A firm must decide as to how it will enter a foreign market, i. It has to establish an institutional arrangement for selling its products in foreign markets.
This chapter addressed two related topics: The two topics are related in that several entry modes e. Most strategic alliances, however, involve more than just issues of market access.
For that reason Lenovo exploited the entry mode to get into the international market, tolaid a good basis for establishing branches in different countries afterwards. At year Lenovo and NEC Corporation (NEC) announced a strategic partnership to set up a joint venture with two companies to become Japan's major personal computer group. Jan 30, · Lenovo’s acquisition of Motorola could be bad news for Indian mobile phone brands currently dominating the Android market. The deal comes at a . international market, because the sale abroad is treated like the domestic one. For these reasons it is difficult to say that it is an internationalization strategy.
This chapter made the following points: Basic entry decisions include identifying which markets to enter, when to enter those markets, and on what scale. The most attractive foreign markets tend to be found in politically stable developed and developing nations that have free market systems and where there is not a dramatic upsurge in either inflation rates or private-sector debt.
There are several advantages associated with entering a national market early, before other international businesses have established themselves.
These advantages must be balanced against the pioneering costs that early entrants often have to bear including the greater risk of business failure. Large-scale entry into a national market constitutes a major strategic commitment that is likely to change the nature of competition in that market and limit the entrant's future strategic flexibility.
The firm needs to think through the implications of such commitments before embarking on a large-scale entry. Although making major strategic commitments can yield many benefits, there are also risks associated with such a strategy.
There are six modes of entering a foreign market: Exporting has the advantages of facilitating the realization of experience curve economies and of avoiding the costs of setting up manufacturing operations in another country.
Disadvantages include high transport costs and trade barriers and problems with local marketing agents. The latter can be overcome if the firm sets up a wholly owned marketing subsidiary in the host country.
Turnkey projects allow firms to export their process know-how to countries where FDI might be prohibited, thereby enabling the firm to earn a greater return from this asset.
The disadvantage is that the firm may inadvertently create efficient global competitors in the process. The main advantage of licensing is that the licensee bears the costs and risks of opening a foreign market. Disadvantages include the risk of losing technological know-how to the licensee and a lack of tight control over licensees.
The main advantage of franchising is that the franchisee bears the costs and risks of opening a foreign market. Disadvantages center on problems of quality control of distant franchisees. Joint ventures have the advantages of sharing the costs and risks of opening a foreign market and of gaining local knowledge and political influence.
Disadvantages include the risk of losing control over technology and a lack of tight control. The advantages of wholly owned subsidiaries include tight control over technological know-how. The main disadvantage is that the firm must bear all the costs and risks of opening a foreign market.
About the Market. Mobile and Tablets industry are one of the fast growing sector in India and accounted for percent of India’s GDP in Increasing macro-economic imbalances and improving economic condition in the western countries led to huge shift in investments, away from the country. Locational Advantages of Global Sourcing Illustration Boeing’s Global R&D Network Market Characteristics and the PESTEL Framework The CAGE Framework SABMiller’s International Markets Hindustan Lever Ltd Modes of Entry Exporting Joint Ventures and Alliances Licensing Foreign Direct Investment Internationalisation and Performance Case. International marketing is based on an extension of a company’s local marketing strategy, with special attention paid to marketing identification, targeting, and decisions internationally (See .
The optimal choice of entry mode depends on the strategy of the firm. When technological know-how constitutes a firm's core competence, wholly owned subsidiaries are preferred, since they best control technology.
When management know-how constitutes a firm's core competence, foreign franchises controlled by joint ventures seem to be optimal.
This gives the firm the cost and risk benefits associated with franchising, while enabling it to monitor and control franchisee quality effectively. When the firm is pursuing a global or transnational strategy, the need for tight control over operations in order to realize location and experience curve economies suggests wholly owned subsidiaries are the best entry mode.
Strategic alliances are cooperative agreements between actual or potential competitors. The advantage of alliances are that they facilitate entry into foreign markets, enable partners to share the fixed costs and risks associated with new products and processes, facilitate the transfer of complementary skills between companies, and can help firms establish technical standards.
The disadvantage of a strategic alliance is that the firm risks giving away technological know-how and market access to its alliance partner in return for very little.
The disadvantages associated with alliances can be reduced if the firm selects partners carefully, paying close attention to the issue of reputation and structure of the alliance so as to avoid unintended transfers of know-how.
Two of the keys to making alliances work seem to be building trust and informal communications networks between partners and taking proactive steps to learn from alliance partners.When discussing the selection of entry modes, both the PTI and INV theory seem to focus on outward-oriented international business activities, i.e.
exporting, licensing out and setting up a joint venture or a wholly owned enterprise in a foreign country, whether the development pattern is . The five most common modes of international-market entry are exporting, licensing, partnering, acquisition, and greenfield venturing.
Each of these entry vehicles has its own particular set of advantages and disadvantages. Driscoll’s () foreign market entry modes choice framework as research framework for our case study.
Based on the assumption that the internatio nalization is the consequence of a series. Selecting a mode for entering or expanding in a foreign market is a crucial strategic decision for an international firm. This article identifies and compares the most influential factors that affect the international modes of entry and expansion decisions of US and Japanese firms.
The most common advantages of franchising are that it capitalises on an already successful strategy, the franchisee generally has local knowledge, it’s less risky than equity based foreign entry modes, and the franchisor isn’t exposed to risks associated with the foreign market (Alon, ).
This article explores the relevance of different entry modes for Danish exporting small and medium enterprises (SMEs). Internal and external resources that influence the choice of entry modes into the Brazil, Russia, India and China (BRIC) markets are investigated from both a resource-based view (RBV) and a market-based view (MBV).