PART -A
Introduction of entry market strategy
Strategy is planning through companies achieve their goals and move forward. A company makes a decision to enter an international market, this strategy works to expand its wings. Company could use many ways to get it. These ways can be a shade of company’s strength, potential and the level of interest in marketing. Exporting is main entry strategy in international arena which can be used direct or indirect mode. A company’s aim to international market can require minimal investment and be limited to infrequent exporting with title thought given to market development. Or a company can make large investments of capital and management effort to capture and maintain a permanent, specific share of world market. Both approaches can be profitable. Entry market strategy can be fulfilled through these mechanisms.
- Exporting
- Piggybacking
- Licensing
- Franchising
- Joint venture
- Manufacturing
Exporting
A company can decide to enter foreign market by exporting from home country. This means of foreign market development is the easiest and most common approach employed by companies taking their first international steps because the risk of the financial loss can be minimised. Many companies engage in exporting as their
major market entry method
. Generally early motives are to skim the cream from the market or gain business to absorb overheads. Even though such motives might appear opportunistic, exporting is sound and permanent from of operating in international marketing.
Piggybacking
Piggybacking occurs when a company (supplier) sells its product abroad using another company’s (carrier) distribution facilities. This is quite common in industrial product but all types of product are sold using this method. Normally piggybacking is used when the companies involved have complementary but non- competitive product. Some companies use this method to share transportation costs and some companies do it purely for the profits as they can make profit on other companies (suppliers) products. This method also can be used a first step towards a company’s own international activities to test the market. This particularly advantageous for small firms as they often lack the necessary resources. Once they realise the market potential, they can start their own exporting.
Licensing
A mean of establishing a foothold in foreign markets without large capital outlays is licensing patent rights, trademark rights and the rights to use technological processes are granted in foreign licensing. It is favourite strategy for small and medium-sized companies although by no means limited to such companies. Not many companies confine their foreign operations to licensing alone. It is generally viewed as a supplement to exporting or manufacturing rather than the only means of entry into foreign market. The Advantages of licensing are most apparent when capital is scarce, when import restrictions forbid other means of entry, when a country is sensitive to foreign ownership or when it is necessary to protect patents and trademarks against cancellation for non use. Although this may be the least profitable way of entering a market but the risks and headaches are less than for direct investments.
Franchising
Franchising is a rapidly growing form of licensing in which the franchiser provides a standard package of products, systems and management services and the franchise provides market knowledge, capital and personal involvement in management. The combination of skills permits flexibility in dealing with local market condition and yet provides the parent firm with a reasonable degree of control. Potentially the franchise system provides an effective blending of skills centralisation and operational decentralisation and has become increasingly important form of international marketing.
Joint venture
Joint ventures one of the more important types of collaborative relationship, have accelerated sharply during the past 20 years. Besides serving as a means of lessening political and economic risks by the amount of the partner’s contribution to the venture, joint ventures provide a less risky way to enter markets that pose legal and cultural barriers than would be the case in the acquisition of the existing company. A joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity. Joint ventures should also be differentiated from minority holdings by an MNC in a local firm. Four factors are associated with joint ventures.
Manufacturing
Another means of foreign market development and entry is manufacturing within a foreign country. A company may manufacture locally to capitalise on low cost labour to avoid high import taxes to reduce the high cost of transportation to market to gain access to raw materials and or as means of gaining market entry. Seeking lower labour costs offshore is no longer an unusual strategy. A hallmark of global companies today is the establishment of manufacturing operations throughout the world. This is a trend that will increase as barriers to free trade are eliminated and companies can locate manufacturing wherever it is most cost effective.
Illustration of entry strategies for some organisations
Starbucks
entered in UK, was the first European country. The UK provided facilitation this company to expand its business in Europe. That has been a milestone of its achievements and to go into a foreign market. Strategy was taken by Starbucks to enter and fulfil new or all sort of market, encourage country’s culture and traditions. Recently three different strategies are used in starbucks