In this assignment, there have several ten questions for us for selection, I have choose the question five for my assignment this time, this question is regarding to two areas, one is the market entry strategy and explain why no single strategy can be used in all circumstances; another one is explaining why franchising is popular method of entering markets abroad and describe its characteristic.
2Market Entry Strategy
Why firms go abroad
First of all, we need to know why firms go abroad and looking for entering foreign countries’ market.
In General, the reasons why Enterprise seeks to invest in the foreign countries and have International expansion, which can be divided into several aspects. Firstly, domestic market is becoming saturated, therefore, enterprise had to seek to invest in the other market so as to solve the issue of overcapacity. Moreover, could obtain more market share in the foreign countries through global investment while niche market would also be available to the enterprise in the Market. Furthermore, economies of scale would be formed through the distribution both in domestic and abroad and as a result enterprise could reduce operating cost and earn more profits. Fourthly, investing in the foreign countries is a wise option to avoid anti-dumping measures.
2.1Type of entry strategies
According to above reason we mentioned, the enterprises are required to seek alternative and appropriate market entry strategies to help enterprise to entry different market. Normally, we can find the most common strategies as the following
Exporting is the marketing and direct sale of domestically –produced goods in another country. Exporting is traditional and well-established method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the cost associated with exporting take the form of marketing expenses. In general, this method requires coordination among four entities, which included Exported, importer, transport provider and government.
Essentially permits a company in target country to use the property of the licensor. Usually, the property is intangible, such as trademarks, techniques of production and style of patents. The licensee pays a fee for the right to use the property and possibly for technical assistance. Licensing has the potential to provide a very large return on investment as little investment on the part of the licensor is required .
It’s a business agreement which parties agree to develop, for a finite time, a new entity and new assets by contributing equity, which includes five common objectives, which are market entry, risk and reward sharing, technology sharing and joint product development, and conforming to government regulations, other than that it may be benefited as political connections and distribution channel access that may depend on the relationships. The key issues to consider in a joint venture are ownership, length of agreement, pricing, technology transfer, local firm capability and resources, and government intentions.
It’s an agreement between Franchisor and Master franchise. Basically a grant from franchisor for the master to operate the business system in the agreed country. It also can be defined as “ A system in which semi-independent business owner (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services , and often to use its business format and system. Unusually franchisor offers a broader package of rights and resources, such as equipment, managerial system, initial trainings, site approval and all the support necessary for the franchisee to run its business in the same way it is done by the franchisor....