Entering Foreign Markets

Foreign market entry alternatives Exporting Contractual Agreements Direct Foreign Investment Strategic Alliances Internet

Exporting Direct - selling to a customer in another country Indirect - selling to a domestic or foreign company who resells in another country How? Trade shows, country visits, internet

International Export Alternatives Domestic Intermediaries Foreign Intermediaries Internet Direct exporting Foreign consumer U.S. Company Foreign Retailer Export Management Company (EMC) Distributor Acts as an export department for the company; foreign buyers often don’t know the EMC isn’t actually Company X Accumulate & distribute goods from many countries to many countries; Gray McKenzie & Company – entire middle east; Nissho-Iwai Corp – gets Nike shoes to South Korea & Taiwan Trade Companies (Japanese sogo shosha)

Contractual Agreements Licensing -- one company (licensor) makes an asset available to another company (licensee) in exchange for royalties, fees or other compensation Pros – little investment required; avoid tariffs, quotas & other export barriers Cons – little control over licensee, licensees become competitors after agreement expires Philip Morris Amer Tobacco (Finland)

Contractual Agreements Franchising – A contract that allows a franchisee to operate a business developed by the franchisor in return for a fee & adherence to franchise-wide practices UK

Joint Ventures Forming a new business entity with a partner in the target country Pros - shared risk, learn about new market, combine strengths, permit entry by means otherwise not possible Cons – partners share rewards as well as risk, potential for conflict between partners, partner is self-interested (wants technology, expertise, know-how) Sichuan Pepsi accused of breech of contract; refused access to financial records and transferred stock without PepsiCo’s knowledge

“The purpose of any joint venture, or even a wholly-owned investment, is to allow Chinese companies to learn from foreign companies. We want them to bring their technology to the soil of the People’s Republic of China.” - Yuan Sutai Ministry of Electronics Industry, China

Direct foreign investment Strategic alliances operate manufacturing facilities and/or sales offices in the host country align with other companies in foreign markets to give customers access to those markets Europe, North and Latin America, Middle East, Africa, South-east Asia and the South Pacific