The paper 'International Market Entry and Development" is a good example of a business assignment. There are varied modes of entry into the international market and whichever mode a firm selects impacts on the number of resources allocated to the firm’ s foreign operations, risks that must be considered and the level of control the firm has over its operations as supported by Charles Hill et al, (1990). The mode of entry refers to the medium that a firm uses in order o gain entry into a new global market (Charles Hill et al, 1990).
Ghauri (2000) argues that the effective selection of mode ensures thriving foreign operations. There are varied modes and methods of international market entry and development which can be categorized into non-equity modes and equity modes (Schaffer, et al. , 2008). Under non-equity modes, there are exports and contractual agreements and under equity modes, there are joint ventures and wholly-owned subsidiaries. Non-equity modes Export; refers to the process of one country selling products and services to other countries, which can be facilitated directly or indirectly (Menipaz & Menipaz, 2011). Contractual modes Licensing; Dlabay, et al. , (2010) describes it as a business arrangement where a licensee offers a fee to a licensor who has monopoly position and rights which include patent, copyright or trademark which offers them exclusive right that hinders other organizations from utilizing the idea, brand, logo for business purposes. Franchising; is almost similar to licensing only that the franchisees, who are the partial-independent business owners pay royalties and charges to the franchiser to acquire the trademark and use its systems to sell (Ghauri 2000).
Franchising is distinguished from licensing in that the franchisee has to comply with specific terms and conditions stipulated by the franchiser (Peng, 2008).
The notable franchised business includes McDonald's. Research and Development contracts; which offer entering business the benefit the capacity to enter into lucrative locations for specific innovations cost-effectively. Turnkey projects; are projects where contractors are paid to develop and build innovative facilities and train staff (Peng, 2008). Peng notes that often, these projects are a means for an entering business to export their processes and technologies into new markets by coming up with factories in new markets. Co-marketing; Peng indicates that co-marketing is another non-equity mode of internationalization where the business benefits through its ability to access a wider customer base (Peng, 2008). Equity modes Joint ventures; are strategic agreements between two organizations to partner in a project in a certain market (Peng 2008). Wholly owned subsidiaries; they can be in the form of acquisitions or Greenfield operations (Peng, 2008).
According to the author, the main benefits of the two forms include full control over operations and equity, global coordination and safeguarding knowledge. There are varied theoretical models that explain how/which method/mode of market entry managers decides to use when entering an overseas market.
This includes the transaction cost analysis model which suggests that an organization will often spread out until the cost of forming another transaction within the organization becomes similar to the cost of conducting a similar transaction through open market exchanges (Dlabay, et al. , 2010). Often transaction cost occurs when markets do not function under the law of perfect competition since there is discord between the buyer and seller. The theory is limited in that it assumes that there is no discord in a foreign firm and it understates the significance of production cost (Schaffer, et al. , 2008).
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Charles W.L.Hill, Peter Hwang & Kim, W.C. 1990. An Eclectic Theory of the Choice of
International Entry Mode, Strategic Management Journal. New York: Wiley.
Dlabay, L., Scott, J., & Scott, J.C. 2010. International Business. London: Cengage Learning.
Ghauri, P. 2000. Internationalization of the Firm. From Tayeb, M, H. International Business Theories, Policies and Practice. Pp 129-153, 658.049 156: Pearson Education Ltd.
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Menipaz, E., & Menipaz, A. 2011. International Business: Theory and Practice. London: SAGE Publications Ltd.
Peng, M.W. 2008. Global Strategy. London: Cengage Learning.
Schaffer, R., Agusti, F., & Earle, B. 2008. International Business Law and Its Environment. London: Cengage Learning