Alternative Market entry strategies

1. Export 2.Licensing 3. Franchising 4. Management contracts 5. Turnkey operations 6. Joint Ventures 7. Assembly operation 8. Manufacturing facilities

Export
Manufacturing Export Merchant Export Direct and Indirect Export Advantages- an easy mode of entering in to IB-it helps the firm achieve experience curve and location economies Dis advantages-there may be lower-cost manufacturing locations high transport costs and tariffs can make it uneconomical agents in a foreign country may not act in exporters best interest

Licensing an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified time period, and in return, the licensor receives a royalty fee from the licensee Intangible property includes patents, inventions, formulas, processes, designs, copyrights, and trademarks Advantages-the firm does not have to bear the development costs and risks associated with opening a foreign market & the firm avoids barriers to investment Disadvantages-proprietary (or intangible) assets could be lost

Franchising
a specialized form of licensing in which the franchisor not only sells intangible property to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business Franchising is used primarily by service firms Advantages-Firms can quickly build a global presence Disadvantage-the geographic distance of the firm from its foreign franchise is difficult for the franchisor to detect poor quality

Management contracts
Transfer of management talents ,by using a part of its management personal to assist a foreign company for specified period for a fee. Advantages- Sell companies talents internationally without much risk. Disadvantages- No longstanding interest is possible

Turnkey Projects
The contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel At completion of the contract, the foreign client is handed the "key" to a plant that is ready for full operation Advantages-they can be less risky than conventional FDI Disadvantages-the firm that enters into a turnkey deal will have no long-term interest in the foreign country

Joint Ventures
A joint venture is the establishment of a firm that is jointly owned by two or more otherwise independent firms Most joint ventures are 50:50 partnerships Advantages they allow the firm to benefit from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems the costs and risks of opening a foreign market are shared with the partner Disadvantage the firm risks giving control of its technology to its partner shared ownership can lead to conflicts and battles for control if goals and objectives differ or change over time

Assembly operation
Firms set up assembly plants in foreign countries in order to facilitate the availability of cheap human resources Advantages- cost of production can reduce Easier than full manufacturing facility. Disadvantages-sourcing of skilled labors Difficulty in managing vendors.

Manufacturing facility
Firms set up its full manufacturing facility in foreign countries for facilitating cheap factors of production Advantages-Since it is a long term investment ,companies can adopt strategic plans Full control over the unit Disadvantages-the risk factor is high