International marketing

Unit no. 2- International market entry strategies

Direct exporting
When the export activity is directly carried out by the manufacturer of
the goods, it is called as direct exporting. Since all the activities such
as packaging, promotion, shipment and distribution are carried on
own, manufacturer enjoys the control over entire export activity.
Direct exporter engages with the foreign customer directly. This will
help him earn the goodwill of the in the overseas market. This method
is suitable for large enterprises as it involves more costs and
resources. Direct engagement with the overseas customers will
provide the first hand market information may help in future
expansions in foreign markets.
Advantages of Direct Exporting-
1. Direct exporting; in general, avoid all the costs of "middleman."
It also allows businesses to have greater control over sales and
to interact directly with your customers. Following are some
advantages Direct exporting:
2. In direct exporting manufactures profits are greater because
there are eliminating intermediary for their businesses.
3. In direct exporting domestic owner or manufacturing firm have
a greater degree of control over all aspects of the transaction.
4. Manufacturer know customers and customers knows
Manufacturer, and thus it has more secure for doing business
directly and its useful to maintain good relationship with
customers in foreign country.
5. In this type of exporting, Businesses get better protection for
their trademarks, patents, and copyrights.
 6. businesses present itself as fully committed and engaged in the
export process.
7. In direct exporting businesses should better understand
marketplace.
8. Core advantage for this export type manufactures knows whom
to contact if something isn't working.
9. In direct exporting customers provide faster and more direct
feedback on product and its performance in the marketplace.

Disadvantages of Direct Exporting-

1. In direct exporting businesses requires more time, energy and
money,it depends on manufacturer may be able to afford.
2. It requires more "people power" to improve a customer base.
3. the business will have required more responsibility from every
level of organization.
4. Businessmen accountable for whatever happens in the business
conditions or environment.
5. Businesses may not be able to respond to customer
communications as quickly as a local agent.
6. Businesses haveto handle all the logistics of the transaction.

Indirect exporting
Indirect exporting means selling products to an intermediary, who in
turn sells your products either directly to customers or to importing
wholesalers. In international trading the easiest method of indirect
exporting is to sell to an intermediary in domestic country, he will
responsible for coordinating the shipping logistics.
An export management company (EMC), Trading Companies and
other importing distributer (wholesalers) are some example of
intermediary. Businesses can determine which export strategy suits
their needs. choice will depend on business goals, its available
resources, and the type of business. It is recommended that,
manufacture has to choose the method that makes most comfortable
and focus on business priorities.

Advantages of Indirect Exporting-

1. When businessmen think for international trade then Indirect
exporting is a risk-free way to begin businesses.
2. Indirect exporting demands minimal involvement of
manufacturer/owner in the export process.
3. It allows owners to continue concentrate on their domestic
business because middlemen should doing her international
business activities.
4. businesses have limited liability for product marketing problems
—there's always someone else to point the finger.
5. Depending on the type of intermediary with which are dealing,
manufacturer don't have to concern herself with shipment and
other logistics.
6. In some instances, local agent can field technical questions and
provide necessary product support.

Disadvantages of Indirect Exporting-

1. In indirect exporting there are always owner’s profits are lower
because profits are share with intermediary.
2. In indirect exporting, Businesses lose control over foreign sales.
 3. Businesses or owner rarely know about customers and thus lose
the opportunity to tailor offerings to their needs.
4. The intermediary might also be offering products similar to
manufactures product so, it excludes representation of own
products.
5. Because of intermediary long-term outlook and goals for export
program can change rapidly, and if businesses put own products
in someone else's hands, it's hard to redirect programs
accordingly.

Foreign manufacturing Strategies with Indirect

Investments
1. Joint Venturing

A method of entering a foreign market is joint venturing-joining with

foreign companies to produce or market products or services. Joint
venturing differs from exporting, in that the company joins with a
host country partner to sell or market abroad. It differs from direct
investment in that an association is formed with someone in the
foreign country.

2. Licensing

Licencing a simple way for a manufacturer to enter intentional

marketing, the company enters into an agreement with a licensee in
the foreign market. For a royalty, the licensee buys the right to use the
company's manufacturing process, trademark, patent, trade secret, or
other item of value. The company thus gains entry into the market at
little risk the licenses gains production expertise or a well-known
product name without having to start from root level. for eg. Coca-
Cola markets internationally by licensing bottlers around the world
and supplying them with the syrup needed to produce the product. In
Japan. Licensing has disadvantages, however The firm has less
control over the licensee than it would over its own operations.
Furthermore, if the licensee is very successful, the firm has given up
these profits, and if and when the contract ends, it may find it has
created a competitor.

3. Contract Manufacturing-

Another option is contract manufacturing, the company contracts with

manufacturers in the foreign market to produce its product or provide
its service. A well-known company in America used this method in
opening up department stores in Mexico and Spain, where it found
qualified local manufacturers to produce many of the products it sells.
The drawbacks of contract manufacturing are decreased control over
the manufacturing process and loss of potential profits on
manufacturing. The benefits are the chance to start faster, with less
risk, and the later opportunity either to form a partnership with or to
buy out the local manufacturer.

4. Management Contracting-

Under management contracting, the domestic firm supplies

management know-how to a foreign company that supplies the
capital. The domestic firm exports management services rather than
products. Hilton uses this arrangement in managing hotels around the
world. Management contracting is a low-risk method of getting into a
foreign market, and it yields income from the beginning. The
arrangement is even more attractive if the contracting firm has an
option to buy some share in the managed company later on. The
arrangement is not sensible, however, if the company can put its
scarce management talent to better uses or if it can make greater
profits by undertaking the whole venture. Management contracting
also prevents the company from setting up its own operations for a
period of time.

5. Joint Ownership-

Joint ownership ventures consist of one company joining forces with

foreign investors to create a local business in which they share joint
ownership and control. A company may buy an interest in a local firm
or the two companies may form a new business venture. The firm
may lack the financial, physical, or managerial resources to undertake
the venture alone. Or a foreign government may require joint
ownership as a condition for entry.
Joint ownership has certain drawbacks- The partners may disagree
over investment, marketing, or other policies. Whereas many U.S.
firms like to reinvest earnings for growth, local firms often prefer to
take out these earnings; and whereas U.S. firms emphasize the role of
marketing, local investors may rely on selling.

Foreign manufacturing Strategies with Direct Investments

The firm may improve its image in the host country because it creates
jobs. Generally, a firm develops a deeper relationship with
government, customers, local suppliers, and distributors, allowing it
to adapt its products to the local market better. Finally, the firm keeps
full control over the investment and therefore can develop
manufacturing and marketing policies that serve its long term
international objectives.
1. Franchise-

Is a method of distributing products or services involving a

franchisor, who establishes the brand's trademark or trade name
and a business system to a franchisee, who pays a royalty and often
an initial fee for the right to do business under the franchisor's
name and system.
Franchising is a popular form of entry mode for companies that
possess marketing excellence comparatively better than technology
excellence.In franchising, a well-set business model, popular brand
name, and efficient marketing management techniques are
transferred to the franchisee from the franchisor. This transfer is
governed by an agreement known as franchisee agreement which
sets the rights and responsibilities of both the involved parties.
Under the agreement, the franchisee is required to pay a fee,
popularly known as 'franchising fees' to the franchisor on a
monthly basis calculated on possible revenue generation in the
venture. In return, the franchisor supports the franchisee with a
complete marketing plan towards managing and operating the
establishment. Since the franchisee depends on brand image of the
franchisor.

2. Wholly owned foreign enterprise(WOFE)-

Using this mode of entry, a company has two options; first,

develop a new facility(business) in the foreign country and
second, acquire a local business operation by outright purchase.
However, company makes investment for the benefits attached
to this mode of entry such as complete control of business
operation including marketing and closeness to the market.
WOFE provides full ownership of the foreign establishment; so,
the profit generated from foreign operation need not to be shared
with any local company.The desired marketing control will be
highest in this operation. A company requires tackling ever
changing market place dynamics with the ability to change
marketing mix in accordance with the requirements of the
market place.
WOFE also helps a company to get involved in any international
alliance with other establishments as per its own requirement
without taking concurrence from a partner company.