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Market Entry Mode

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Exporting is one way which investors can use in entry to new international markets. It is the most well established form of operating in foreign markets. This provides the simplest way of getting into a foreign market. When a company exports to a foreign country, it is able to enter the country without having to establish itself in the country. Exporting could either be direct exportation or indirect exportations. Direct exporters sell directly to buyers who are foreign while indirect exporters depend on domestic intermediaries to link them to foreign buyers. There is the tendency that there is no need to obtain a lot of detailed marketing information like manufacturing in marketing country. Its advantages include it is less risky because manufacturing is home based, it gives investors the chance to study and learn overseas markets before they invest and reduces risks that are associated with overseas operation.

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Outsourcing will also help a company that wants to establish itself overseas. It enables the company to know the political environment of the country that they want to invest in. It enables them to know nature of political parties and what politics influences business operations in the country. It also enables a company to know the different legal systems that exist in different countries that could act as a constraint to establishment of business. This could entail theocratic law, civil law or institutional laws. These laws play a major role in overseas investment. Licensing is a perfect strategy for a company having an in demand brand or product but does not have sufficient resources to grow internationally. When it licenses its products in a foreign country, it sells to another company in a foreign country the rights to produce the same product. The advantage with this method is that the company does not need to invest in the development of the market but rather, what they do is to simply collect the payments that the foreign firm will pay. Wholly owned subsidiary entering of a foreign market involves creation of a local firm with the assistance of a local partner which can be through Greenfield development or Brownfield development. This method of entering new markets has the advantage that it offers local expertise hence the company will not find it expensive hiring more expertise.

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When selecting an international market, a company must be careful enough because it is one of the most important decisions that relates to international trade. Despite its importance, some organizations and companies take approaches of identifying servable and profitable markets based on ad hoc decisions instead of using a formalized attempt that matches the organization with relevant foreign target markets. Companies that have the desire to pursue a long term position in a foreign market require being more active in their strategy to market entry by involving themselves directly. By exporting directly, the firms will be allowed to have more control over such activities as marketing mix variables, market selection, monitoring competitor activity and adaptation to local markets. However though, a long term commitment and investment is needed form the firm to sustain its foreign markets activity. Due to the high costs that are involved in direct exporting, it would be wiser to move from indirect approach gradually by establishing a beach head as the initial step in their strategy of exporting.

The concept of beach head entails establishing operations in a key market that is relatively low, following the market, gaining the required experience and trying to advance using more aggressive strategies. Another factor that has to be considered is separation of ownership and control. Control should be left to qualified business employees and its operation should be distinct from the owners. Other factors that will influence a company’s choice of entry method include: level of resource commitment necessary, level of control that the company is seeking, the need for control and the company’s overall global strategy.

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