International market entry modes

1. Modes of International market
entry or expansion
Do not put all eggs in
one basket.
― Warren Buffet

2. “Creative Crew”
group identification
Crew number Crew name ID
# Crew 1 Rahat Ahmed Chowdhury 131-116-051
# Crew 2 Shufia Befum Shuly 131-116-066
# Crew 3 Koyray Alahe Tuhin 131-116-060
# Crew 4 Md. Abdul Matin 131-116-070
# Crew 5 Sonchita Rani Nath 131-116-054
# Crew 6 Sourov Badiya 131-116-259

3. Acknowledgment
Preparing this assignment appeared to be a great experience to us. It added a lot to
our knowledge. This assignment is one of our memorable experiences in student life.
We also would like to give a lot of thanks to our honorable course teacher, Md.
Saidur Rahman a.k.a Polash sir for giving us a wonderful opportunity to make
such an interesting and valuable assignment and giving us a clear concept about the
assignment.

4. International market entry
 Once a firm has decided to establish itself in
global market—it becomes necessary that
the company studies and analyzes the
various options available to enter the
international markets and select the most
suitable one.
 In order to succeed in international markets,
the decision to select an appropriate entry
mode is a crucial and integral part of a firm’s
international marketing strategy.

5. Why firms goes international???
Major reasons for firms going international are:
 Profitability
 Growth
 Economies of scale
 Access to resources
 Marketing opportunities
 USP of product & services

6. Modes of entry

7. Exporting
Exporting is frequently employed mode of
internationalization.
It is one of the simplest and most common
approaches adopted by firms in their
endeavor to enter foreign markets.
Simply we can define it as,
“Exporting is marketing and sale of
domestically produced goods in another
country. “

8. Exporting classified
Direct export: Producer sells directly to the
importer. This mode gives the company a
greater degree of control over its distribution
channels.
Indirect export: Indirect exporting is the
process of exporting through domestically
based export intermediaries.

9. Classification of export continues…..
Intra corporate transfer: It is a process of
exporting which includes, sale of goods by a
firm in one country to an affiliated firm in
another.
Piggybacking: In piggybacking exports, overseas distribution channels of another firm are used by
the company to make its product available in the overseas market. Exporting company know as
‘Rider’, uses a foreign company which has an established distribution network in foreign market,
known as ‘Carrier’.

10. Pros & Cons of Exporting
E
x
p
o
r
t
i
n
g
Relatively low financial exposure
Permit gradual market entry
Acquire knowledge about local
market
Avoid restrictions on foreign
investment
Vulnerability to tariffs and NTBs
Logistical complexities
Potential conflicts with distributors

11. Providing offshore services
A company of a country can provide offshore services to
overseas clients with the help of information and
telecommunication technology.
Offshore services is similar to outsourcing. But offshore
activities can’t be termed similar with outsourcing.
Business sectors which provide opportunities for offshore
services include: Insurance, Banking & Finance, Airlines,
Telecom, Automotive, Transportation etc.
‘Gartner’ one of the world’s famous offshore power.

12. Offshore services
The work is done overseas
Outsourcing
Someone else does the work for us
V/
S
Offshore services versus Outsourcing
Operations decision Outsourcing? Off shoring?
A UK based firm sets up its own call centre in
Bangladesh to serve the UK customers
No Yes
A UK based firm hands over its payroll processing
activities to a specialist supplier in Bangladesh
Yes No

13. International Licensing
Under a licensing agreement the licensor,
leases the right to use its intellectual
property—technology, work methods, patents,
formulas, inventions, designs, copyrights,
brand names, or trademarks—to licensee, in
return for a fee.

14. Pros & Cons of International Licensing
• Low financial risks
• Low-cost way to assess
market potential
• Avoid tariffs, NTBs,
restrictions on foreign
investment
• Licensee provides
knowledge of local
markets
• Limited market
opportunities/profits
• Dependence on licensee
• Potential conflicts with
licensee
• Possibility of creating
future competitor

15. International Franchising
Under franchising, an independent organization
called the franchisee operates the business
under the name of another company called the
franchisor.
Franchising is a form of Licensing but the
Franchisor can exercise more control over the
Franchisee as compared to that in Licensing

16. Pros & Cons of International Franchising
Pros
• Proven products & Services
• Proven Trade Mark
• Reduced Risk of Failure
Cons
• Does not provide
experiential knowledge in
foreign markets
• High potential for
opportunism
• High monitoring costs

17. Licensing
 Operations can be done by own
way
 Licensee has to pay royalty fee and
it is comparatively low
 Products are major source of
concern
 Life cycle: 15-20 years
 Licensee enjoys substantial
measure of fee negotiation
 Licensor exercise less control over
licensee
FranchisingV/
S
Licensing versus Franchising
 Operations is done by following
licensor’s rule
 Franchisee has to pay management
fee and it is very high
 Covers all aspects of business
including goodwill, trade marks,
IPR etc
 Life cycle: 5-10 years
 Standard fee structure
 Franchisor exerts greater control
over franchisee

18. Turnkey project(B.O.T)
A turnkey project is a contract under which a
firm agrees to fully design, construct and
equip a manufacturing/business/service facility
and turn the project over to the purchaser
when it is ready for operation, for
remuneration
The company hires a contractor in the desired
country that they want to create an operation.
At the completion of the contract, the foreign
company gives the “key” to the project and it
is ready for operation.

19. Pros & Cons of Turnkey project
•Focus firm’s resources on
its area of expertise
•Avoid all long-term
operational risks
•Financial risks
•Cost overruns
•Construction risks
•Problems with suppliers

20. Contract manufacturing
Contract manufacturing is a process that
establishes a working agreement between two
companies. As part of the agreement, one
company produces parts or other materials on
behalf of their client. Simply it can be defined
as the process of outsourcing entire or part of
a company’s manufacturing operations.
A number of global companies outsource their
manufacturing activities to low-cost locations.

21. Pros & Cons of Contract manufacturing
Low financial risks
Minimize resources devoted to
manufacturing
Focus firm’s resources on other
elements of the value chain
Reduced control (may affect
quality, delivery schedules, etc.)
Reduce learning potential
Potential public relations
problems

22. Management contract
A management contract is an agreement
between two companies whereby one company
provides managerial assistance, technical
expertise and specialized services to the second
company for a certain period of time in return for
monetary compensation.
Most management contracts provide for
training of local personnel who will eventually
take over the management responsibilities.

23. Pros & Cons of Management contract
Pros
• Focus firm’s resources on its
area of contracts
• Minimal financial exposure
Cons
• Potential returns limited by
contract expertise
• May unintentionally transfer
proprietary knowledge and
techniques to contractee

24. Specialized entry modes
Management contract, Turnkey projects, &
Contract manufacturing are known as
specialized entry modes. Previously we have
discussed about them. Now we will know:
Why they are called specialized entry modes?
These entry modes are called ‘special’ because
the activities included on them contains short term
investment, less litigation risks, less exposure
to financial risks, compared to other sorts of entry
modes

25. Thank You!!!

26. If You have any question