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A mode of entry into an international market

A mode of entry into an international market is the channel which your organization employs to gain entry to a new international market. This Article we shall consider modes of entry into international markets such as the Internet, Exporting, Licensing, International Agents, International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacture and International Sales Subsidiaries. Finally we consider the Stages of Internationalization.

The Internet

The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations. The eMarketing space consists of new Internet companies that have emerged as the Internet has developed, as well as those pre-existing companies that now employ eMarketing approaches as part of their overall marketing plan. For some companies the Internet is an additional channel that enhances or replaces their traditional channel(s). For others the Internet has provided the opportunity for a new online company.

New Internet companies :

These companies only trade on the Internet.

Pre-existing companies that have adopted eMarketing.

These are traditional companies that trade on the Internet.

Exporting

Exporting is the marketing and direct sale of domestically-produced goods in another country. Exporting is a traditional and well-established method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.

Exporting commonly requires coordination among four players:

There are direct and indirect approaches to exporting to other nations. Direct exporting is straightforward. Essentially the organization makes a commitment to market overseas on its own behalf. This gives it greater control over its brand and operations overseas, over an above indirect exporting. On the other hand, if you were to employ a home country agency (i.e. an exporting company from your country - which handles exporting on your behalf) to get your product into an overseas market then you would be exporting indirectly. Examples of indirect exporting include:

Licensing

Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance.

However, because the licensee produces and markets the product, potential returns from manufacturing and marketing activities may be lost.

Licensing includes franchising, Turnkey contracts and contract manufacturing.

International Agents and International Distributors

Agents are often an early step into international marketing. Put simply, agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country. They rarely take ownership of products, and more commonly take a commission on goods sold. Agents usually represent more than one organization. Agents are a low-cost, but low-control option. If you intend to globalize, make sure that your contract allows you to regain direct control of product. Of course you need to set targets since you never know the level of commitment of your agent. Agents might also represent your competitors - so beware conflicts of interest. They tend to be expensive to recruit, retain and train. Distributors are similar to agents, with the main difference that distributors take ownership of the goods. Therefore they have an incentive to market products and to make a profit from them. Otherwise pros and cons are similar to those of international agents.

Strategic Alliances (SA)

Strategic alliances is a term that describes a whole series of different relationships between companies that market internationally. Sometimes the relationships are between competitors. There are many examples including:

Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate.

Joint Ventures (JV)

Joint Ventures tend to be equity-based i.e. a new company is set up with parties owning a proportion of the new business There are five common objectives in a joint venture: market entry, risk/reward sharing, technology sharing and joint product development, and conforming to government regulations. Other benefits include political connections and distribution channel access that may depend on relationships.

Such alliances often are favorable when:

The key issues to consider in a joint venture are ownership, control, length of agreement, pricing, technology transfer, local firm capabilities and resources, and government intentions.

Potential problems include:

Joint ventures have conflicting pressures to cooperate and compete:

reasons why companies set up Joint Ventures to assist them to enter a new international market:

I personally am working in a Joint Venture Company that is Legal And General Gulf Takaful , which in a UK based insurance company that has expanded abroad the entire nation using the (JV) Technique , LnG is a 50% Joint venture with Ahli United Bank Bahrain ( Main Branch in GCC region ) And is expanding in the rest of GGC region .

In India LnG is a ( J V ) with India First Insurance company .

Overseas Manufacture or International Sales Subsidiary

A business may decide that none of the other options are as viable as actually owning an overseas manufacturing plant i.e. the organization invests in plant, machinery and labor in the overseas market. This is also known as Foreign Direct Investment (FDI). This can be a new-build, or the company might acquire a current business that has suitable plant etc. Of course you could assemble products in the new plant, and simply export components from the home market (or another country). The key benefit is that your business becomes localized - you manufacture for customers in the market in which you are trading. You also will gain local market knowledge and be able to adapt products and services to the needs of local consumers. The downside is that you take on the risk associated with the local domestic market. An International Sales Subsidiary would be similar, reducing the element of risk, and have the same key benefit of course. However, it acts more like a distributor that is owned by your own company.

Internationalization Stages

So having considered the key modes of entry into international markets, we conclude by considering the Stages of Internationalization. Some companies will never trade overseas and so do not go through a single stage. Others will start at a later or even final stage. Of course some will go through each stage as summarized now:

Entry Modes For International Markets: Case Study Of

Huawei, A Chinese Technology Enterprise, in

European market : Huawei co-operate with Marconi in product development and marketing. Marconi helps Huawei to sell products in Europe using their channels. At the same time, Huawei helps selling Marconi's product in China and Asia markets. Early to 2002, Huawei has cooperated with Motorola in Mobile network infrastructure area using the OEM method. To develop the market of data communication in North American and other international markets, Huawei set up joint venture: Huawei-3Com

with 3com, the main player in data communication market. In this method, Huawei takes the advantage of R&D ability and the 3Com's international market resource.

Huawei often uses join-venture and export methods. In the products without advantages, for instance in 2G mobile networks, Huawei cooperates with Giants of this area. For the products with technological advantage and without market resource, it uses the modes of joint venture, franchising or co-research.

although Huawei's WCDMA 3G solutions has not been applied in domestic market, up till 2005, Huawei has got 11 WCDMA commercial contracts from overseas; the countries include Holland, United Arab Emirates Malaysia and so on (Li, W. 2005).

The development of modern international market is reflected in the following ways:• Deploying a great deal of agents in the host market that to help foreign enterprises overcome the shortness of marketing experience.

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