Today’s era is of globalization and this globalization has boosted up international trade into a great extent. Every company, whether small or big, would like to spread its reach to global markets to be sure a sizable subscriber base. There are lots of ways of coming into a different market. A business which really wants to enter the foreign market has got to choose the mode of entry very wisely that may provide it the utmost output.

Modes of Entry

Exporting

Exporting is the term for selling of items or services produces in a single country into another country. Exports are considered is the basic most mode of entry into foreign market. It will take least investment and the risk associated is lowest.

A business generally is a manufacturer exporter or possibly a merchant exporter. A producer exporter manufactures its own goods and exports it, whereas a merchant exporter procures goods from the manufacturer and exports it under its name. Exports make the perfect way to obtain foreign earnings of your country.

A merchant exporter can choose exporting items itself or hire an agent for similar. In case the exporter exports items with no agent, it can be called as direct exports. The direct exports provide better control over the goods, market and feedback mechanism towards the exporter. Conversely when the exports are produced through the channel associated with an agent, it can be known as indirect exports. Although it is preferred achievable exporters to match indirect exporting, but direct exporting provides better returns in long-term.

Licensing

Look at a company which holds a patent for a certain product. The business may sell or give on rent its license of production with an overseas company. The parent company which is in home country gets a rent or royalty to the sales made by the overseas company from the foreign market. Licensing is an easy method of earning extra income without putting in high efforts. The license could be directed at the foreign company either on rent for a specified period or on percentage royalty for amount of sales. The most important disadvantages of licensing include risk of reputation being spoiled through the licensee reducing income in comparison with other modes of entry.

Franchising

Franchising is actually an advanced system of licensing. With this system, the owner of an organization which is also termed as franchiser allows an organization called franchisee to sell its products on the name of the parent company. Parents company earns royalty for the sales made. The franchisee needs to utilize business name and standards from the parent company internet marketing an integral part of this system. Put simply, the franchisee runs his business the same way as the franchiser does. The threat to this method is how the franchisee turns into a potential future competitor to the franchiser.

Jv

Joint venturing is again an important and commonly adopted method of entering into a foreign market. A joint venture cuts down on the perils associated with the participants considerably. Jv is highly very theraputic for a business. Think about company which desires to enter an overseas market but it doesn’t have any understanding concerning the culture, environment and ethics with the citizens. Such a company will enter a joint venture with another company that’s already perfectly located at the target country. By doing this they could have a better knowledge of the mark market since they have connection to a nearby players of the country.

Jv also allows the companies to merge their resources and perform in a large. Two businesses can begin to play bulk production and selling. When the jv is between companies from developing and developed countries, the technological and managerial skill sharing together gets a very important aspect. But when looking at business expansion, the two companies might possibly not have similar opinion also it becomes the main reason of failure on most joint ventures across the globe.

Turnkey Projects

Turnkey projects are mostly observed in large investment projects. Why don’t we consider for example a developing country which includes very less technological expertise. Such countries outsource their public construction work like roads, dams, bridges, rail lines etc. to foreign companies that are technologically sound. Once the project is done, two possibilities exist. The company which accomplished the work may operate the job and produce through tickets, toll taxes etc. or hand over your entire project to the concerned government on full payment of the contract.

Strategic Alliances

Strategic alliances include cooperative agreements between 2 or more companies. These agreements are generally created for research and development work but may also cover managerial assistance. The strategic alliances thus mainly concentrate on developing services instead of expanding the markets of existing products. Technological sharing is one of the most important benefit for strategic alliances.

Wholly Owned Subsidiaries

Wholly owned subsidiary is known as the non plus ultra mode of entry into foreign markets. A company establishes its production plant within a foreign market and operates it there. This mode of entry requires countless number of capital investment along with the risk associated can also be considerably high. As a possible advantage the wholly owned subsidiary gives a better control for the company for the overseas activity. The company has got to keep to the norms of both home and host country’s government.

Companies which usually begin a wholly owned subsidiary also go for acquisitions in foreign market as a possible easier way. If a company in the host country includes a well-established business, the company of your home country will want to acquire it as an alternative to starting a new business unit from the host country.

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