Assessing Internationalisation: Market Entry Flashcards
What are the four ways to enter an international market in order or least risk go most?
Export.
Licensing.
Alliances.
Direct investment.
Define exporting.
Selling products in overseas markets.
Two types of exporting.
Direct.
Indirect.
Indirect exporting definition.
Exporting and selling through local agents.
Direct exporting definition.
Exporting and selling on own behalf.
What are most uk exports? Examples?
Services e.g. banking and insurance.
Benefit of exporting.
Increase market share.
Disasvantages, example.
Expensive and time consuming to access market e.g. tariff negotiation and customisation.
Disadvantage of inderect exporting.
Element of control lost to the agent.
Licensing definition.
Selling rights to a foreign firm to produce or sell products.
Product type licensing is common for
Distinct, differentiated and protected product.
Licensing is useful for
Companies involving products with high cost to transport and establish in a foreign country.
Risk of licensing.
Foreign company who is responsible to generate sales within their own market.
Disadvantage of licensing.
Loss of marketing control and danfer of host company “breaking away” in the future.
When does the licensing disadvantage often happen?
Technology business where intellectual property is able to be limited.
Licensing is most suitable for
Companies with strong, consistent innovation enabling a competitive advantage.
Alliances definition.
Joining forces with a similar company overseas, combining local market knowledge with a successful domestic product.
Alliances most suitable for…why?
Small medium business.
Provides immediate access to international markets, technology, distribution and expertise etc.
Benefits of alliances based on research.
Faster growth, higher productivity and refenue = benefits of synergy.
Synergy remembering equation.
2 + 2 = 5
Synergy definition.
Value and performance of two companies combined will be greater than the sum of seperate, individual parts.
Alliances can be formalised as
Joint venture - joint ownership of the businesses.
Benefit of joint venture alliance.
Avoid trade barriers - minimise costs - product is more competitive.
Alliances disadvantages.
Shared profits.
Joint investment of the building in the new market.
Minor control loss over brand.
Alliance businesses must be aware of
Conflicting interests and objectives.
Disadvantage of alliances.
Costs shared.
Direct investment definition:
Uk based firms taking over or merging with overseas business.
Effects of direct investment.
Immediate access to market.
Acquire instant share of market.
More suitable for…why?
Established businesses due to the capital implications.
Advantages of direct investment.
reduces risk - uk firm can continue to use established firms brand and reputation - gain direct access to raw materials.
Cheaper labour and avoid import duties.
Full control maintained of the venture.
Disadvantages of takeovers and mergers (direct investment).
expensive.
require shareholder permission to proceed.
challenges and risks in operating abroad.
(Direct investment(DI) two ways overseas bases can be formed. ``
Organic growth.
takeover.
Organic growth defintion.
Business establishes overseas factory or outlet.
Takeover definition.
Foreign business takes over a host business in order to enter and expand in a domestic market within another country.
Three types of strategically direct investment.
Horizontal.
Vertical.
Conglomerate.
Horizontal direct investment definition.
Invests in a company that is involved in the same activities as it does at home.
Vertical direct investment definition.
Different stages of activities are added abroad.
Can be forward or backward vertical investment.
backwards vertical direct investment definition.
Firm brings goods or components back to home country.
Forward vertical direct investment definition.
`Firm sells goods into local or regional markets (acting as distributor).
Conglomerate direct investment definition.
Corporation made up of several businesses.
Made in an unrelated business abroad.
Conglomerate is…why?
Most uncommon form.
Requires investing business to overcome both new market and industry (2 barriers).
Multinational company definition.
Companies with headquarters based in one country but operations in several.
Multinational companies are enabled…effects?
to produce goods in the most cost effective method possible.
Increased profit and economic power.
Multinational companies and internet relation.
Growth of the internet has made the establishment of mnc’s easier.
Why is the establishment of mcn’s easier?
Communication and spread of information through the growth of the internet is now more accurate.
