international market entery
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International Market Entry Modes
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Why and how firms go abroad is a very important issue in international marketing
and extremely important for success. A particular market can attract foreign companies and have an ideal mode of intermediate entry. How a market will best best served by a foreign company depends on the company’s objectives and the characteristics of that specific market. They may enter for profit, local resources or lower operation costs, factors like these will help determine which location a company would like to enter.
According to Ghauri and Cateora, a number of studies have concluded that the selection for foreign market entry depends on the availability of infrastructure, language, and supportive attitude of the home market (2005, p270).
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When a company decides to go international, it then decides on the best mode of
entry into the market. This decision should reflect an analysis of market potential, company capabilities, and the degree of marketing involvement and commitment management is prepared to make (Ghuari & Cateora 2005, p275). There are many modes companies can go about entering into an international market such as management contracting, contract manufacturing, branches, franchising, licensing, joint venture, and marketing subsidiaries. All of these modes has its advantages and disadvantages and require commitment, therefore it is a critical decision for the company. This paper will discuss three of these modes; licensing, joint ventures and wholly owned subsidiary, critically analyzing each entry mode, while using examples of
Starbucks foreign entry for each.
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A Licensing agreement is an arrangement wherein the licensor gives something
of value to the licensee in exchange for certain performance and payments (Hollensen
2011 p358). Licensing is a way of entering an international market with limited risk on the organization, because the grunt of the work is put on the
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International Market Entry Modes
!
!
!
Why and how firms go abroad is a very important issue in international marketing
and extremely important for success. A particular market can attract foreign companies and have an ideal mode of intermediate entry. How a market will best best served by a foreign company depends on the company’s objectives and the characteristics of that specific market. They may enter for profit, local resources or lower operation costs, factors like these will help determine which location a company would like to enter.
According to Ghauri and Cateora, a number of studies have concluded that the selection for foreign market entry depends on the availability of infrastructure, language, and supportive attitude of the home market (2005, p270).
!
When a company decides to go international, it then decides on the best mode of
entry into the market. This decision should reflect an analysis of market potential, company capabilities, and the degree of marketing involvement and commitment management is prepared to make (Ghuari & Cateora 2005, p275). There are many modes companies can go about entering into an international market such as management contracting, contract manufacturing, branches, franchising, licensing, joint venture, and marketing subsidiaries. All of these modes has its advantages and disadvantages and require commitment, therefore it is a critical decision for the company. This paper will discuss three of these modes; licensing, joint ventures and wholly owned subsidiary, critically analyzing each entry mode, while using examples of
Starbucks foreign entry for each.
!
A Licensing agreement is an arrangement wherein the licensor gives something
of value to the licensee in exchange for certain performance and payments (Hollensen
2011 p358). Licensing is a way of entering an international market with limited risk on the organization, because the grunt of the work is put on the
References: Bennett, R. and Blythe, J. 2002. International marketing. pp 212 - 217, London: Kogan Page. Fao.org. 2013. Chapter 7: Market Entry Strategies. [online] Available at: http:// www.fao.org/docrep/w5973e/w5973e0b.htm#entry%20strategies [Accessed: Ghauri, P. and Cateora, P. 2006. International marketing. pp 270 275,Maidenhead: McGraw-Hill Education. Hollensen, S. 2011. Global marketing. pp 358- 377,Harlow, England: Financial Times Prentice Hall. Santamaria,B and Shuang, N. 2008. Entry Modes of Starbucks. pp 33-45, Master. Taylor, D. 2013. Market Entry Strategies — Pacific Business Intelligence. [online] Available at: http://www.globethoughts.com/2011/international-marketing/ Terpstra, V. and Russow, L. 2000. International dimensions of marketing. pp132, Cincinnati: South-Western College.