Entry Strategies (Continuity)

Question 1

What are the criteria for choosing an entry strategy?

Answer 1

• Foreign market knowledge.
• Product & service e=to be offered.
• Market/niche potential.
• Export expertise.
• Sale & profit objectives.
• Long term planning (possible evolution.
• Human & financial resources.
• Desire level of control.

Question 2

What is indirect export?

Answer 2

When your product is consumed in a foreign market by contracting with an intermediary in the firm’s home country to perform export functions.

Question 3

What are the 3 component of Direct Exports?

Answer 3

• Direct Export Channels.
• Manufacturer’s sales agent.
• Foreign Distributor.

Question 4

What is Direct Export Channels?

Answer 4

Exporter that sells to the buyer abroad through sales department, manufacturer’s agent, brand office abroad, subsidiary, foreign distributor.

Question 5

What are the characteristics of a Manufacturer’s Sale Agent (Representative)? (6)

Answer 5

• Independent.
• Situated in the target market.
• Locates customers & gets orders.
• Works in a limited territory.
• Paid by commission at a fixed rate.
• May sell on an exclusive basis.

Question 6

What are the advantages of a sales agent? (6)

Answer 6

• Potential for faster sales through existing customer base.
• Minimal risks.
  Minimal and variable costs compared to in-house sales.
• Obtains competitive data, market knowledge.
• Exporter controls the marketing mix.
• “Halo effect” from other products in the agent’s portfolio.

Question 7

What are the disadvantages of a sales agent? (3)

Answer 7

• Exporter far from the target market and the agent.
• Difficult to control agent’s effort level.
• Possible conflict with other products in the agent’s portfolio.

Question 8

How do you find a sales agent? (6)

Answer 8

• Visiting trade shows.
• Trade associations and directories.
• Survey of potential customers.
• Referrals from other agents.
• Research on complementary product lines.
• Foreign trade delegations. (physical institutions, helps with associating companies find and associating you with companies, agents, legal firms or give you their contact to do the linkage on your own).

Question 9

What is a Foreign Distributor? (3)

Answer 9

• Buys merchandise from exporter and resells it in the foreign market.
• May also keep merchandise in stock for quick deliveries or reorders.
• May provide after sales service or installation services.

Question 10

What are the advantages of a Foreign Distributor? (4)

Answer 10

• Potential for immediate sales.
• Simplicity for the exporter.
• Infrastructure.
• May take control of marketing mix.

Question 11

What are the disadvantages of a Foreign Distributor? (3)

Answer 11

• Middleman can cause price to increase.
• Exporter usually has less access to final customers.
• Less control over marketing mix (4P’s).

Question 12

What is the difference of contracting between a sale agent and a foreign distributor.

Answer 12

The method of payment.
Agent are payed by commission, whereas the foreign distributor is payed in a more “stable/direct” way.

Question 13

What are the 2 types of Contractual Relationships?
(L&F)

Answer 13

Licensing & Franchising

Question 14

What is licensing?

Answer 14

Arrangement where the owner of IP grants another firm the right to use that IP for a specified period of time in exchange for royalties.

Question 15

What is Franchising?

Answer 15

Arrangement where the firm allows another the right to use an entire business system in exchange for fees or royalties.

Question 16

What is Intellectual Property Rights? (IPR)

Answer 16

• The legal claim through which the proprietary assets of firms and individuals are protected from unauthorized use by other parties.

*** Without legal protection and the assurance of commercial rewards, most firms and individuals would have little incentive to invent.