Elements Of Foreign Market Entry Strategy

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Elements of Foreign Market Entry Strategy

A foreign market entry strategy is a comprehensive plan that lays down the objectives, resources, and policies that will guide a company’s international business over a period of time long enough to achieve a sustainable growth in world markets. Market entry plans call for decisions on the following issues.

1.    The target product and target foreign market
2.    The company’s objective and goals in the target market
3.    The entry modes to penetrate the target foreign country
4.    The marketing plan to penetrate the target market in the target country
5.    The control system to monitor performance in the target country/market.

Foreign Market Entry Modes

Foreign market entry modes may be classified as follows:

1. Export Entry Modes

a.    Indirect
b.    Direct agent/distributor
c.    Direct branch/subsidiary
d.    Other

2. Contractual Entry Modes

a.    Licensing
b.    Franchising
c.    Technical Agreements
d.    Services Contracts
e.    Management Contracts
f.    Construction/Turnkey Contracts
g.    Contract Manufacture
h.    Co-production Agreements
i.    Assembling Arrangements

3. Investment Entry
a.    Sole Venture: new establishment
b.    Sole Venture: acquisition
c.    Joint Venture: majority
d.    Joint Venture: 50-50
e.    Joint Venture: minority

Overseas market can be tapped in two ways:

-Basing production in home country
-Arranging in foreign manufacture


Production in home country

Possible in two ways – Indirect exports and direct exports

Indirect Exports

•    Foreign visitors purchase goods- in the process add to foreign exchange earnings

•    Foreign department stores, foreign firms having branch offices locally or agents who buy on behalf of their parent offices abroad. Though add foreign exchange-not result of any deliberate effort on part of locals to promote exports

•    Merchant exporters/Export houses, where manufacturers entrust the job of selling his products abroad- normally do not engage in manufacturing.

Advantages of using Export House/Merchant Exporter

•    Manufacturer avoids problems of direct exporting such as investment of resources in collecting market intelligence, setting up of export depts.- served with foreign market knowledge

•    Operational cost of export house/merchant exporter spread over several parties-results in saving in unit cost

•    Effecting consolidated shipment- possibility of reduction of unit freight

•    Reputation of export house enables manufacturers to get better representation


•    May take too many unrelated lines resulting in producer neither getting expertise nor the attention he is looking for

•    Possibility of manufacturer continually depending on export house and not developing export expertise himself

•    Export house will push the product abroad on its won name and reputation-foreign customer may not associate the product with the manufacturer at all

By using an indirect channel, a manufacturer can begin exporting with low start-up costs, modest risks, and the prospects of early profits on sales

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