Market entry methods
After assessing the environment in your selected country, how do you decide which are the best countries to enter? Paliwood (1993) suggests that before you enter an overseas market there are six factors that need to be considered: Speed – How quickly do you wish to enter your selected market? Costs- What is the cost of entering that market?
Flexibility – How easy is it to enter/leave your chosen market? Risk Factor – What is the political risk of entering the market? What are the competitive risk? How competitive is the market? Payback period – When do you wish to obtain a return from entering the market? Are there pressures to break even and return a profit within a certain period? Long- term objectives- What does the organization wish to achieve in the long term by operating in the foreign market? Will they establish a presence in that market and then move onto others?
There are a number ways an organization can start to sell their products in international markets. 1. Direct export.
The organization produces their product in their home market and then sells them to customers overseas. 2. Indirect export
The organizations sells their product to a third party who then sells it on within the foreign market. 3.Licensing
Another less risky market entry method is licensing. Here the Licensor will grant an organization in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment. 4.Franchising
Franchising is another form of licensing. Here the organization puts together a package of the ‘successful’ ingredients that made them a success in their home market and then franchise this package to oversea investors. The Franchise holder may help out by providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets. 5.Contracting
Another of form on market entry in an...
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