Entering Foreign Markets

Foreign market entry alternatives

• Exporting

• Contractual Agreements

• Direct Foreign Investment

• Strategic Alliances

• Internet

Exporting

• Direct - selling to a customer in another country

• Indirect - selling to a domestic or foreign company who resells in another country

• How? – Trade shows, country visits, internet

Foreign Intermediaries

U.S. Company

Domestic Intermediaries

Foreign consumer

Internet

Direct exporting

Export Management Company (EMC)

Foreign RetailerDistributor

Trade Companies

(Japanese sogo shosha)

International Export Alternatives

Acts as an export department for the company; foreign buyers often don’t know the EMC isn’t actually Company X

Accumulate & distribute goods from many countries to many countries; Gray McKenzie & Company – entire middle east; Nissho-Iwai Corp – gets Nike shoes to South Korea & Taiwan

Contractual Agreements

Philip MorrisAmer Tobacco (Finland)

• Licensing -- one company (licensor) makes an asset available to another company (licensee) in exchange for royalties, fees or other compensation

• Pros – little investment required; avoid tariffs, quotas & other export barriers

• Cons – little control over licensee, licensees become competitors after agreement expires

Contractual Agreements

UK

Franchising – A contract that allows a franchisee to operate a business developed by the franchisor in return for a fee & adherence to franchise-wide practices

Joint Ventures• Forming a new business entity with a partner

in the target country• Pros - shared risk, learn about new

market, combine strengths, permit entry by means otherwise not possible

• Cons – partners share rewards as well as risk, potential for conflict between partners, partner is self-interested (wants technology, expertise, know-how)

Sichuan Pepsi accused of breech of contract; refused access to financial records and transferred stock without PepsiCo’s knowledge

“The purpose of any joint venture, or even a wholly-owned investment, is to allow Chinese companies to learn from foreign companies. We want them to bring their technology to the soil of the People’s Republic of China.”

- Yuan Sutai

Ministry of Electronics Industry, China

operate manufacturing facilities and/or sales offices in the host country

align with other companies in foreign

Direct foreign investment

Strategic alliances

Europe, North and Latin America, Middle East, Africa, South-east Asia and the South Pacific

markets to give customers access to those markets