Foreign Market Entry
Foreign Market Entry Modes
Expansion into foreign markets can be achieved via the following mechanisms:
Exporting is the process of selling of goods and services produced in one country to other countries.
There are two types of exporting: direct and indirect.
Direct exports
Direct exports represent the most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism.
Types
Sales representatives
Sales representatives represent foreign suppliers/manufacturers in their local markets for an established commission on sales. Provide support services to a manufacturer regarding local advertising, local sales presentations, customs clearance formalities, legal requirements. Manufacturers of highly technical services or products such as production machinery, benefit the most form sales representation.
Importing distributors
Importing distributors purchase product in their own right and resell it in their local markets to wholesalers, retailers, or both. Importing distributors are a good market entry strategy for products that are carried in inventory, such as toys, appliances, prepared food.
Advantages
• Control over selection of foreign markets and choice of foreign representative companies
• Good information feedback from target market
• Better protection of trademarks, patents, goodwill, and other intangible property
• Potentially greater sales than with indirect exporting.
Disadvantages
• Higher start-up costs and higher risks as opposed to indirect exporting
• Greater information requirements
• Longer time-to-market as opposed to indirect exporting.
Indirect exports
Indirect export is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign
Expansion into foreign markets can be achieved via the following mechanisms:
Exporting is the process of selling of goods and services produced in one country to other countries.
There are two types of exporting: direct and indirect.
Direct exports
Direct exports represent the most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism.
Types
Sales representatives
Sales representatives represent foreign suppliers/manufacturers in their local markets for an established commission on sales. Provide support services to a manufacturer regarding local advertising, local sales presentations, customs clearance formalities, legal requirements. Manufacturers of highly technical services or products such as production machinery, benefit the most form sales representation.
Importing distributors
Importing distributors purchase product in their own right and resell it in their local markets to wholesalers, retailers, or both. Importing distributors are a good market entry strategy for products that are carried in inventory, such as toys, appliances, prepared food.
Advantages
• Control over selection of foreign markets and choice of foreign representative companies
• Good information feedback from target market
• Better protection of trademarks, patents, goodwill, and other intangible property
• Potentially greater sales than with indirect exporting.
Disadvantages
• Higher start-up costs and higher risks as opposed to indirect exporting
• Greater information requirements
• Longer time-to-market as opposed to indirect exporting.
Indirect exports
Indirect export is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign