Export Market Entry Options

Topics: Investment, International trade, Trade Pages: 7 (896 words) Published: April 30, 2014
4.3

199

Export Promotion
Export Market Entry Options

4.3

Export Market Entry Options

Name of the Tool:

Export Market Entry Options

Source:

GIZ

Usage:

This tool can be used for two different purposes:
1. As an analytical framework for the formulation of the market entry strategy of a national export promotion strategy
2. As a conceptual basis for supporting SMEs in choosing an appropriate market entry option for exporting (export promotion on the operational level) Choosing the right market entry option depends on the particular structure of the target market and on the specific objectives, capabilities and resources of the IT companies.

IT companies do not necessarily have to stick to a single entry mode but can combine several entry options.

Description:

The Tool provides an overview on five different export market entry options for IT companies from developing and transformation countries, ranging from the so-called intermediate mode of internationalisation to establishing a representative office in a particular target market. For each option a short comparison of the particular advantages and disadvantages is being provided

Overview on the different market entry options:
IT exporters from developing and emerging countries

1

Intermediate mode of
internationalisation

2

Offshoring IT consultants,
agents, brokers

3

Internet

IT service providers,
IT consultants,
system integrators

4

5

Direct investment:
representative office,
subsidiary

End-clients on potential export markets (non-IT end-clients, software vendors)

200

Short description of market entry options:
Option 1: Intermediate mode of internationalisation
Channelling of a company’s services or products through an existing multinational client in the home market
Examples: in Ireland and India, for many SMEs, doing business with MNCs in the domestic market was the first step in entering international markets
Also several examples from Macedonia (e.g. Ein-Sof)
Through referrals by international clients in the domestic market, access to new clients in export markets
Strategic linkages with MNCs also provide local companies with access to latest technologies Increasing FDI creating business opportunities for local IT companies

+
Indirect access to foreign markets without
overstretching resources


High transaction costs

International reference clients

Lack of information on markets and
end-clients (information asymmetry)

Reputation

Dependency on MNCs

Leverage MNCs’ assets, scale and networks

Discourages development of own export
capabilities

Option 2 and 3: Indirect market entry through intermediaries  IT companies use an intermediary / distributor to enter the market The intermediaries could be:
a.)Specialised offshoring consultants (brokers, agents)
b.)Service providers and IT consultants
Trend towards integrating offshoring elements into IT services and the increasing specialisation within the IT service value chain, provide additional opportunities for cooperation between IT service companies and offshoring providers from developing and transformation countries

+
Less investment required
Less risk since intermediaries provide in-depth
customer and market know-how
Mitigates lack of branding


Limited control over export activities and
customer contacts
Reduced profit margin
Hampers development of export and market
know-how

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Export Promotion
Export Market Entry Options

Option 4: Direct export
Direct exports from IT companies to end-clients in the export market (non-IT end-clients, software companies)
Direct sales without involvement of intermediaries
Focus on SME segment since access to large-scale end-clients rather unlikely Several examples of companies from developing and transformation countries conducting direct...
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