Question

select a consumer or industrial commodity business service and explore the options of entering any specific market, country. write a at least 700 word in pdf or word

Answer 1

When an organisation has made a decision to enter in market, there are varieties of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. The simplest form of entry strategy is exporting using either a direct or indirect method. Many agricultural products of a raw or commodity nature use agents, distributors or involve Government..

Basic issues in marketing

An organisation wishing to "go international" faces three major issues:

i) Marketing - which countries, which segments, how to manage and implement marketing effort, how to enter - with intermediaries or directly, with what information?

ii) Sourcing - whether to obtain products, make or buy?

iii) Investment and control - joint venture, global partner, acquisition?

five strategies used by firms for entry into new foreign markets:

i) Technical innovation strategy - perceived and demonstrable superior products
ii) Product adaptation strategy - modifications to existing products
iii) Availability and security strategy - overcome transport risks by countering perceived risks
iv) Low price strategy - penetration price and,
v) Total adaptation and conformity strategy - foreign producer gives a straight copy.

Entry strategies

There are a variety of ways in which organisations can enter foreign markets.

Exporting

Exporting is the most traditional and well established form of operating in foreign markets. Exporting can be defined as the marketing of goods produced in one country into another.

The advantages of exporting are:

· manufacturing is home based thus, it is less risky than overseas based
· gives an opportunity to "learn" overseas markets before investing in bricks and mortar
· reduces the potential risks of operating overseas.

Piggybacking

Piggybacking is an interesting development. The method means that organisations with little exporting skill may use the services. Another form is the consolidation of orders by a no. of companies in order to take advantage of buying in bulk. Normally these would be geographically able to be served, on an air route. The fertilizer manufacturers of Zimbabwe, for example, could piggyback with the South Africans who both import potassium from outside their respective countries.

Counter Trade

Counter trade is the modem form of barter, except contracts are not legal and it is not covered by GATT. It can be used to circumvent import quotas. Barter is the direct exchange of one good for another, although valuation of respective commodities is difficult. Simple barter is the least complex and oldest form of bilateral, non-monetarised trade. Often it is called "straight", "classical" or "pure" barter. Barter is a direct exchange of goods and services between two parties.

Counter purchase, is where the customer agrees to buy goods on condition that the seller buys some of the customer's own products in return. Alternatively, if exchange is being organised at national government level then the seller agrees to purchase compensatory goods from an unrelated organisation up to a pre-specified value. The difference between the two is that contractual obligations related to counter purchase can extend over a longer period of time and the contract requires each party to the deal to settle most or all of their account with currency or trade credits to an agreed currency value.

Foreign production

Besides exporting, other market entry strategies include licensing, joint ventures, contract manufacture, ownership and participation in export processing zones or free trade zones.

Licensing

Licensing is defined as "the method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how or some other skill provided by the license". Licensing involves little expense and involvement. The only cost is signing the agreement and policing its implementation.

Licensing gives the following advantages:

· Good way to start in foreign operations and open the door to low risk manufacturing relationships
· Linkage of parent and receiving partner interests means both get most out of marketing effort
· Capital not tied up in foreign operation and
· Options to buy into partner exist or provision to take royalties in stock.

The disadvantages are:

· Limited form of participation - to length of agreement, specific product, process or trademark
· Potential returns from marketing and manufacturing may be lost
· Partner develops know-how and so licence is short
· Licensees become competitors - overcome by having cross technology transfer deals and
· Requires considerable fact finding, planning, investigation and interpretation.

Joint ventures

Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control over property rights and operation".

Joint ventures give the following advantages:

· Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process

· Joint financial strength

· May be only means of entry and

· May be the source of supply for a third country.

They also have disadvantages:

· Partners do not have full control of management
· May be impossible to recover capital if need be
· Disagreement on third party markets to serve and
· Partners may have different views on expected benefits.

If the partners carefully map out in advance what they expect to achieve and how, then many problems can be overcome.

Ownership

These forms of participation: exporting, licensing, joint ventures or ownership, are on a continuum rather than discrete and can take many formats. the entry mode as a choice between company owned or controlled methods - "integrated" channels - or "independent" channels. Integrated channels offer the advantages of planning and control of resources, flow of information, and faster market penetration. The disadvantages are that they incur many costs the risks are high, some may be more effective than others and in some cases their credibility amongest locals may be lower than that of controlled independents. Independent channels offer lower performance costs, risks, less capital, high local knowledge and credibility. Disadvantages include less market information flow, greater coordinating and control difficulties and motivational difficulties. In addition they may not be willing to spend money on market development and selection of good intermediaries may be difficult as good ones are usually taken up anyway.

Export processing zones (EPZ)

Whilst not strictly speaking an entry-strategy, EPZs serve as an "entry" into a market. They are primarily an investment incentive for would be investors but can also provide employment for the host country and the transfer of skills as well as provide a base for the flow of goods in and out of the country.