INTERNATIONAL

MARKET
STRATEGIES
PROF. DHAVAL BHATT
SESSION NO. 07
EXPORTING

• Indirect Exporting
• Export management companies

• Cooperative Exporting
• Piggyback Exporting

• Direct Exporting
• Firms set up their own exporting departments
LICENSING
• Licensor and the licensee
• Benefits:
• Appealing to small companies that lack resources
• Faster access to the market
• Rapid penetration of the global markets
• Caveats:
• Other entry mode choices may be affected
• Licensee may not be committed
• Lack of enthusiasm on the part of a licensee
LICENSING (CONTD.)

• Biggest danger is the risk of opportunism

• Licensee may become a future competitor

• How to seek a good licensing agreement:

• Seek patent or trademark protection
• Thorough profitability analysis
• Careful selection of prospective licensees
• Contract parameter (technology package, use conditions, compensation, and provisions for the
settlement of disputes)
FRANCHISING
• Franchisor and the franchisee
• Master franchising
• Benefits:
• Overseas expansion with a minimum investment
• Franchisees’ profits tied to their efforts
• Availability of local franchisees’ knowledge
• Caveats:
• Revenues may not be adequate
• Availability of a master franchisee
FRANCHISING (CONTD.)

• Limited franchising opportunities overseas

• Lack of control over the franchisees’ operations
• Problem in performance standards
• Cultural problems
• Physical proximity
CONTRACT MANUFACTURING

• Benefits:
• Labor cost advantages
• Savings via taxation, lower energy costs, raw materials, and overheads
• Lower political and economic risk
• Quicker access to markets
• Caveats:
• Contract manufacturer may become a future competitor
• Lower productivity standards
CONTRACT MANUFACTURING (CONTD.)

• Backlash from the company’s home-market employees regarding HR and labor issues
• Issues of quality and production standards
Qualities of an ideal subcontractor:
• Flexible/geared toward just-in-time delivery
• Able to meet quality standards
• Solid financial footings
• Able to integrate with company’s business
• Must have contingency plans
JOINT VENTURES

• Cooperative joint venture

• Equity joint venture
• Benefits:
• Higher rate of return and more control over the operations
• Creation of synergy
• Sharing of resources
• Access to distribution network
• Contact with local suppliers and government officials
JOINT VENTURES (CONTD.)

• Caveats:
• Lack of control
• Lack of trust
• Conflicts arising over matters such as strategies, resource allocation, transfer pricing,
ownership of critical assets like technologies and brand names
• Drivers Behind Successful International Joint Ventures :
• Pick the right partner
JOINT VENTURES (CONTD.)

• Establish clear objectives from the beginning

• Bridge cultural gaps
• Gain top managerial commitment and respect
• Use incremental approach
WHOLLY OWNED SUBSIDIARIES

• Acquisitions
• Greenfield Operations
• Benefits:
• Greater control and higher profits
• Strong commitment to the local market on the part of companies
• Allows the investor to manage and control marketing, production, and sourcing decisions
• Caveats:
• Risks of full ownership
WHOLLY OWNED SUBSIDIARIES (CONTD.)

• Developing a foreign presence without the support of a third part

• Risk of nationalization
• Issues of cultural and economic sovereignty of the host country

• Acquisitions and Mergers

• Quick access to the local market
• Good way to get access to the local brands