What are the various modes of entry for a multinational enterprise (MNC) to expand operations or sales to another country? Why would an MNC select one mode of entry over another? What change in conditions would alert an MNC to consider a different mode of entry?© BrainMass Inc. brainmass.com October 1, 2020, 6:53 pm ad1c9bdddf
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There are numerous market entry strategies that a business can adopt when setting up offshore. Each has differing levels of risk, legal obligation, advantages and disadvantages. Following is an overview of factors that should be considered when assessing the options.
Under this simple form of foreign direct investment the exporter establishes a local presence through a representative or branch office, rents office space and hires staff (could be just one person).
* Greater control of marketing and distribution
* Direct contact with customers
* Improved credibility in market place with customers
* Access to local venture capital
* Cost of establishing an office is higher than using an agent and/or distributor
* Do not have a local partner with contacts and expertise as in a joint venture
If your company is interested in going beyond the simple export of goods and services, licensing, joint ventures (JV) and offshore operations should be explored. While direct exporting may be a profitable method of market entry for some businesses, licensing manufacturing rights to your product to a foreign company or setting up a foreign manufacturing JV may be viable alternatives. Strategic alliance partners are often identified through bankers, accountants, business consultants, industry associations and networks, and government contacts. Austrade can normally supply lists of such contacts or, through its own network, a short-list of potential partners for Australian exporters at a reasonable cost.
A market entry option which the exporter and a domestic company in the target country join together to form a new incorporated company. Both parties provide equity and resources to the JV and share in the management, profits and losses. The JV be limited to the life of a particular project. This option is popular in countries where there are restrictions on foreign ownership, eg. China and Vietnam.
* Acquire competencies or skills not available in-house
* When market needs to be penetrated quickly, eg. when competitive entry is imminent or technological change is very rapid
* Spread the risk of a large project over more than one firm
* Enable faster entry and payback
* Often forced into JV by government regulation or pressure
* Avoid tariff barriers and satisfy local ...
This solution discusses the advantages and disadvantages of different modes of entry in to foreign markets in 1457 words.