When entry a new market, especially to China, exporting is a good choice. There are many forces that lead us to choose the exporting. It involves more risk and investment as the firm sets up its own presence in the host country but the potential return is also greater.
When choosing exporting as the market entry mode, there are many advantages and disadvantages exist:
Exporting can minimizes risk and investment. Since the industry and the head quarter are at the home country, it can decline the risk and investment in other counties. It just need one thing—export. In addition, exporting can also maximizes scales and use existing facilities to expend the market. When we develop the industry in other countries especially a new environment, there are many conditions that we are not sure, we can use the existing resource to save the investment and minimize risk, that’s why exporting can be benefit for developing a new market.
There still some disadvantages of exporting. Firstly, the company may be viewed as an outsider and it can not be accepted easily in a new environment, we should look into the consumer, and make it out what customers’ need. Another disadvantage is that exporting need a lot of tariff costs and a high level of barriers to entry the new market. Because of the exporting, the corporation may spend a lot of fund on exporting, at the same time, there are many differences between the two countries, just like culture, custom policy and so on, they are all the restrictions when entering a new market.
In the next five years, the corporation will become more and more mature, and we should change the way of the market entry. At that time, foreign direct investment (FDI) is a suitable way to operate the industry in a foreign market. Since we have been there for almost five years, we have enough fund to set up new company there. FDI can be benefit to the development of the company. It can gets...