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ISSN: 2249-7196
IJMRR/Oct. 2016/ Volume 6/Issue 10/Article No-3/1382-1385
Sonia Goyat et. al., / International Journal of Management Research & Review
STRATEGIES OF ENTERING IN FOREIGN MARKET
Sonia Goyat*1, Amandeep Nain2
1
Dept. of Commerce, CRM Jat P.G. College, Hisar, India
2
Assoc. Prof, Hisar, India.
ABSTRACT
Foreign market entry strategy is an important strategic decision for international business
units. The paper approches about cautious selection of strategy made for long-term
implications in international marketing environment. The choice of appropriate strategy
depends upon factors like risk level, tariff barrier, transportation cost, management vision and
resource availability etc.
Keywords: Export, licensing, joint venture, turnkey project, franchising.
1. INTRODUCTION
The need for a solid market entry decision is an integral part of a global market entry
strategy. Entry decisions will heavily influence the firm’s other marketing-mix decisions.
Globalisation promote the international business units to take entry in various nations. Global
marketers have to make a multitude of decisions regarding the entry mode which may include
[2,3]:

the target product/market

the goals of the target markets

the mode of entry

The time of entry

A marketing-mix plan

A control system to check the performance in the entered markets
There are two major types of entry modes: Equity and Non-equity modes. The non-equity
modes category include export and contractual agreements. The equity modes category
includes: joint venture and wholly owned subsidiaries
FOREIGN MARKET ENTRY MODES
EQUITY
*Corresponding Author
NON-EQUITY
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Sonia Goyat et. al., / International Journal of Management Research & Review
2. EXPORT
Exporting is the most traditional and well established form of entering into foreign markets.
Exporting can be defined as the marketing of goods produced in one country into another.
Exporting is very useful when a country has surplus production capacity. At the same time,
the country enjoys comparative advantage in producing these goods in comparison to other
nations. It can be further described in two ways:
Direct Exports
Direct exports represent the most basic mode of exporting made by a company, capitalizing
on in production concentrated in the home country and affording better control over
distribution. Direct export works the best if the volumes are small. The main characteristic of
direct exports entry model is that there are no intermediaries. Through direct exports
countries Control over selection of foreign markets and choice of foreign representative
companies.
Indirect exports
Indirect export is the process of exporting through domestically based export intermediaries.
The exporter has no control over its products in the foreign market.
Licensing
This paper tells that term licensing allows foreign firms, either exclusively or non-exclusively
to manufacture a proprietor’s product for a fixed term in a specific market. The resources in it
may include patents, trademarks, managerial skills, technology, and others that can make it
possible for the licensee to manufacture and sell in the host country a similar product to the
one the licensor has already been producing and selling in the home country without
requiring the licensor to open a new operation overseas [1]. Licensing is a relatively flexible
work agreement that can be customized to fit the needs and interests of both, licensor and
licensee. Following are the main advantages and reasons to use an international licensing for
expending internationally:

Obtain extra income for technical know-how and services

Reach new markets not accessible by export from existing facilities

Quickly expand without much risk and large capital investment

Pave the way for future investments in the market

Retain established markets closed by trade restrictions
Franchising
The meaning can be defined as: "A system in which semi-independent business owners
(franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to
become identified with its trademark, to sell its products or services, and often to use its
business format and system. In some cases, key components are provided by franchiser to
franchisee. For example soft drink manufacturer like Pepsi and coca-cola provide the key part
of their product [1,4].
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Sonia Goyat et. al., / International Journal of Management Research & Review
Turnkey Project
A turnkey project refers to a project when clients pay contractors to design and construct new
facilities and train personnel. A turnkey project is a way for a foreign company to export its
process and technology to other countries by building a plant in that country.
One of the major advantages of turnkey projects is the possibility for a company to establish a
plant and earn profits in a foreign country especially in which foreign direct investment
opportunities are limited and lack of expertise in a specific area exists.
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". Profit of joint venture is shared
between foreign partner and local unit in a predetermined ratio.
Drivers Behind Successful International Joint Ventures
o Pick the right partner
o Establish clear objectives from the beginning
o Bridge cultural gaps
o Gain top managerial commitment and respect
Joint ventures are a more extensive form of participation than either exporting or licensing.
Joint ventures give the advantage of sharing of risk and ability to combine the local in-depth
knowledge with a foreign partner with know-how in technology or process and joint financial
strength.
Wholly Owned subsidiaries
These subsidiary companies are wholly owned by their parent company. Mncs prefer this
route when they want to have complete control over manufacturing activities in other nations.
For example, LG electronics has set up LG India as its wholly owned manufacturing
subsidiary unit in india. Setting up a wholly owned operation in a new international market
offers less of the ‘quick’ advantages of other market entry modes as it involves setting up a
presence from scratch.
It takes some time and effort to build a new market presence, especially in mature markets
and where your business may have little knowledge of the local market. It does offer more in
the way of control and management of the business.
Benefits

Greater control and higher profits

Strong commitment to the local market on the part of companies

Allows the investor to manage and control marketing, production, and sourcing
decisions
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Sonia Goyat et. al., / International Journal of Management Research & Review
3. CONCLUSION
The aspects of foreign market entry strategy considered in this paper are the rationale for
market selection, the choice of entry mode staffing and establishing foreign operations. The
aspects of foreign market entry strategy considered in this study are (1) the rationale for
market selection, (2) the choice of entry mode and (3) staffing and establishing foreign
operations. Thus, in summary the institutional context is found to affect entry strategies, not
in isolation, but in interplay with other factors.
REFERENCES
[1] Anderson E, Gatingon H. Modes of Foreign Entry: A Transaction Cost Analysis and
Propositions. Journal of International Business Studies, 1986
[2] Root FR. Entry Strategies for International Markets, Lexington Books, 1987.
[3] Cunningham MT. Strategies for International Industrial Marketing. In D.W. Turnbull and
J.P. Valla (eds.) Croom Helm 1986.
[4] Welsh D, Alon
Incorporated, 2001.
I.
International
Franchising
in
Emerging
Markets,
CCH
[5] Agarwal S, Ramaswami S. Choice of foreign market entry mode: impact of ownership,
location and internationalization factors, Journal of International Business Studies 1992;
23(1): 1-27.
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