There are difference in market entry modes with the risk involved, control over the resources and the rate of return on the investment. There are two main types of market entry modes and they are as follows;
Export and contractual agreements comes under the non-equity mode category and equity mode category include subsidiaries and joint ventures.
Export can be defined as selling goods or services in another country away from the country which items are produced. The exports also can be categorized into two types and they are as follows;
Basic mode of exporting is the direct export. In the event volume of export is rather small and in that case direct export works well and in the case of large quantity of exports it is necessary the protection.
On sales commission basis sales representative are engaged in sales of goods. Support services such as advertising goods presentations, clearance of customs, legal needs, technical service are required.
Importing distributors purchase products and sell it in their local markets to wholesalers and retail traders. Import of distributors are searching market entry strategy for products and services. This mode is ideal for goods such as toys, appliances prepared foods items etc.
There is a control over selection of markets in other countries as foreign companies can be selected. It is possible to get feedback from the consumers, protection of the trademarks, goodwill and other intellectual property. Potentiality is greater in sales than with indirect exporting.
It is the exporting through domestically based intermediaries and there is no control over the products in foreign market for the exporter.
Export Trading Companies are providing support services for the export process for suppliers. Suppliers are not familiar with export procedures and Export Trading Companies are performing all the required work. They find out foreign buyers and sent the quotations and made necessary inquiries etc.
Export Management companies are also similar in nature to Export Trading Companies. They take on export credit risks and carry on type of products and not represent competing goods. Normally these companies are trading on behalf of suppliers.
Export merchants are companies which are in wholesale business and they purchase unpackaged products from suppliers or from producers for selling in foreign markets and they are doing the selling on their own brand names. Disadvantages of engaging export merchants is presence of identical products on various brands and various pricing in the market. Activities of the export merchants obstruct exports by producers.
Confirming Houses are intermediate sellers. They are working for foreign buyers. They receive goods from the suppliers and negotiate purchase deliveries and pay the supplier. In the event client likes the product he can become trade representative. Supplier unaware and lack the controlling power what a confirming House does with their product and this is a disadvantage.
Purchasing agents are also like confirming Houses but they do not make payments to suppliers direct. Payments are taken place among supplier, and foreign buyer.
International license agreement allows overseas companies to produce proprietor’s products for a specific time duration in specific market. Licensor in the home country makes rights or resources available to the in foreign country. Patents are included the rights and resources.
Licensee is able to manufacture and sell in the host country a similar product to licensor has been producing and selling in the home country without having the licensor to imitate operation in overseas. Incisor earnings usually one time payment technical fees and royalty payments according to the sales.
This mode of entry transference of knowhow between the parental company and licensee decision making an international licensee agreement depend on the host government show for intellectual property and licensor to select the right associates and deprived them to compete in each market. It is a flexible work agreement that can be tailor made to the requirements of licensor and licensee.
This system is semi –independent business owners pay fees and royalties to a parent company to sell its products. Franchising agreements are for longer periods and franchiser offer packages of rights and resources including equipment, managerial systems, operation manual, training, site approval and other support required for franchise to operate business. Moreover, licensing agreement such as intellectual property, trade secrets and in franchising it is limited.
Clients pay contractors design and build new facilities and provide training to people in a Trunkey project. This is a way for a overseas company to exports its products to other countries building plants etc. This an entry strategy is ideal for industrial companies. Advantage is the possibility to establish a plant and make profits in overseas country.
Disadvantage is the risk involved for disclosing company secrets to competitors. By entering a market with turnkey project is that specific company has no long term interest.