint Venture

Joint venturing is again a very important and commonly adopted technique of getting into an international market. A joint venture cuts down on the hazards of the participants considerably. Three way partnership is extremely beneficial for a firm. Consider a company which wants to enter an overseas market nonetheless it doesn’t have any understanding about the culture, environment and ethics with the citizens. This type of company will enter into a joint venture with another company which is already perfectly located at the target country. This way they can possess a better idea of the objective market as they have connection to the local players of the country.

Joint venture also allows the companies to merge their resources and perform in a large. Two businesses can begin to play bulk production and selling. If your partnership is between companies from developing and civilized world, the technological and managerial skill sharing between them gets to be a highly important aspect. But when you are looking for business expansion, the two companies may possibly not have similar opinion and yes it becomes the main reason of failure of many joint ventures across the globe.

Turnkey Projects

Turnkey projects are typically affecting large investment projects. Why don’t we consider such as a developing country which has very less technological expertise. Such countries outsource their public construction work like roads, dams, bridges, rail lines etc. to foreign companies that are technologically sound. Once the project is fully gone, two possibilities exist. The organization which accomplished the job may operate the work and work out through tickets, toll taxes etc. or give the entire project on the concerned government on full payment of the contract.

Strategic Alliances

Strategic alliances include cooperative agreements between two or more companies. These agreements are often made for development and research work but might also cover managerial assistance. The strategic alliances thus mainly pay attention to developing services instead of expanding the markets of existing products. Technological sharing is amongst the most significant good thing about strategic alliances.

Wholly Owned Subsidiaries

Wholly owned subsidiary is recognized as the intense mode of entry into foreign markets. A business establishes its very own production plant in a foreign market and operates it there. This mode of entry requires countless number of capital investment as well as the risk associated can also be considerably high. As a possible advantage the wholly owned subsidiary gives a better control to the company for the overseas activity. The organization must follow the norms of the home and host country’s government.

Companies which usually establish a wholly owned subsidiary also go for acquisitions in foreign market being an easier way. In case a company inside the host country features a well-established business, the corporation of the house country will choose to acquire it as opposed to generating a home based business unit inside the host country.

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