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AGILITY: A LOGISTIC COMPANY
Modes of entry
Introduction
Foreign markets are very dynamic and full of uncertainty.
Therefore, companies choosing to participates in these ,markets
must be well informed and choose the best entry modes in an
attempt to exploit the revenue advantages they promise.
The companies must also control and commit their resources in
an effective manner so as to mitigate the impacts of the risks
involved
Entry Modes
There are two main entry modes in international
participation.
These are:
1)Equity modes: Comprising of Contractual agreements
and Exports.
2)Non-Equity modes: Comprising of Wholly owned
subsidiaries and joint ventures
How Equity Modes of entry work in logistics companies
Exports: Is a mode of entry in which a company produces and stores
goods to be sold in other countries. Can be direct exports or indirect
exports
Exports are used by third party Logistic companies, such as those involved
in supply chain management, warehousing, transportation and shipping.
In an attempt to economise the economies of scale, companies seeking to
enter foreign markets contact third party logistic companies to transport,
distribute or store their products.
Continuation
For instance, a company may sell its products through its
affiliate logistic company in the foreign country
Contractual agreements: Licensing.
Involves franchising, contract manufacturing and turkey
contracts.
Licensing is where your own organization charges a fee and/or royalty for
the use of its technology, brand and/or expertise
Continuation
Franchising involves the organization (franchiser) providing
branding, concepts, expertise, and infact most facets that are
needed to operate in an overseas market, to the franchisee.
Management tends to be controlled by the franchiser. Examples
include Dominos Pizza, Coffee Republic and McDonald’s
Restaurants.
Turnkey contracts are major strategies to build large plants. They often include a
the training and development of key employees where skills are sparse
How Non-Equity Modes of entry work in logistics
companies
Joint Ventures tend to be equity-based. That is, a new company is set
up with parties owning a proportion of the new business. There are
many reasons why companies set up Joint Ventures to assist them to
enter a new international market:
These might be to gain access to technology, core competences or management skills.
For example, Honda’s relationship with Rover in the 1980’s.
To gain entry to a foreign market. For example, any business wishing to enter China
needs to source local Chinese partners.
Wholly Owned Subsidiaries
A wholly owned subsidiary refers to a company whose
common stock is entirely owned by the parent company.
Their entries are categorised into two strategies: Green field
Investments and acquisitions.
Greenfield investments are the establishment of a new wholly
owned subsidiaries. They are always potentially costly and but
provide full control to the company.
Acquisitions A logistics company may choose to acquire a new firm due to a
variety of reasons.
These are to acquire expertise and knowledge of the existing market
by third parties, such consultant, competitors, or business partners.
This entry strategy is time consuming due to the need of establishing
new distribution networks, new operations, and the need to learn
while implementing appropriate marketing strategies to compete with
rivals in the dynamic markets.
Logistics companies in Kuwait and the UK
There are different logistic countries operating in Kuwait and
United Kingdom
Good examples are the KGL logistic company based in Kuwait
and Agility in the UK.
Agility uses Non-equity based modes such as joint ventures.
Through Joint ventures, Agility is able to partner with premiar
air carriers and maximize on performance and space allocation.
Continuation
Through such joint ventures, Agilitry has been able to have more
than 25000 employees working inn over 600 offices located in
almost 200 countries across the globe.
On the contrary, KGL logistics company in the UK used equity based
entry modes such as to offer warehousing and freight.
For instance, through foreign exports in transportation, shipping and
freight services, KGL has been able to offer customized services
from small parcels to large sea freights.
Agility and Airfreight services
Continuation
Furthermore, the manner in which logistic companies in both the UK
and Kuwait creates the basis for arguing that foreign involvements
are intense in the two countries.
Most of the logistics companies in the two countries utilize both
Equity and Non-equity based entry models. However, according to a
research done by Agility in 2014, equity based entry methods are
more predominant that than non-equity based modes due to the
nature of international markets.
KGL AIR FREIGHT
Continuation
If Agility chooses to expand her operations in the UK and Kuwait,
the company may use acquisitions in the UK and joint ventures in
Kuwait.
Joint Ventures will work best in the UK because they facilitate entry
into new markets and also bring together complimentary skills and
assets that Agility cannot achieve alone (Abdulla, 2015).
Similarly, acquisitions work best for Kuwait because the broaden
the company’s customer base.
Conclusion
In summary, entry modes into foreign partcipatiions can either be
equity based or non-equity based modes
Equity based entry modes comprise of exports and contractual
agreements such as licensing, franchises and other forms of contracts.
Non-equity based entry modes comprise of joint ventures and wholly
owned subsidiaries. ‘
Each entry mode has its own strengths an d weaknesses
References
Agility. (2015). Agility emerging markets logistic index. Retrieved
from:http://www.agility.com/EN/About-Us/Documents/Agility%20Emerging%20Markets
%20Logistics%20Index%202015.pdf
Abdulla, M. (2014). Modes of Entry. Retrieved
from:http://www.slideshare.net/aleem_ab2002/modes-of-entry
Marketing teacher.com. (2009). Modes of entry into international market places.
Retrieved from:http://www.marketingteacher.com/modes-of-entry-into-international-
markets-place/
KGL Logiostics. (2010). Supply chain management. Retrieved
from:http://www.kgl.com/Logistics/Home.aspx
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