Modes of Entry Into International Marketing

MODES OF ENTRY INTO
INTERNATIONAL MARKETING
EXPORTING
• It is the simplest way of entering world markets
• Traditional Entry mode
• Exporting means shipping the goods and services out of the port of a country.
• Seller is referred to as an "exporter" .
• Buyer is referred to as an "importer“.
• Mainly there are two types of exporting
they are
Direct Exporting
Indirect exporting
DIRECT EXPORTING
• Direct exporting means that a producer or supplier directly sells its product to an
international market, either through intermediaries – such as sales representatives,
distributors, or foreign retailers – or directly selling the product to the end user.
• An example of this would be directly selling computer parts to a computer
manufacturing plant.
• Direct exporting requires market research to locate markets for the product,
international distribution of the product, creating a link to the consumers, and
collections.
INDIRECT EXPORTING
• Indirect exporting means selling to an intermediary, who in turn sells
your products either directly to customers or to importing wholesalers.
The easiest method of indirect exporting is to sell to an intermediary in
your own country.
• When selling by this method, you normally are not responsible for
collecting payment from the overseas customer, nor for coordinating
the shipping logistics.
ADVANTAGES & DISADVANTAGES OF EXPORTING
ADVANTAGES DISADVANTAGES
• Increased Competition • Extra Costs
• Increased Sales • Financial Risks
• Higher Profits • Product Modification
• Transportation Risks
• Extending the Product Life
Cycle • Lack Of Market Information
LICENSING
• Licensing is when a firm, called the licensor, leases the right to use its
intellectual property—technology, work methods, patents, copyrights, brand
names, or trademarks—to another firm, called the licensee,
• In return the licensee is required to pay royalty to the licensor at an agreed
percentage of turnover.
• The property licensed may include:
• Patents
• Trademarks
• Copyrights
• Technology etc.
PROCESS OF LICENSING
ADVANTAGES & DISADVANTAGES OF LICENSING
• It creates an opportunity for passive • It creates a dependency upon the
income. licensor.
• It creates new business opportunities. • It could damage the reputation of
• It reduces risks for both parties. both parties.
• It creates an easier entry into foreign • It is not a guarantee of revenues.
markets. • It takes time for royalty payments to
• It creates self-employment arrive.
opportunities.
FRANCHISING
• Franchising is a form of licensing in which the owner of a business
system (the franchisor) grants to an individual or group of individuals
(the franchisee) the right to run a business selling a product or
providing a service using the franchisor’s business system.
• Fast food restaurants are good examples of this type of franchise.
Prominentexamples include McDonalds, Burger King, and Pizza Hut.
• In franchising agreement, royalties might be paid weekly out of the
sales that are generated at the register.
ADVANTAGES & DISADVANTAGES OF
FRANCHISING
• Established Brand and Customer • Higher Initial Payout (Franchise
Base Fee and Start-up Costs)
• Marketing Support • Royalty Payments
• Reduced Risk • Marketing/Advertising Fees
• Financial Assistance • Limited Creativity/Flexibility
• Provides Training • Dependent on Franchisor
Success
CONTRACT MANUFACTURING
• This is an alternative to licensing
• A company contracts with foreign producer to manufacture products
for sale in the foriegn market.
• The company retains responsibility for promoting and distributing its
product.
• It is commonly seen in book publishing.
• An example of a reputed contract manufacturing company is
Foxconn Technology Group that supplies products to high-profile
companies like Microsoft, Amazon, and Apple.
ADVANTAGES OF CONTACT MANUFACTURING
• Saves ample time especially the time needed to set up
manufacturing units in another place
• Firms can save on the cost of capital as they do not have to
pay for equipment, labour, training, and place, etc. Most
companies look at low-cost countries like China and India
to get the benefit of low labour costs.
• Hiring a contract firm results in an increase in productivity.
It helps to send your products to market quickly.
• Increased innovation and ultimately improved brand
reputation and recognition as the firm are dealing with
quality products.
DISADVANTAGES OF CONTACT MANUFACTURING
• The firm that places an order is dependent on the contract manufacturing meeting
his demands promptly. There is also a lack of flexibility without direct control.
• As the hiring firm is dependent on a contract manufacturing company for its parts,
it might not be able to meet sudden demands in the market at the right time
• While signing the contract, the hiring company must make sure that the quality
standards of the contract manufacturing company are congruent with their own.
There is always a risk that the manufacturer can make quality adjustments at your
cost
• It is vital to maintain a good relationship with your contract manufacturer.
Remember the manufacturer has other customers and you cannot force him to
manufacture your products before someone else’s products. Most hiring firms
decrease the risk by working on a one-to-one basis with the contract
manufacturing and offering him additional benefits for his extra efforts
THANK YOU

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