Bài giảng International Business - Chapter sixteen: Entry Modes

Entry ModesMcGraw-Hill/IrwinInternational Business, 11/eCopyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.chapter sixteenLearning ObjectivesExplain the international market entry methods Discuss the debate on whether being a market pioneer or a fast follower is most usefulIdentify two different forms of piracy and discuss which might be helpful and harmful to firms doing international businessDiscuss channel members available to companies that export or manufacture overseas3Pioneers vs. Fast FollowersPioneersCan gain and maintain competitive edge in new marketOverall pioneers may not perform as well in the long run as followersMost successful whenHigh entry barriers existFirm has sufficient size, resources, and competenciesFollowersMany become followers by defaultMay be advantage to let pioneer take initial risksMost successful whenFew legal, technological, cultural, or financial barriersSufficient resources or competencies to overwhelm the pioneer’s early advantage4Entering Foreign MarketsNonequity modes of market entryExportingSelling some regular production overseasRequires little investmentRelatively free of riskIndirect exportingDirect exportingEquity modes of market entryWholly owned subsidiaryJoint ventureStrategic alliance5Summary: Modes of Entry6Indirect ExportingExporting of goods and services through various home-based exportersManufacturers’ export agents sell for manufacturerExport commission agents buy for overseas customersExport merchants purchase and sell for own accountsInternational firms use the goods overseas7Indirect Exporting, cont’d.DisadvantagesCommission to export agents, commission agents, export merchantsForeign business can be lost if exporters decide to change their sources and supplyFirm gains little experience from transactions8Direct ExportingExporting of goods and services by the producing firmSales company optionBusiness established to market goods and servicesInternet has made direct exporting much easierCost of trial low9ExportingTurnkey Project used for export ofTechnologyManagement expertiseCapital equipment (some cases)After trial run, facility is turned over to purchaserExporter of a turnkey project may beContractor that specializes in designing and erecting plants in a particular industryCompany that wishes to earn money from its expertiseProducer of a factory10Exporting, cont’dLicensingA contractual arrangement: one firm sells access to its patents, trade secrets, or technology to another Licensee pays fixed sum and sales royalties (2%-5%)Popular becauseCourts have begun upholding patent infringement claimsPatent holders have become vigilant in suing violatorsForeign governments have been pressed to enforce their patent laws11FranchisingFranchisingForm of licensing in which one firm contracts with another to operate a certain type of business under an established name according to specific rules12ContractsManagement ContractArrangement by which one firm provides management in all or specific areas to another firmContract ManufacturingArrangement in which one firm contracts with another to produce products to its specifications but assumes responsibility for marketing13Equity-Based Modes of EntryWholly Owned SubsidiaryJoint VentureStrategic Alliance14Wholly Owned SubsidiaryWholly Owned Subsidiary build a new plant (greenfield investment)acquire a going concernpurchase distributor, to obtain a distribution network familiar with products15Joint VentureJoint VentureCooperative effort among two or more organizations that share common interest in business enterprisecorporate entity formed by international company and local ownerscorporate entity formed by two international companies for the purpose of doing business in a third market a corporate entity formed by a government16Joint Venture, cont’d.DisadvantagesProfits sharedIf law allows no more than 49% foreign ownership, lose controlControl with minority ownership is possible ifTake 49% of shares and give 2% to local law firm or trusted nationalTake in local majority partner (sleeping partner)Management contractCan enable the global partner to control many aspects of a joint venture even when holding only a minority position17Strategic AlliancesPartnerships between competitor, customers, or suppliers that may take various formsAims to achieveFaster market entry and start-upAccess to new ProductsTechnologiesMarketsCost-savings by sharingCostsResourcesRisks18Strategic Alliances, cont’d.May be Joint VenturesPooling alliances driven by similarity and integrationTrading alliances driven by contribution of dissimilar resourcesAlternatives to mergers and acquisitionsFuture of AlliancesMany fail or are taken over by a partnerDifficult to manageDifferent strategiesDifferent operating practicesDifferent organizational culturesAllow partner to acquire technological or other competenciesRegardless, will continue to be important strategic tool19Channel of DistributionLinks producer with foreign userProduct and its title pass from producer to user20Channel of Distribution Members: Indirect ExportingIndirect Export Channel MembersSell for manufacturerBuy for overseas customersBuy and sell for own accountPurchase on behalf of foreign middlemen or users21Indirect ExportingExporters that sell for the manufacturerManufacturers’ export agentActs as the international representative for various noncompeting domestic manufacturersExport management companies (EMC)Acts as the export department for noncompeting manufacturers International trading companiesActs as agent for some companies and as wholesaler for others22Indirect Exporting: International Trading CompaniesInternational Trading CompaniesJapan: Sogo ShoshaOriginally established by the zaibatsu, centralized, family-dominated economic groupsKorean: chaebolOwned by Korean conglomeratesExport trading companies (ETC)U.S. firm established principally to export domestic goods and services23International Channels of Distribution24Indirect Exporting, cont’d.Exporters that buy for their overseas customersExport commission agentsRepresent overseas purchasers, such as import firms and large industrial usersPaid commission by the purchaser for acting as resident buyer25Indirect Exporting, cont’d.Exporters that buy and sell for their own accountExport merchantsPurchase products directly from the manufacturer and then sell, invoice, and ship them in their own namesCooperative exporters/piggyback exportersEstablished international manufacturers that export other manufacturers’ goods as well as their own Webb-Pomerene AssociationsOrganizations of competing firms that have joined together for the sole purpose of export trade26Indirect Exporting, cont’d.Exporters that purchase for foreign users and middlemenLarge foreign usersBuy for their own use overseasExport resident buyersPerform essentially the same functions as export commission agents but more closely associated with a foreign firm27Direct Exporting Distribution Channel MembersManufacturer’s agentIndependent sales representative of noncompeting suppliersDistributor/wholesale importerIndependent importer that buys for own account for resaleRetailerFrequently direct importerTrading companyFirm that develops international trade and serves as intermediary between foreign buyers and domestic sellers and vice versa28