Documente Academic
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– 1
TRIMESTER - II
GROUP – 7
Project 1
Submitted to:
DATE: 23/1/2009.
Friday
Submitted by:-
Gurjar pankaj(34)
Jadav Akshay(38)
Kharpate swapnil(47)
Modi Dhara(59)
1 Acknowledgement 03
2 Preface 04
4 Modes of entry 06
5
07
6 Working capital 08
7 Investing 09
8 Finance 11
9 Dividend 13
10. Suggestions 15
11` Conclusions 16
Market potential :
The companies must consider both present and likely future levels
of competition while selecting the foreign markets. The company
should consider:
For example
Honda could offer superior quality car at low cost during1970s
owing to manufacture of poor quality cars by General motors, Ford
and Chrysler in USA . however ,Japanese cars could successfully
enter us market due to their cost, convenience and product
design .At present, the level of competition is less for
telecommunication industry in most of the liberalized economies.
Socio-cultural Influences:
Types of Exports
Exporting
Indirect exports
Disadvantages
• Little or no control over foreign market
decisions
• Lower profit margins
• Little experience/knowledge/foreign
contacts gained
• Often involves an unsolicited purchase
• Direct Marketing
– Database Marketing Tools
• telemarketing, media marketing,
direct mail and the internet
– Transferability across boundaries
– Customisation is essential for success
Factors to be considered
• Govt. policies like export and import
policies, export financing, foreign exchange
etc.
• Marketing factors like image, distribution
networks, responsiveness to the customer,
customer awareness and customer
preferences
• Logistical consideration: These factors
include physical distribution costs,
warehousing costs, packaging, transporting,
inventory carrying costs etc.
• Distribution Issues: These include own
distribution networks, networks of host
country’s companies.
• Also other ways like countertrade,
piggybacking
ENTRY SRATEGIES OF MARKET 17
Export Intermediaries
• Export management companies act as export
dept. of the exporting firm, the act as the
exporting agents
• Co-operative society: they undertake the
exporting activities for the small domestic
companies.
• International trading company
• Manufacturer’s export agents
• Export and Import Brokers
• Freight Forwarders
Export Tasks
• Transportation
– Negotiation
– Coordination between modes and
shippers
• Export licenses and permissions
• Customs clearing
• Warehousing
• Financing
• Quotes
• Point of transfer (FOB)
• Credit
• Risk assessment/letters of credit
RISK
Risk
Exporting
• Advantages:
Need for limited finance: selection of a host
company, use of the logistics and the
distribution channels
Less Risk: Enough time to learn the culture,
customer and the market of host country,
and can enter later in full-fledged way.
• Disadvantages:
Licensing
• International Licensing
• Is the mode in which domestic manufacturer
leases the right to use its intellectual
property,
• Like technology, working patterns, copy
rights, brand names, trade marks etc for a
fee.
• The manufacturer in domestic country is
called a ‘licensor’ and those in foreign
country is called a ‘licensee’
Constraints:
• Disputes settlement Mechanisms
• Agreement Duration
Advantages
ENTRY SRATEGIES OF MARKET 22
• Licensing mode carries relatively low
investment on the part of licensor
• Licensing mode carries low financial risk to
the licensor.
• Licensor can investigate the foreign market
without much efforts n his part
• Licensee escapes himself from the failure of
the product
Disadvantages
Franchising
Franchising is “a form of licensing (the franchiser) grants another
independent entity (the franchisee) the right to do business in a
prescribed manner.
The franchisor can exercise more control over the franchised
compared to that in licensing.
International franchising is growing at a fast rate
Under this agreement the franchisee pays a fees to the
franchisor
The franchisor provides the following services to the
franchisee:
1. Trade marks
2. Patents
3. Copyrights
4. Technology
Disadvantages:
1. International franchising may be more complicated than
domestic franchising.
2. It is difficult to control the international franchisee.
3. Franchising agents reduce the market opportunities for both
the franchisor and franchisee.
4. Both the parties have the responsibilities to maintain product
quality and product promotion.
5. There is scope for misunderstanding between the parties.
6. There is a problem of leakage of trade secretes.
Special Modes
Contract Manufacturing
Disadvantages
1. In some cases, there will be the loss of potential profit from
manufacturing.
2. Less control over the manufacturing process.
Management contracting
• A flat fee or
• Percentage over sales and
• Performance bonus based on profitability, sales growth,
production or quality measures.
Advantages:
1. Foreign company earns additional income without any
additional investments, risks and obligations.
2. This additional income allows the company to enhance its
image in the investors and mobilize the funds for expansion.
3. Management contract helps the companies to enter other
business area in the last country.
4. The companies can act as dealer for the business of the host
country’s business in the home country.
Disadvantages:
1. The host country’s companies may leak the secrets of
technology.
2. Sometimes the companies allow the companies in the host
countries in the host country even to use their trade marks
and brand name. The host country’s companies spoil the
brand name, if they do not keep up the quality of product
service.
GREENFIELD STRATEGY
The term Greenfield refers to starting with a virgin green site and
then building on it. Thus, Greenfield strategy is starting of a company from
scratch in a foreign market. The company conducts the market survey, select
the location, buys or leases land, creates the new facilities, erect the
machinery, remits or transfer the human resources and starts the operations
and marketing activities. This strategy is followed by Fuji in locating its
manufacturing facilities in south corolina , by Marcedies Benz in locating
automobile assembly plant in ALABAMA and by Nissan in locating its
factory in Sunderland, England.
ADVANTAGES;-
• The company can have latest model of the buildings, machinery and
equipment technology.
• The company can have its own policies and styles of human
resources management.
• The company can have its gestation period to understand and adjust
to the new culture of the host country. Thus, it can avoid the cultural
shock.
DISADVANTAGES;-
• The company has to follows the rules and regulation imposed by the
host country’s government in case of construction of the factory
buildings.
• Selecting Partners
• Structuring Alliances
• Alliance Dynamics
• Limits to Alliances
ADVANTAGES;-
• The company immediately gets the ownership and control over the
acquired firm’s factories, employees, technology, brand names and
distribution network.
DISADVANTAGES;-
Reuters reported Tata Steel Ltd. last year engineered India's biggest
takeover to date, a US$13 billion purchase of Anglo-Dutch steelmaker
Corus Group Plc, which was more than double the size of the next biggest
deal, Hindalco Industries purchase of Canada's Novelis.
Indian firms have announced deals worth $6.8 billion so far in 2008,
down 39 percent from the same period last year.
JOINT VENTURE.
ADVANTAGES;-
DISADVANTAGES;-
Referencces
1) Business Environment Text &Cases By Francis Cherunilam
2) www.icfai/papers.html
3) www.nwikipedia.com
4) www.finmin.gov.in
5) www.indiatimes.com
6) www.economictimes.com