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Foreign Market Entry Essay

921 words - 4 pages

Entering a foreign market can be delicate for a business. There are different steps to entering a market abroad, and there are different strategies to look at, as they all vary. There is no single approach to enter all forms of international business. Many benefits come from expanding a business globally. Making the move into foreign markets will increase the size of an organization, their profits, and the overall global economy. A company must determine trade barriers, the different risks associated with their entry, and develop a strategy (Hill 2008).
Steps to entering the foreign market vary, but here are six basic steps to consider: First the organization needs to assess their ...view middle of the document...

Licensing is when a domestic firm allows a foreign company the right to produce and market certain products in exchange for a profit or royalties. Franchising is a specific form of licensing that follows firm procedures on how to use their products, an example of franchising may be fast food companies due to the business policies, and the operating models are fixed (Arnold 2003). Joint venture is the creating of a company that is owned by two or more different businesses. Wholly owned subsidiary is where a business owns 100% of the stock, and this can be done when a company sets up a new operation in a foreign market or when a company attains an established company (Hill 2008). Each of the six entries come with great potential for an organization to benefit, as well, each one has possible negative effects. We will compare two of the six entry methods in the following paragraphs.
Let’s start by taking a closer look at the export method of entry. Some advantages associated with exporting include low cost of entry, organizations also save money because they don’t need to create new manufacture sites out of the country, and exporting assists a company with attaining economies to scale in current locations (Hill 2008). Disadvantages to exporting include possible lower costs of manufacturing in a foreign market, companies may experience expensive transporting prices, depending on the location of exports, tariffs and trade barriers can be costly, and overseas trading agents may not have the best interest of the company exporting. Given both the advantages and disadvantages, a company can export fairly easy. Organizational leaders need to plan and determine all the factors that pertain to their product or service, as well as the location of where...

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