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