The Advantages and Disadvantages of the Entry Modes of International Business.docx

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Advantages and Disadvantages of the entry modes of InternationalBusinessCourse No: HRM-3217Course: Strategic ManagementSubmitted ToProsenjit TarafdarAssistant professorHuman Resource Management DisciplineKHULNA UNIVERSITYSubmitted ByShabbir HossainID: 1825123rdYear, 2ndTermHuman Resource Management DisciplineKHULNA UNIVERSITYJanuary 16,2021
The Advantages and Disadvantages of the Entry Modes ofInternational BusinessCompanies that wish to moveto a different national market must need suitable entrystrategies.There are a variety of ways in which a company can enter a foreign market. Onemarket entry strategy does not work for all international markets. Direct exporting may bethe most appropriate strategy in one market while in another may need to set up a jointventure and in another one may need to license manufacturing. There is a number offactors that influence companies’ choice of strategy including- tariff rates, the degree ofadaptation of product required, marketing and transportation costs. While these factorsmay well increase costs, it is expected the increase in sales will offset these costs.There are five primary choices of entry mode:a)Exportingb)Licensingc)Franchisingd)Joint Venturee)Wholly Owned SubsidiaryEach mode has its advantages and disadvantages, and managers must weigh these carefullywhen deciding which mode to use.ExportingExporting is a typically the easiest way to enter an international market, and therefore mostfirms begin their international expansion using this model of entry. Exporting is the sale ofproducts and services in foreign countries that are sourced from the home country.It is theentry strategy most favored by small and medium enterprises (SMEs). The advantage ofthis mode of entry is that firms avoid the expense of establishing operations in the newcountry.It is very flexible as compared to other strategies as the exporter can both enterand exit from the market very easily.There are 2 types of exporting what is (a) Direct Exporting and (b)Indirect Exporting.Direct Exporting is the strategy that a firm can use to sale directly to the customers inforeign countries by opening an export sales department which can create opportunitiesfor the firm to establish a closer relationship with the foreign market and the end buyers.This is common in the Middle East, Central America and in some Asian Countries. Firmswishing to pursue a long-term position in a foreign market need to be more proactive intheir approach to the market entry by becoming directly involved. Other direct exportoptions are the use of export intermediaries.Indirect Exporting is the other strategy that can be used by firms to export its products andservices. Indirect exporting may seem to be the better option to other businesses throughusing intermediaries may be a better alternative looking at the complex tasks and risksinvolved in direct exporting. In this strategy, the firm can decide to use the domesticIntermediaries that can perform market research and develop a marketing strategy onbehalf of the firm.

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Term
Fall
Professor
N/A
Tags
Marketing, Corporation, Subsidiary, Parent company

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