MCOM 2nd Year Modes To Enter In Foreign Market Study Notes Sample Model Practise Papers Study Material Notes In Our Site a2znotes.com
MODES TO ENTER IN FOREIGN MARKET
The multinational corporations of the developed countries threat the MNCs of developing countries but they only do not threat them but they also provide them technological and advanced knowledge about business and marketing and help to make them developed. Developing countries do not have sufficient marketing skill and technical know-how to avoid or sort out this major problem. Developing countries get technical knowledge and try to opt latest technology. Without technology no country can be developed therefore developing countries go to the foreign market.
But this is not an easy task to make entry into foreign market. There are different modes to be a member of foreign market. These modes are as follows:
1. Exporting. To reduce or minimise the risk of marketing on the global scale, a nation can increase his export of domestically manufactured products.
Marketing is the best way to enter into foreign market and a experience. Without experience a nation cannot succeed in foro major part of the overseas involvement of large firm is through export trade.
2. Contractual Agreement. Contractual a marketing. There are various kinds of contractual agreements. These under:
(1) Patent Licensing Agreement. The patent licensing is focused on
royalty based agreement or fixed fee. It also provide managerial training.
(ii) Turnkey Operation. The turnkey operation adds construction of plant, personal training and focused on fixed fee or cost plus management.
(iii) Coproduction Agreement. Soviet-bloc countries usually use this agreement. These COLies built plants and paid for with part of the output.
(iv) Management Contract. The management contract is most common in or used in middle east. This contract needs key personnel to operate the foreign market operations.
(v) Licensing Licensing is an important part of contractual agreements. The marketers of multinational companies provide intangible assets (Patents, trade secrets, technical know-how, company name, and trademarks) in the return of these assets, marketer receives payment. 3. Joint Venture. Joint venture is a business which is done by two or more persons, jointly to minimize the risk. Joint venture is more risky than licensing because it needs more direct investments. Joint venture divides the risk in different parts because two or more persons contribute and bear losses combindly. A joint venture between two corporations or persons share risk to attain the predetermined goal. Joint ventures are the next most usual way to take an entry into foreign market.
(i) General Motor Corporation partnership with Egypt’s State owned Nasar Car Co. to establish a plant for assembling of trucks and diesel engines.
(ii) The agreement between Nestle and P.A. and Coca-cola Co. for development of and increase to sale of ready-made drink such as tea and coffee
In joint venture, partners come together to gain profit and take advantage of useful functions of each other and to avoid weaknesses and to make good management research and marketing. A domestic company can make a joint venture with foreign company and this joint venture make a way to take a entry into foreign market.
4. Strategic Alliances. In last few years in international market a new kind of collaborative strategy has become famous. This new collaborative strategy s called ‘strategic alliances’. This is very popular in leading firms and specially n high technical industries. These industries use this technique for their mutual profit. The merger is strategic alliances but this is also very useful because hey are deeper than lengthy market transactions. Two or more persons or firms give their own decisions independently and every firm have, an opportunity to nake decision. In other words, every firm shared in decision-making and involved
In all of firm. Strategic alliance and joint venture are not the same. In alliance, activities are made for particular time or activities which ne in strategic alliances have time limitation. The goals of strategi alliances are as follows:
(i) Reduce transactions costs by establishing a mutual commitment between the supplying and buying firms.
(ii) Apply new technologies and make researches for development and deduce capabilities.
(iii) Increase the demand of product make the reputation in market and spread technology.
To take a entry into emerging markets, strategic alliances is the best mode wulcinational corporations took to combine the markets for development. In emerging markets in which a company looks for modes into the burgeoning World wide economy, strategic alliances helps to make a decision or solution for both sides.
5. Subsidiary Which is Wholly Owned. Multinational companies direct investment in subsidiary (Manufacturing or Assembly). Direct investment in subsidiary helps those companies in establishment in global markets.