International Market Entry Strategies-:

According to Frank Bradley and Michael Gannon, Any injudicious selection of the entry mode may give rise to opportunity costs and in some cases thwart subsequent endeavors in international markets First, Firms seeking to international markets have to check if there is a potential market for their products in foreign markets. The second steps are to choose an appropriate country. Third, they have to decide the mode of entry. Some researchers classify the entry mode choices available to a company are shared and full/wholly owned control modes, while others classify them as high control and low control modes.

1.High Control/Fully Owned Mode of Entry

A high control mode is where companies like to have greater control over their operations in international markets. It is more susceptible to environmental uncertainties and involves high risk. Wholly owned subsidies

Firms having expertise in marketing and advertising and research and development, prefer to enter foreign markets through wholly owned subsidiaries. In a wholly owned subsidiary, the firm owns 100% of the stock of the subsidiary. Wholly owned subsidiaries can be established in a foreign country in two ways: (1) Greenfield operation: A firm can set up new operations in the foreign country. (2) Cross border Acquisition: It can acquire a firm and promote its products through firm.

2.Low Control / Shared Ownership

The low control/shared ownership mode is relatively less risky but the returns are moderate. This mode of entry is suitable for firms which do not have good internal resources and cannot commit resources in a foreign land. These firms enter into a foreign market with the help of local partner. A low control mode takes different forms:

1. Exporting: (a) Direct exporting (b) Cooperative (c) Indirect 2. Contractual Entry Mode: (a) Licensing (b) Contract Manufacturing (c) Turn key projects (d) Franchising 3. Joint venture 4. Strategic Alliances

1) Exporting:
Most firms begin their global expansion with exports and later switch to another mode. It was through exports that Sony Corporation became the leader in the global television market. Matsushita dominated the VCR market and Japanese automobile companies made inroads into the US automobile market.

(a) Direct Exporting:

The following three are the most common modes: 1. Companies establish their own branches or their personnel travel abroad. 2. They use a foreign import agent 3. They use a foreign distributor (b) Cooperative Exporting: One of the most popular forms of cooperative exporting is piggyback exporting. In this method, a company uses the distribution network of an existing local or foreign firm to market their products in the foreign land. For example, Wrigley, the US based chewing gum company entered India by piggybacking Parrys, a local confectionary firm. With this Wrigley got ready access to 2,50,000 retail outlets of Parrys throughout India. (c) Indirect Exporting: In this method, a firm sells its products in the foreign market with the help of an intermediary, may be an Export Management Company (EMC) or trading house or a broker. This mode is most suitable for firms which are entering into the international markets for the first time. The company does not have to commit its own resources for marketing.

 It can obtain export expertise with the help of the export agent and can familiar itself with the corporate methods of the host country.

(2) Contractual Entry Mode

Firms have tie-ups with foreign companies in the host countries. Firms enter international markets with the help of these contracts.

(a) Licensing:
Licensing is an arrangement whereby a company (licenser) grants the rights to intangible property like patents, inventions, formula, process, designs, copyrights and trademarks to another company (licensee) for a specified period of time. The licenser receives a royalty fee from the licensee. For example, in the early 1960s, Xerox licensed its patented xerographic know-how to Fuji-Xerox. It was initially meant for ten years, but the license was extended several times. In return, Fuji-Xerox paid Xerox a royalty fee equal to 5% of net sales revenue that it earned. (b) Contract Manufacturing: Some components of the product/s may be manufactured in the local market (host country). The responsibility of selling the product lies with the firm from the home country. Nike follows this mode of entry. Product designing and marketing strategies are decided by the company while manufacturing is outsourced.

(c) Turnkey Projects:

The Contractor handles every aspects of the project for a foreign client including the training of operating personnel. After the completion of the contract, the foreign client is handed the key to the plant that is ready for operation. Turnkey projects are common in the chemical, pharmaceutical and petroleum refining industries. Turnkey projects are useful where FDI is restricted by the regulations of the host government.

 For example, many oil rich countries in the Middle East wanted to retain ownership of their own petroleum refining industry, and therefore restricted FDI in their oil and refining sectors. But since many of these countries did not have the technological know-how for petroleum refining, they entered into turnkey projects with foreign firms that had the technology.

(d) Franchising:
Franchising is similar to licensing except that it requires long-term commitments. In franchising the franchiser not only sells intangible property to the franchisee, but also insists that the franchisee abide by the rules as to how he does business. In some cases, the franchiser also assists the franchisee in running the business. The franchiser receives a royalty payment that is usually a percentage of the franchisees revenues. Service companies usually opt for franchising. For example, McDonalds pursues its expansion abroad through franchising. Through franchising a firm can avoid the costs and risks of opening a market on its own in foreign countries. The costs and risks are borne by the franchisee.

3) Joint Venture:
Kogut and Singh define joint ventures as vehicles to share complementary but distinct knowledge which could not otherwise be shared or to co-ordinate a limited set of activities to influence the competitive positioning of the firm. Joint ventures allow companies to own a stake and play a role in the management of the foreign operation. Joint ventures require more direct investment and training, management assistance and technology transfer Joint ventures can be equity or non-equity partnerships. Joint ventures help a firm to benefit from the local partners knowledge of the host countrys culture, language and political systems. Companies can also enjoy the advantage of synergy. Kogut and Singh in a study found that firms from the source countries, which have higher cultural differences with US, prefer to enter the US market through a joint venture.

(4)Strategic Alliances:
Strategic alliances can be described as a coalition of two or more organizations to achieve strategically significant goals that are mutually beneficial. Companies come together to exchange new technology, new marketing techniques or new methods of operations and logistics techniques and to share risks and costs. For Example: Motorola and Toshiba shared the costs and risks by entering into a strategic alliance in the Microprocessor business, which is highly capital intensive. An alliance of Airbus Consortium, formed by the government of European countries to create an Entity, which could be a formidable competitor to Boeing. The Alliance between Boeing and a number of Japanese companies to build 767 was Boeings attempt to share the costs of manufacturing an aircraft.