International Trade and Business (MODULE 3)

INTERNATIONAL MARKET ENTRY STRATEGIES

EXPORT-IMPORT BUSINESS

A relatively low-risk business operation that involves penetrating foreign markets (by exporting) or importing merchandise (of all kinds) at competitive prices for domestic consumption.

LICENSING

The practice in which a company or individual provides the foreign partner with the technology (patterned technology, copyright, process, trademark, etc.) to manufacture and sell products or services in a target country for an annual license fee.

FRANCHISING

The practice in which the parent firm is obligated to provide specialized equipment and/or service (e.g. product specification and adaptation, pricing, promotion, and distribution strategies), and sometimes to fund some startup costs, to franchisees in return for an annual fee.

STRATEGIC ALLIANCES

An agreement between two or more firms that do not involve the creation of a separate entity with joint ownership and in which the firms stand to gain revenues and maximize profits through cooperation for a given period of time.

INTERNATIONAL JOINT VENTURES

A business that is jointly owned and operated by two or more firms (usually one from the host country and the other from another country) that pool their resources (labor, capital, technology, and management) to penetrate host country markets, generate and split profits, and share commercial risk.

CROSS-BORDER MERGERS AND ACQUISITIONS

Purchase of established firms abroad with the goal of using the existing production, marketing and distribution networks and of having instant access to foreign markets that fit the purchasing firm’s global strategy.

WHOLLY OWNED SUBSIDIARIES

New facilities build and operated overseas that require large investment of capital because these new establishments are tailored to the exact needs of the home country firm.

FOREIGN DIRECT INVESTMENT (FDI)

an international market entry strategy that allows companies to establish a long-term presence in a foreign country.

Types of FDI as a Market Entry Strategy

• Greenfield Investment

• Mergers & Acquisitions (M&A)

• Joint Ventures

• Brownfield Investment

Greenfield Investment

The company builds new operations from scratch in a foreign market.

Mergers & Acquisitions (M&A)

The company buys or merges with an existing local business

Joint Ventures

The company partners with a local firm to establish a new entity.

Brownfield Investment

The company repurposes existing facilities instead of building new ones

Market Conditions

1. Market Size & Growth Potential

2. Competitive Landscape

3. Regulatory Environment.

4. Cultural & Consumer Preferences

Company Goals & Resources

1. Control & Ownership Preferences

2. Financial & Resource Commitment

3. Speed of Market Entry

4. Scalability & Long-Term Strategy

Risk Tolerance

1. Political & Economic Stability

2. Legal & Tax Implications

Risk management

Crucial when expanding internationally. Companies must identify risks and implement proactive strategies to minimize potential losses.

A. Identifying Key Risks

1. Market Risks

2. Financial Risks

3. Political & Legal Risks

4. Operational & Supply Chain Risks

5. Reputational & Cultural Risks

B. Risk Management Strategies

1. Market Research & Feasibility Studies

2. Diversification Strategies

3. Legal & Regulatory Compliance

4. Financial Hedging

5. Strategic Partnerships

6. Contingency Planning