Important Foreign Market Entry Strategies

Significant Foreign Market Entry Strategies are as Follows:

Exporting: It is one of the traditional modes present to enter into a foreign market.

It suits when any of the following conditions are present :-

  • If the volume of foreign business is not large enough ;
  • Cost of production of that particular product in the foreign market is high;
  • Problems related to infrastructural , materials supplies present in the foreign market;
  • Political  and other risks of investment in the foreign country;
  • If the company has no permanent interest in the foreign market
  • If no guarantee of the market available for a long period of time

Licensing: – Under licensing agreement a firm in one country (the licensor) permits a firm in another country (the licensee) to use its intellectual property such as patents, trade marks, copyrights, technology, marketing skill etc. The licensor takes royalty or fees from licensee pays.

Franchising: Franchising is a form of licensing in which the franchiser grants the right to do business to another independent entity (the franchisee) in a prescribed manner. The right of franchisee takes the form of selling the franchiser’s products by using its name, production and marketing techniques etc.

Management Contracting: Through this method supplier put together the skills that will provide an integrated service to the client without incurring the risk and benefit of ownership. It allows a firm to commercialise existing experience that has been built up with significant investments .Under it the firm providing the management experience may not have any equity share in the venture being managed.

Turnkey Contracts: A turnkey operation is the promise by the vendor to supply the buyer a facility fully equipped and ready to be operated by the buyer’s employees, who will be trained by the vendor. This method is common in international business in the supply and commissioning of plants like oil refineries, steel mills, cement and fertilizer plants, etc.

Fully Owned Manufacturing Facilities :  The Companies who has long term and substantial interest in the foreign market usually establish wholly owned manufacturing facilities so that they could get full control over production and quality of their products.

Joint ventures:- It is a very common strategy of entering the foreign market. In this two or more business entities contribute a combination of subsets of assets for a specific business purpose and also for a limited duration. In this strategy both firms have the right of mutual control or management of the enterprise.

Mergers and Acquisitions: – A merger is a combination of two or more businesses into one business. Laws in India use the term ‘amalgamation’ for merger. Amalgamation is the merger of one or more companies with another or the merger of two or more companies to form a new company, in such a way that all assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company. An acquisition may be defined as an act of acquiring effective control by one company over assets or management of another company without any combination of companies. Thus, in an acquisition two or more companies may remain independent, separate legal entities, but there may be a change in control of the companies. When an acquisition is ‘forced’ or ‘unwilling’, it is called a takeover.

Strategic Alliance: – This strategy work to enhance the long term competitive advantage of the firm by forming association with its competitors, in place of competing with each other.