MODULE INFORMATION PACK
Module Code: MK3111
Module Title: INTERNATIONAL MARKETING
Module Size: Standard Module
Module Tutor: Peter Frederick Ruddock
Chinese Name: Zhou Qijuan
English Name: Jean
Finish Date:21th , March, 2013
Tittle: What are the advantages and disadvantages of a market entry strategy of exporting for SME’s v MNE’s? Use both academic and practical sources. You must include references to at least three business sources and at least three academic articles from academic journals.
A number of companies has a huge successful in the domestic. Thus, these companies want to expand the new market in oversea. The company will make a strategy of entry the market involves the market analysis and company condition. The essay main discuss on entry the market strategy of exporting for SMEs and MNEs. Having identified potential country, both smaller and global firms use these strategies to the development of product. Due to exporting has risk less, low cost and ease of operation feature. Usually, core enterprises retain main activities in its home country but conduct marketing, distribution, and customer services activities in the exporting marketing (Anderson,1986). And the exporting divides to two strategies: indirect exporting and direct exporting. A number of enterprises will keep exporting as entry market strategy.
The direct exporting strategy
Direct exporting refers to selling product to your target customer directly. Direct exporting generally need to greater initial expenses of capital, staff, and other resources, and they are regard as the more risk compare with indirect exporting. (Reference for business, 2012). MNEs general have strong economy and power technology, transfer far information. Thus, MNEs have absolute advantage involving product, market share and technology. The most significant feature is their huge size, these multinational companies and the basic characteristics of multinational company, in such a company, control resides in a single institution hands (John H. (1993)). Therefore, the multinational company has a complete organization system. Direct exports have types of model: agency; Dealers; Management contract, franchising, Direct marketing and online purchase (Doole I. & Lowe R. 2012).
Advantages and Disadvantages of Direct Export
In direct export, manufacturer needs to manage the task of exporting sale. It is means the company join the exporting business more directly. This model of advantage has more control power and expand sale channel as well as the company should obtain much information and develop professional skills inside the company. As a company, the direct export has some advantage: 1) the firm could complete control exporting; 2) manufacturer could increase profit by saving expenses for intermediary; 3) the firm has a good relationship with oversea buyer. Furthermore, it can improve feedback involving the performance of product, individual market and competitor advantage. Thus, it is adapted to international market and it is changed the price and position in the market.
On the order hands, direct exporting means the company require more time and resource to build a successful market would outweigh the benefits the exporter could gain from exporting directly. Then, the exporter could obtain more risk, including exchange rate risk, market risk and transaction risk so on. Because the company expands more market, the employee and management condition will improve high demandingness.
The indirect exporting strategy
Indirect exporting means the expensive subsidiary build a relationship with foreign company. Many businesses have been exporting indirectly by using an export intermediary. Firms want to exporting, but the firm has not resource and capital. The firm can through commission agents, export Management...