Modes of Entry
1. Exporting –
Indirect exporting means that the company does not deal with foreign customers or companies by itself but uses intermediates such as export companies, export agents, or export partner network to take care of all export activity. Indirect exporting should be taken into consideration if a company’s own prerequisites in international business are not enough and if the intermediate’s resources as well as the know-how benefit the company. This entry alternative has quite low risks for the exporter.
In direct exporting the company takes care of the exporting activity by itself. The company is in contact with the intermediates in the target market such as import agents, retailers, or brokers. It is essential for the company to know the markets, pick the agent or distributor carefully and posses the knowledge in marketing as well as exporting routines. Benefits in direct exporting are shorter distribution channels, smaller distribution expenses as well as closer connection to the end user and greater potential return.
2. Joint Venture - A second method of entering a foreign market. Joint venture differs from exporting in that the company joins with foreign companies to produce or market a product or service. This includes modes such as licensing, franchising, management contracting, project operations, and joint ownership.
Jointly owned subsidiaries - Joint ownership is the mode of joint venturing in which a company joins investors in a foreign market to create a local business in which they share joint ownership and control. The foreign countries’ regulations may require joint ownership as a condition to enter the country, or company’s financial, physical, or managerial resources are not enough to undertake the venture alone.
3. Licensing - International licensing means that the manufacturer sells the right to use the company’s immaterial rights such as manufacturing process, trademark, patent, trade... [continues]
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