Ways to enter a foreign market
These Kendal Ingraham
BUSA 3145 -01
Dr. Inessa Korovyakovskaya
There are six different ways to enter a foreign market – exporting, turnkey projects, licensing, franchising, establishing joint ventures with host country firms, or setting up a new wholly owned subsidiary in the host country.
Please discuss each method and both its advantages and disadvantages.
Exporting - Exporting is the process of sending goods to another country for sale. It is the spread of goods to another country. An advantage of exporting is the costs of setting up manufacturing operations in another country. Disadvantages of exporting may include trades barriers, tariffs and problems with local market agents. Disadvantages can be overturned if firms set up a wholly owned subsidiary in that market.
Turnkey Projects – A turnkey project is a type of project that is constructed so it can be sold to a buyer as a completed product. This allows a firm to get a greater return from an asset. The disadvantage is that the firm may inadvertently create efficient global competitors in the process.
Liscensing- A license is a legal contract authorizing one business to use the confidential business practices of another business. Advantages of licensing is that it can guarantee revenue for the licensing company. Another advantage is that a licensee bears the costs and risks of opening a foreign market. Disadvantages may persist of losing technological know-how to the licensee and a lack of tight control over licensees.
Franchising - The main advantage of franchising is that the franchisee bears the costs and risks of opening a foreign market. Disadvantages may arise because of problems of quality control of distant franchisees.
Establishing joint ventures – Joint ventures have advantages of sharing the cost and profits with partners. Another advantage is the knowledge of new markets, and negotiated relationships that can help both firms. Establishing joint ventures are easier to
BUSA 3145 -01
Dr. Inessa Korovyakovskaya
There are six different ways to enter a foreign market – exporting, turnkey projects, licensing, franchising, establishing joint ventures with host country firms, or setting up a new wholly owned subsidiary in the host country.
Please discuss each method and both its advantages and disadvantages.
Exporting - Exporting is the process of sending goods to another country for sale. It is the spread of goods to another country. An advantage of exporting is the costs of setting up manufacturing operations in another country. Disadvantages of exporting may include trades barriers, tariffs and problems with local market agents. Disadvantages can be overturned if firms set up a wholly owned subsidiary in that market.
Turnkey Projects – A turnkey project is a type of project that is constructed so it can be sold to a buyer as a completed product. This allows a firm to get a greater return from an asset. The disadvantage is that the firm may inadvertently create efficient global competitors in the process.
Liscensing- A license is a legal contract authorizing one business to use the confidential business practices of another business. Advantages of licensing is that it can guarantee revenue for the licensing company. Another advantage is that a licensee bears the costs and risks of opening a foreign market. Disadvantages may persist of losing technological know-how to the licensee and a lack of tight control over licensees.
Franchising - The main advantage of franchising is that the franchisee bears the costs and risks of opening a foreign market. Disadvantages may arise because of problems of quality control of distant franchisees.
Establishing joint ventures – Joint ventures have advantages of sharing the cost and profits with partners. Another advantage is the knowledge of new markets, and negotiated relationships that can help both firms. Establishing joint ventures are easier to