Topic 4, ENTRY FORMS IN FOREIGN MARKETS Flashcards
Define ‘Indirect export’
The manufacturing firm does not take direct care of exporting activities.
Instead another domestic company performs these activities without the manufacturing firm’s involvement in the foreign sales of its products.
Define ‘direct export’
Occurs when the producing firm takes care of exporting activities and is in direct contact with the intermediaries in the foreign market.
Define ‘coorperative export’
This involves collaborative agreements with other firms concerning the performance of exporting functions
INTERMEDIATE ENTRY MODES
Define ‘contract manufacturing’
It enables a company to develop and control R&D, marketing, distribution, sales and servicing, while handing over the responsibility of production to a local firm.
INTERMEDIATE ENTRY MODES
Define ‘licensing’
Licensing involves obtaining permission from a company (licensor) to manufacture and sell one or more of its products within a defined market area.
INTERMEDIATE ENTRY MODES
Define ‘Franchising’
The production, sales and service are transferred to the local outlets, while the R&D and marketing are controlled by the franchisor.
INTERMEDIATE ENTRY MODES
Define ‘joint ventures/strategic alliances
A joint venture/strategic alliance is a partnership between two or more parties. These parties are based in different countries.
True or false?
International experience reduces the probability of committing resources to foreign markets.
False
International experience INCREASES the probability of committing resources to foreign markets.
True or false?
Products with high value/weight are normally related to hierarchical entry modes.
False
Products with high value/weight (e.g. watches) are directly exported.
Hierarchical entry modes: a subsidiary in the specific market
Define Indirect Export, Direct Export, and Cooperative Export.
Indirect Export: the manufacturing firm does not take direct care of exporting activities
Direct Export: occurs when the manufacturing company takes direct care of exporting activities and is in contact with the intermediaries in the foreign market.
Cooperative Export: involves collaborative agreements with other firms concerning the performance of exporting functions
Identify the advantages and disadvantages of Piggyback for the rider.
Advantages: improves the efficiency, and can learn from the carrier’s experience and over time do its own export transactions
Disadvantages: it gives up control over the marketing of their products
Piggyback (pick-a-back): two companies who are not competing form an alliance (a car company can promote a tire company).
Describe the similarities and differences between Agent and Distributor.
Distributors: are representatives of the company and are generally the sole importers of the company’s product in their markets.
Agents: represents an exporter and sells to wholesalers or retailers in the importing country
Explain the usefulness of franchising for a company’s international expansion.
Starts in the local market for testing and developing the franchising format (feedback is faster and more clear)
Franchisor obtains local knowledge from the local franchisee
