International entry modes http://cnettv.cnet.com/tata-nano/9742-1_53-50000141.html EXPORTING n- number and type of intermediaries, functions performed – full- service high specialization (clearing goods) PARTNER MINDSHARE (= measurement of the strength of a relationship - effort, involvement, sales performance… n - drivers: (1) commitment and trust; (2) collaboration; (3) mutuality of interest and common purpose + product, brand and profit n3 major types: a) indirect export – another domestic company – export house, trading company… performs exporting activities b) direct export – company performs exporting activities (majority of or all) itself c)cooperative export – collaborative agreements with other organizations – some exp. activities n n n n Indirect export modes nLimited international expansion objectives nMinimal resources nGradual market entry nTest of market n n nLittle or no control over the way the product is marketed nNo contact nLittle or no information 1.Export buying agent (export commission house) – the overseas customer's hired purchasing agent operating on basis of orders received from the customer/buyer – scan domestic market 2.Broker – to bring a buyer and seller together; performs a contractual function; does not actually handle the products sold or bought; the broker is paid a commission (cca 5%); commodity specialist 3.Export management company (export house) – „export department“ for a range of companies; conduct business in the name of each manufacturer it represents; knowledge of the market!!!; specialization by geographical area, product or customer type; paid a commission; - competitive products, interest in high profitable products, lower specialization… 4. Trading company – colonial times, Africa and East Asia, in Japan over 50% of whole export; barter – or counter trade, financing 5. Piggyback – non-competitive but related and complementary products; SME with a larger eporting company – full utilization of export facilities of a larger company Direct export modes n DISTRIBUTOR nindependent company that stocks the manufacturer's product nIt has freedom o choose own customer and price nProfit from the differences between seller and buyer price nExclusive representatives = sole distributors in a country nBuy on their own accounts nUsually represents the manufacturer in all aspect of sales and servicing nAGENT nIndependent company that sells on behalf of the manufacturer nUsually it will not see or stock the product nExclusive, semi-exclusive, non-exclusive nCommission on a pre-agreed basis nSells to wholesalers and retailers nSome furnish market and financial information Manufacturer sells directly to the importer located in the foreign market Cooperative export - export marketing groups nFunctions: n - exporting in the name of the association n - consolidating freight, negotiating rates and chartering ships n - performing market research n - appointing selling agents abroad n - obtaining credit information and collecting debts n - setting prices for export n - allowing uniform contracts and terms of sale n - allowing cooperative bids and sales negotiation n nUsually SMEs – more effective n INTERMEDIATE ENTRY MODES n= transfer of skills and knowledge (1)Contract manufacturing – outsourced to an external partner specialized in production and production technology – lower risk, lower costs, appropriate foreign market demand; better interaction with local market, high level of control; high flexibility; product could be exported (2)Licensing – patent covering a product or process, know-how, technical/marketing advice and assistance, use of trade mark/name – concentration on core competences - R&D, lower expertise for overseas, the end of the PLC in home country, government regulations restrict foreign direct investment… (3)Franchising – product and trade name, business format package (trade mark/name, copyright, design, patent, trade secret, business and management know-how, geographic exclusivity, market research for the area…) (4)Strategic alliances/joint ventures – new opportunities, speed up market entry, lower costs compared to solely business; up-stream collaboration – on R&D and/or production; down-stream – marketing, distribution, sales, service - = Y coalition; both streams – X coalition nSeeking for resources: nDevelopment know-how nSales and service expertise nLow-cost production facilities nStrategically critical manufacturing capabilities nReputation and brand equity nMarket access and knowledge nFinancial resources… n? Who is the leading company? n? Double..management? n?Repatriation of profits? n? Shared equity? nMixing different cultures! nDeveloping trust! nProviding and exit strategy! n HIERARCHICAL ENTRY MODES nThe firm completely owns and control foreign market entry mode nAllocation of responsibility and competence between head office and subsidiaries (1)Domestic-based sales representatives/manufacturer´s own sales force (2)Resident sales representatives/sales subsidiary/sales branch (3)Sales and production subsidiary (4)Region centre (5)Transnational organization(globally integrated) n