Globalization has increased the competition amongst firms. There are more and more companies which are motivated to conquer foreign markets and enlarge their presence on these markets. For multiple reasons, companies adopt modes to enter foreign markets and find new channels of distribution. Choosing the right and appropriate market entry strategy has a growing importance. As a matter of fact, companies should align their strategy to their objectives and adapt them to the foreign markets environment. There are numerous different entry strategies which are all linked to different entry modes, different amounts of risks or costs. From the least costly mode to the most expensive one we distinguish three main strategies: Export is characterized by the transportation of finished goods from one country to another. The distribution on site is done by an intermediary or by foreign based distributors or agents. Joint Venturing includes different characteristics of various joint contracts with firms to produce or promote services or products. Direct investment is, when a company decides to invest directly into a foreign country by either establish an assembly operation, a wholly-owned operation as well as a merge or an acquisition. Each of the market entry strategy has both, advantages and disadvantages. The less costly the strategy is, the less control the company has over the distribution channel. Consequently, the company depends more or less on foreign institutions or foreign partners. All in all a company has to figure out for itself which strategy to choose, according to its particular situation, financial as well as economical and environmental. Therefore, before entering a market, a previous comprehensive research and analysis of the target market and its economic environment is indispensable to achieve a successful launch into an unknown market.
Table of Contents
1. Introduction
2. Fundamentals of Market Entry Strategies
2.1 Reasons for companies to go international
2.1.1 Reactive reasons
2.1.2 Proactive reasons
2.2 Deciding which markets to enter
3. Analysis of Market Entry Strategies
3.1 Exporting
3.1.1 Indirect exporting
3.1.2 Direct exporting
3.2 Joint Venturing
3.2.1 Licensing
3.2.2 Contract manufacturing
3.2.3 Management Contracting
3.2.4 Joint ownership
3.3 Franchising
3.4 Direct Investment
3.4.1 Assembly
3.4.2 Wholly-owned subsidiary
3.4.3 Merger and Acquisition
4. Conclusion
Research Objectives and Key Topics
This paper aims to analyze and interpret various market entry strategies, evaluating their respective advantages and disadvantages to help companies choose the most appropriate method for their international expansion. The study provides a structured framework for understanding the strategic alignment required between company objectives, market conditions, and entry modes.
- Strategic motivations for internationalization (reactive vs. proactive reasons)
- Methodological decision-making processes for selecting target markets
- In-depth analysis of three primary entry modes: Exporting, Joint Venturing, and Direct Investment
- Risk and control assessment of different international market entry paths
- Comparative overview of entry strategies based on cost, control, and return expectations
Excerpt from the Book
3.1.1 Indirect exporting
Indirect exporting means that the products of the manufacturer are sold overseas by others, minimizing the risks for the producer. In practice there are five different methods of indirect exporting, the methods of using an export buying agent or export commission houses, a broker, an export management company, a trading company as well as the piggyback method.
Export buying agents know the domestic market very well and look therefore for potential domestic sellers on behalf of foreign buyers who want to import a product. The export buying agent negotiates amounts and prices with the seller and gets paid by a commission from the buyer. Transporting, marketing and distribution of the product are the tasks of the buyer. Similar to export buying agents are export commission houses which can also be seen as domestic buyer acting on behalf of foreign importers. The export commission houses are agencies who invite the sellers to bid for a special order. This process eliminates the negotiation between potential sellers and buyers and leads to the fact that the seller with the lowest bid receives the order. These similar methods are also known as domestic purchasing.
Chapter Summaries
1. Introduction: Outlines the increasing necessity for global expansion due to rising competition and explains the structural approach of the paper.
2. Fundamentals of Market Entry Strategies: Discusses the internal and external drivers, such as reactive and proactive factors, that motivate firms to seek international opportunities.
3. Analysis of Market Entry Strategies: Provides a detailed examination of various entry modes ranging from low-involvement exporting to high-involvement direct investment strategies.
4. Conclusion: Summarizes that there is no single perfect strategy and emphasizes the need for comprehensive market research before committing to a specific entry approach.
Keywords
Market Entry Strategies, International Marketing, Globalization, Exporting, Joint Venturing, Franchising, Direct Investment, Risk Management, Market Expansion, Competitive Advantage, Wholly-owned Subsidiary, Merger and Acquisition, Distribution Channels, Strategic Planning, Foreign Markets
Frequently Asked Questions
What is the core focus of this publication?
This paper focuses on the diverse strategies companies use to enter foreign markets, evaluating how different modes of entry affect risk, cost, and operational control.
Which primary topics are covered in the work?
The work covers market entry drivers, decision-making processes, and specific strategies including exporting, joint venturing, franchising, and direct investment.
What is the central research goal?
The primary goal is to provide a summarized overview that helps management select the most convenient entry strategy tailored to their specific financial, environmental, and corporate situation.
What scientific methods are applied?
The author utilizes a comprehensive literature analysis and thematic synthesis of established international marketing management concepts to interpret market entry paths.
What is addressed in the main section?
The main section provides an analytical breakdown of market entry modes, contrasting the advantages and disadvantages of each, supported by industry examples.
Which keywords characterize this paper?
Key terms include market entry strategies, risk management, international marketing, and specific entry modes like direct investment and joint venturing.
Why is the distinction between reactive and proactive reasons important?
It helps companies understand whether they are entering a market due to external pressures or strategic foresight, which impacts their long-term market commitment.
How does the paper differentiate between indirect and direct exporting?
The differentiation is based on the level of control and involvement: indirect exporting relies on intermediaries to minimize risk, while direct exporting requires the company to manage foreign activities itself for higher potential returns.
What role does franchising play in international expansion?
Franchising serves as a popular, marketing-oriented method for expanding brands like restaurant chains rapidly with low capital investment by the franchisor.
When is a direct investment strategy recommended?
Direct investment is recommended for firms seeking long-term market entrenchment, full control over operations, and those that have already gained market experience through other methods.
- Quote paper
- Viktor Tielmann (Author), 2010, Market Entry Strategies, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/154541
