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Entering Foreign Markets
Foreign market entry alternatives
• Exporting
• Contractual Agreements
• Direct Foreign Investment
• Strategic Alliances
• Internet
Exporting
• Direct - selling to a customer in another country
• Indirect - selling to a domestic or foreign company who resells in another country
• How? – Trade shows, country visits, internet
Foreign Intermediaries
U.S. Company
Domestic Intermediaries
Foreign consumer
Internet
Direct exporting
Export Management Company (EMC)
Foreign RetailerDistributor
Trade Companies
(Japanese sogo shosha)
International Export Alternatives
Acts as an export department for the company; foreign buyers often don’t know the EMC isn’t actually Company X
Accumulate & distribute goods from many countries to many countries; Gray McKenzie & Company – entire middle east; Nissho-Iwai Corp – gets Nike shoes to South Korea & Taiwan
Contractual Agreements
Philip MorrisAmer Tobacco (Finland)
• Licensing -- one company (licensor) makes an asset available to another company (licensee) in exchange for royalties, fees or other compensation
• Pros – little investment required; avoid tariffs, quotas & other export barriers
• Cons – little control over licensee, licensees become competitors after agreement expires
Contractual Agreements
UK
Franchising – A contract that allows a franchisee to operate a business developed by the franchisor in return for a fee & adherence to franchise-wide practices
Joint Ventures• Forming a new business entity with a partner
in the target country• Pros - shared risk, learn about new
market, combine strengths, permit entry by means otherwise not possible
• Cons – partners share rewards as well as risk, potential for conflict between partners, partner is self-interested (wants technology, expertise, know-how)
Sichuan Pepsi accused of breech of contract; refused access to financial records and transferred stock without PepsiCo’s knowledge
“The purpose of any joint venture, or even a wholly-owned investment, is to allow Chinese companies to learn from foreign companies. We want them to bring their technology to the soil of the People’s Republic of China.”
- Yuan Sutai
Ministry of Electronics Industry, China
operate manufacturing facilities and/or sales offices in the host country
align with other companies in foreign
Direct foreign investment
Strategic alliances
Europe, North and Latin America, Middle East, Africa, South-east Asia and the South Pacific
markets to give customers access to those markets
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