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BUS 401: International Business Archiverr Resource Center Study Notes Foreign Market Entry Modes The outcome is highly dependent on the choice of how to enter foreign markets. The following four methods may be used to expand into new markets outside of your own country: Exporting Licensing Joint Venture Direct Investment Exporting Domestically-produced commodities may be exported and sold directly to foreign customers. Foreign markets may be reached by exporting, which is a well- established strategy.
There is no need to invest in overseas manufacturing facilities since shipping does not need the manufacture of products in the target nation. Exporting costs are mostly incurred in the form of marketing expenditures. Coordination among four parties is often required when exporting: Exporter Importer Transport provider Government Licensing Licenses allow a corporation outside the licensing nation to use the licensor's property. Trademarks, patents, and manufacturing procedures are all examples of intellectual property. In return for the right to use the intangible property and, maybe, technical help, the licensee pays a fee. As long as the licensor is willing to put in as little as possible, licensing has the potential to provide a significant return. Because the licensee is the one that manufactures and advertises the product, any profits that may have been gained from such operations could be lost.
Cultural clashes If, how, and when to terminate the relationship Cooperative and competitive forces exist in joint enterprises: Strategic imperative: the partners want to maximize the advantage gained from the joint venture, but they also want to maximize their competitive position. The joint venture attempts to develop shared resources, but each firm wants to build and protect its proprietary resources. The joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control. Foreign Direct Investment Direct ownership of assets in a foreign nation is known as a foreign direct investment (FDI). Involved are transfers of assets such as money and expertise. Purchasing an existing company or creating a new one are two options for bringing in direct foreign investment. Indirect ownership allows for more control over the company's operations and a better understanding of its customers and the competitive landscape. However, it requires a substantial investment of time and money.
The Case of EuroDisney The entry form is a crucial aspect of the project's success, and various ways of entry may be more suited in certain situations. Building a theme park in Europe was an uphill battle for Walt Disney Co. Licensing has been Disney's primary entrance point in Japan. However, the company decided to invest directly in its European theme park, controlling 49 percent of the company, and the public owns the other 51 percent. Additionally, the admission route influenced Disney's choice to settle in Europe. Site selection involves numerous aspects, all of which must be thoroughly defined and evaluated by the organization in question. However successful a firm like Disney has been in the past; the EuroDisney initiative shows that future success is not guaranteed for any business, particularly when expanding into a new nation with a distinct culture. The correct modifications should always be made to account for country variances.
