Question

In great detail please answer the following (at least 300 words per each question)

1. Explain the 5 main modes of market entry and describe the benefits of each to a particular situation.

Answer 1

The five main modes of entry are following:

1. Exporting: The benefit of this is market expansion by serving new markets abroad. This is fast, easy. Firms don’t have to invest directly in manufacturing units in the foreign land. The advantage is that firms have protection in terms of patents, copyrights, trademarks. Other advantage is that the firms can trade in both tangible as well as intangible goods.
2. Licensing and franchising: Under this the companies assign the foreign business and companies to manufacture and involve in retail to sell its product and expand the market size. Advantage is that the licensing firm gets a pre-agreed upon licensing or franchising fee which is not affected by the sales as such.
3. Opening Subsidiaries: The business can open subsidiaries in the foreign land by directly investing and setting up a plant under its banner. The benefit of this is that the firms are able to regulate manufacturing and marketing in their own way.
4. Joint venture: Under this two companies join hand to jointly invest their resources and manufacture and sell a product in the foreign land. For example, a firm from USA, joins another firm in India to manufacture and sell in India acquiring market share for itself. The advantage in this mode of entry is that the firm finds a friend and a learned partner in foreign land that has knowledge of the local markets, demand and regulations that exist in the foreign land. This helps the firm to tackle many issues readily.
5. Online sale. The firms involve in attracting customers online by showcasing their products online through advertisements and websites. The benefit is that this is the most hassle free and instant way of acquiring the foreign markets and expanding consumer base. This is very cheap and effective way of chasing the customers. Also another benefit is that physical presence of the firm in the serving market is not necessary.