Entering Foreign Markets

Entering Foreign Markets

Presented byMaxim Simonov

Where to Enter?

Evaluate:• Political factors• Economic factors• Demographic factors• Purchasing power

When to enter?

First Movers

Advantages:• Preempt rivals and

capture demand

Disadvantages:• Pioneering costs

What would be the Scale of Entry?

Big Scale• Commitment• Confidence • Inflexibility

Small Scale• Learning• Flexibility

Exporting

Turnkey Project

Licensing

Franchising

Joint Venture

Subsidiary

Entry Modes

Entry Modes

Exporting

Advantages:• No costs associated

with building manufacturing facilities

Disadvantages:• Transportation costs• Tariffs• Exporting agent who

can also work for a competing firm

Turnkey Project

Advantages:• Less risky than FDI• Good way to earn an

economic return from know-how

Disadvantages:• No long-term interest in

the foreign country• The firm may create a

competitor

Licensing

Advantages:• Bearing no costs

with development and risk

• Royalty paymentsDisadvantages:• Passing control over

manufacturing (RCA)

Franchising

Advantages:• Bearing no costs with

development • Passing control over

manufacturing

Disadvantages:• Using a company’s

brand name puts the company’s reputation at risk

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are needed to see this picture.

Joint Venture

Advantages:• Combines one

company’s expertise with the other company’s local knowledge

Disadvantages:• Risks of giving

control of technology

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Wholly Owned Subsidiaries

Advantages:• Gives a firm a 100%

share in the profits• Tight control over

operations• Protection of

technologyDisadvantages:• Costly investment

Questions