entry into export market

8/7/2019 Entry Into Export Market

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` Licensing /Franchising

` Exporting

` Contract Manufacturing

` Turnkey Contracts` Joint Venture

` Strategic Alliance

` Mergers & Acquisition

` Fully Owned Manufacturing Facilities


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Licensing

` A firm in one country (the licensor) permits a firm

in another country (the licensee) to use itsintellectual property e.g. patents, copyrights,technical know-how, marketing skills or someother specific skills. The monetary benefit to thelicensor is the royalty or fees paid by the licensee.

` It could be a mutual or cross licensing too, insteadof cash payment.


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Advantages:

` Good way to start in foreign operations and open

the door to low risk manufacturing relationships` Linkage of parent and receiving partner interests

means both get most out of marketing effort


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Disadvantages:

` Partners develop know how, so License is forshorter period

` Licensees become competitors


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` There are political instability or risk of investment

in the foreign market.

` Foreign investment is not favoured or encouragedby the foreign country concerned

` Licensing or contract manufacturing is not a better

alternative


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Types:

` Direct : the organization makes a commitment to

market its products overseas on its own behalf.

This gives it greater control over its brand andoperations overseas.

` Indirect: employ a home country agency (i.e. an

exporting company from your country - which

handles exporting on your behalf) to get yourproduct into an overseas market.


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` A company contracts with firms in foreign

countries to manufacture or assemble the

products but retains the responsibility of marketing

the product.Advantages:

` The company does not have to commit resource

for setting up production facilities

` It frees the company from the risk of investing inforeign countries


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Disadvantages:

` Less control over manufacturing process

` It also has the risk of developing potentialcompetitors

` Not suitable in cases which involve technical

secrets


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` An agreement by the seller to supply a buyer with

a facility fully equipped & ready to be operated by

the buyers personnel, who will be retained by the

seller


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` Joint ventures can be defined as "an enterprise inwhich two or more investors share ownership andcontrol over property rights and operation".

Advantages:

` Access to distribution channels, manufacturingand R&D

` Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-

how in technology or process


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` Joint financial strength

Disadvantages:

` Partners do not have full control of management` Partners may have different views on expected

benefits


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` A Strategic Alliance is a formal relationship betweentwo or more parties to pursue a set of agreed upongoals or to meet a critical business need whileremaining independent organizations

` Partners may provide the strategic alliance withresources such as products, distribution channels,manufacturing capability, project funding, knowledge,expertise, or intellectual property. The alliance is acooperation orcollaboration which aims for a synergy

where each partner hopes that the benefits from thealliance will be greater than those from individualefforts.


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Disadvantages:

` Language barrier` Trust building

` Clash of company culture


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` A merger or acquisition is a combination of twocompanies where one corporation is completelyabsorbed by another corporation. The less importantcompany loses its identity and becomes part of themore important corporation, which retains its identity. A

merger extinguishes the merged corporation, and thesurviving corporation assumes all the rights,privileges, and liabilities of the merged corporation. Amerger is not the same as a consolidation, in whichtwo corporations lose their separate identities and

unite to form a completely new corporation


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` Companies with long term & substantial interest in

the foreign market normally establish fully owned

manufacturing facilities there

Advantages:` Complete control over the manufacturing process

` No risk of developing potential competitor


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Disadvantages:

` High cost involvement` Might have production bottlenecks


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entry into export market

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