6.0 Introduction
Learning Objectives
After reading this section, students should be able to:
- Define and describe the five common international-expansion entry modes.
- Discuss the advantages and disadvantages of each entry mode.
- Explain why companies would select each mode of entry.
Companies that wish to move beyond exporting and importing can avail themselves of a wide range of alternative market entry strategies. Each alternative has distinct advantages and disadvantages associated with it; the alternatives can be ranked on a continuum representing increasing levels of investment, commitment, and risk. Licensing can generate revenue flow with little new investment; it can be a good choice for a company that possesses advanced technology, a strong brand image, or valuable intellectual property. Contract manufacturing and franchising are two specialized forms of licensing that are widely used in global marketing.
A higher level of involvement outside the home country may involve foreign direct investment. This can take many forms. Joint ventures offer two or more companies the opportunity to share risk and combine value chain strengths. Companies considering joint ventures must plan carefully and communicate with partners to avoid “divorce.” Foreign direct investment can also be used to establish company operations outside the home country through greenfield investment, acquisition of a minority or majority equity stake in a foreign business, or taking full ownership of an existing business entity through merger or outright acquisition.
Cooperative alliances known as strategic alliances, strategic international alliances, and global strategic partnerships (GSPs) represent an important market entry strategy in the twenty-first century. GSPs are ambitious, reciprocal, cross-border alliances that may involve business partners in a number of different country markets. GSPs are particularly well suited to emerging markets in Central and Eastern Europe, Asia, and Latin America. Western businesspeople should also be aware of two special forms of cooperation found in Asia, namely Japan’s keiretsu and South Korea’s chaebol.
Core Principles of International Marketing – Chapter 7 by Babu John Mariadoss is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.
