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First-mover disadvantages includePioneering costs - arise when the foreign business system is so different from that in the home market that the firm must devote considerable time, effort and expense to learning the rules of the gamethe costs of business failure if the firm, due to its ignorance of the foreign environment, makes some major mistakesthe costs of promoting and establishing a product offering, including the cost of educating customers
On What Scale Should a Firm Enter Foreign Markets?After choosing which market to enter and the timing of entry, firms need to decide on the scale of market entryfirms that enter a market on a significant scale make a strategic commitmentto the marketthe decision has a long term impact and is difficult to reversesmall-scale entry has the advantage of allowing a firm to learn about a foreign market while simultaneously limiting the firm’s exposure to that market
Is There a “Right” Way to Enter Foreign Markets?No, there are no “right” decisions when deciding which markets to enter, and the timing and scale of entry - just decisions that are associated with different levels of risk and reward Every country, every business, every type of product will be different as companies deal with and adjust to differences in markets
How Can Firms Enter Foreign Markets?These are five most common ways to enter a foreign market1.Exporting – a common first step for many manufacturing firmslater, firms may switch to another mode2.Licensing- a licensor grants the rights to intangible property to the licensee for a specified time period, and in return, receives a royalty fee from the licenseepatents, inventions, formulas, processes, designs, copyrights, trademarks
How Can Firms Enter Foreign Markets?(cont)3.Franchising - a specialized form of licensing in which the franchisor not only sells intangible property to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business used primarily by service firms4.Joint venture with a host country firm - a firm that is jointly owned by two or more otherwise independent firms
5.Wholly owned subsiteraries - the firm owns 100 percent of the stock set up a new operationacquire an established firmHow Can Firms Enter Foreign Markets?(cont)