International entry modes EXPORTING n - number and type of intermediaries, functions performed – full- service high specialization (clearing goods) PARTNER MINDSHARE (= measurement of the strength of a relationship - effort, involvement, sales performance… - drivers: (1) commitment and trust; (2) collaboration; (3) mutuality of interest and common purpose + product, brand and profit n 3 major types: a) indirect export – another domestic company – export house, trading company… performs exporting activities b) direct export – company performs exporting activities (majority of or all) itself c)cooperative export – collaborative agreements with other organizations – some exp. activities Indirect export modes n Limited international expansion objectives n Minimal resources n Gradual market entry n Test of market n Little or no control over the way the product is marketed n No contact n Little or no information Direct export modes DISTRIBUTOR n independent company that stocks the manufacturer's product n It has freedom o choose own customer and price n Profit from the differences between seller and buyer price n Exclusive representatives = sole distributors in a country n Buy on their own accounts n Usually represents the manufacturer in all aspect of sales and servicing n AGENT n Independent company that sells on behalf of the manufacturer n Usually it will not see or stock the product n Exclusive, semi-exclusive, non-exclusive n Commission on a pre-agreed basis n Sells to wholesalers and retailers n Some furnish market and financial information Cooperative export - export marketing groups n Functions: - exporting in the name of the association - consolidating freight, negotiating rates and chartering ships - performing market research - appointing selling agents abroad - obtaining credit information and collecting debts - setting prices for export - allowing uniform contracts and terms of sale - allowing cooperative bids and sales negotiation n Usually SMEs – more effective INTERMEDIATE ENTRY MODES n = transfer of skills and knowledge • Contract manufacturing – outsourced to an external partner specialized in production and production technology – lower risk, lower costs, appropriate foreign market demand; better interaction with local market, high level of control; high flexibility; product could be exported • Licensing – patent covering a product or process, know-how, technical/marketing advice and assistance, use of trade mark/name – concentration on core competences - R&D, lower expertise for overseas, the end of the PLC in home country, government regulations restrict foreign direct investment… • Franchising – product and trade name, business format package (trade mark/name, copyright, design, patent, trade secret, business and management know-how, geographic exclusivity, market research for the area…) • Strategic alliances/joint ventures – new opportunities, speed up market entry, lower costs compared to solely business; up-stream collaboration – on R&D and/or production; down-stream – marketing, distribution, sales, service - = Y coalition; both streams – X coalition n Seeking for resources: n Development know-how n Sales and service expertise n Low-cost production facilities n Strategically critical manufacturing capabilities n Reputation and brand equity n Market access and knowledge n Financial resources… n ? Who is the leading company? n ? Double..management? n ?Repatriation of profits? n ? Shared equity? n Mixing different cultures! n Developing trust! n Providing and exit strategy! HIERARCHICAL ENTRY MODES n The firm completely owns and control foreign market entry mode n Allocation of responsibility and competence between head office and subsidiaries • Domestic-based sales representatives/manufacturer´s own sales force • Resident sales representatives/sales subsidiary/sales branch • Sales and production subsidiary • Region centre • Transnational organization(globally integrated)