Terracota Army,

Terracotta sculptures
Xian

depicting the armies of

Qin Shi Huang, the first
Emperor of China.
Shaanxi province
Date to 3rd century BC
Discovered by farmer in
1974.
A form of funerary art
buried with the emperor
in 210209 BC.
Purpose was to protect
emperor in his afterlife &
to make sure that he
had people to rule over.

Modes of Entry into Global Markets

Session 10-11 dtd 28.1.14

Global Marketing
Global marketers have to make global marketing
strategy decisions like:
1. Target product/market
2. Mode of entry
3. Time of entry
4. Marketing-mix plan
5. Control systems to check the performance
in the foreign markets

Modes of Entry into Global Markets

1. Export

Indirect
Direct

2. Production Abroad
Assembly/Contract
Mfg
Licensing
Franchising
Joint Ventures
Acquisition
Wholly owned
subsidiary

Modes of Entry into Global Market

high

Acquisition/
Wholly-Owned Subsidiary

Control and
Foreign Market Presence

Joint
Ventures
Franchising
Licensing
Assembly & Contract Mfg
Direct
Exporting
Indirect
Exporting
Production in the
Home Market

low
low

Production Abroad

Resource Deployment

high

Factors affecting Modes of Entry

into Global Markets
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

Firm size
Resources
Risk capacity
Mgt. Attitude
Market potential
Profit Target
Competition
Knowledge/experience
Business Environment
Barriers
Degree of Control

Export

Indirect Exports
Process of exporting through domestically
based export intermediaries.
The exporter has no control over its products
in the foreign market.
Used by companies which lack resources,
knowledge or want to avoid financial risk.
Types of Indirect Exports:
1.Export Trading Companies
2.Export agents
3.Merchant Traders
4.Buying houses

Indirect Exports
Intermediary provides support
services like warehousing, shipping,
insuring and billing for one or more
suppliers.
Locate buyers, present the product,
make quotations, do documentation
etc. in their own name.
Act like an outsourced Export
Department.
Attractive to suppliers not familiar

Indirect Exports
.cont Indirect exports

Often bear all commercial risk of exports.

Japan - half of the exports is through
large ETCs called Sogo shosha :
Top 7 ETCs :
1.Mitsubishi Corporation
2.Mitsui & Co.
3.Sumitomo Corporation
4.Itochu
5.Marubeni
6.Toyota Tsusho
7.Sojitz

Indirect Exports
.cont Indirect exports

Korea Hanwa, Hyundai, Samsung

C&T, LG Intl, SK Networks.
China Li & Fung, Minmetals
Development Shanghai Material
Trading, Xiamen C&D
India - Adani Enterprises (Forbes
2011 rank 1,062), Tata Intl,
Reliance India Ltd, Ruchi Intl.

FORBES- Worlds biggest Trading Cos

as on

April 2012

Pg 1/2
Source:
http://www.forbes.c
om/global2000/list/
#p_1_s_a0_Trading%2
0Companies_All%20co

FORBES- Worlds biggest Trading Cos

as on

April 2012

Pg 1/2
Source:
http://www.forbes.c
om/global2000/list/
#p_1_s_a0_Trading%2
0Companies_All%20co

Indirect Exports

Advantages:

Fast market access & Low risk.

Little or no financial commitment. The export
partner usually covers most expenses
associated with international sales.
Good for companies which consider their
domestic market to be more important.
Good for companies just entering
international markets and have no
international exposure.
The management team is not distracted.
No direct handling of export complexities.

Indirect Exports

Disadvantages:
Lower margin due to payment to
intermediary
No control over price, distribution, sales,
marketing, buyer etc.
Dont learn how to operate overseas.
Wrong choice of market and distributor
may lead to inadequate market feedback
affecting the international success of the
company.
Potentially lower sales as compared to
direct exporting.

Direct Exports

Co.s have their own Export Dept. or some

direct foreign presence.
Allows economies of scale in production
based in the home country.
Affords better control over distribution.
Works well till volumes are moderate;
Very large volumes of export may trigger
protectionism.
Types of Direct Exports
1.
Manufacturer or Service provider
Exporters.
2.
Sales Representatives /Importing
Distributors.

Direct Exports

Manufacturer Exporter
Exporters who manufacture the product in their
processing unit and then export.
Service providers
Provide services, usually IT, ITES, Software & ebusiness.
Manufacturer Exporter/Service Providers can be:
EOUs
100% Export Oriented Units
Units in :
EPZs
Export Processing Zones

Direct Exports

SEZs
Special Economic Zones
AEZs
Agri Export Zones (AEZs)
EHTPs
Electronic Hardware Technology Parks
STPs
Software Technology Parks
BTPs
Biotechnology Parks

Status Holders

Status Holder Incentive Scheme (SHIS)

Status Category
Performance

Export
FOB/FOR

Value (Rs Crores)

1. Export House (EH)

20
2. Star Export House (SEH)
100
3. Trading House (TH)