Abstract
The chapter aims to explore different modes of market entry strategies in international markets for market expansion against the relevant competition, and also to investigate different entry strategy-based examples to discover the corporate uniqueness which could build up a specialised distribution and supply chain management for their competitive advantage. At times it may help to nurture product or the corporate image. This study will explore different components of market entry strategies like exporting, franchising, contracting, joint venture, licensing, technology transfer, international subcontracting, turnkey, mergers and acquisition, and foreign direct investment.
TopIntroduction
The Mode of entry in foreign countries is one of the most debatable topics in corporate governance and decision making (Rosado-Serrano et al., 2018), since a company weighs and adopts the mode of entry in the foreign markets based on various factors like direct investments, residual income, ownership, nature of the products, marketing plan, nature of the foreign market environment and the allocation of decision rights (Jell-Ojobor and Windsperger, 2014). Also, there are different degrees of control mechanism in the strategic alliance amongst companies; exporting has a minimum control with the host country penetration, since it has to deal with plethora of mediators like agents/exporter/importer, brokers, third parties, the carrier, albeit major control in home country. The franchising has diverse nature of control based on the subtypes; The multinational franchisor markets the business conception to a single franchisee in the host country via direct franchise or master franchise. Under this proposition, the franchisor grants a master franchisee the authority to operate franchise units and to sell franchise rights to third parties under the terms of a master franchising agreement. The franchisor grants the franchisees a specific territory in which they can develop units under an area development agreement. The local partner in the host country has just decision-making and residual income rights in these models. (Jell-Ojobor and Windsperger, 2014; Rosado-Serrano et al., 2018). In the case of Licensing, Licensor has the cardinal control over licensee; in Joint Venture it maintains somewhat an equity in the power equation. The Foreign Direct Investment comes with an immunity for the host country operation with a trivial government intervention to equate the social contribution of the parental company. Several earlier researches have used various theoretical lenses to examine governance styles and the elements that impact their selection (Aguiar et al., 2017; Alon, 2000; Benito et al., 2009; Burton et al., 2000; Dikova and Brouthers, 2016; Jell-Ojobor and Windsperger, 2017, 2014; Mumdˇziev, 2011). However, the importance of theoretical variety in describing complex phenomena like international entrance and governance systems is widely acknowledged (Anil et al., 2014; Brouthers and Hennart, 2007; Chiao et al., 2010; Combs et al., 2004; Dikova and Brouthers, 2016; Gaur et al., 2014; Merrilees, 2014; Rosado-Serrano et al., 2018).A few multi-theoretical research on international market entry strategies and related governance forms demonstrates this, and the majority of these publications are conceptual, descriptive, exploratory studies. (Aguiar et al., 2017; Alon, 2000, 2006a; Jell-Ojobor and Alon, 2017; Jell-Ojobor and Windsperger, 2014, 2017; Merrilees, 2014). Furthermore, despite the rising significance of developing markets and industry, the majority of entrance and governance method research have been focused on first world countries. The historical, cultural, economic, and social aspects of emerging economies are unique. More research on their unique institutional framework is necessary to fully appreciate their global expansion pathways (Aguiar et al., 2017; Lafontaine, 2014; Melo et al., 2019; Nielsen et al., 2018).
Key Terms in this Chapter
Acquisition: This involves acquiring an existing company in the new market to gain immediate access to its customer base and resources.
Turnkey Operation/ Project: One sort of foreign business is a turnkey project, in which a company completely plans, builds, and outfits a production or service facility. When the project is finished, ownership is transferred to the buyer. Turnkey projects are typically executed as a contract between two businesses, one from a developed country and the other from a developing country.
Licensing: This involves giving another company the right to produce and sell the company’s products or services in a new market in exchange for a fee or royalty.
Franchising: This involves allowing another party to use the company’s business model and brand in exchange for a fee or royalty.
Market Entry Strategies: Market entry strategies refer to the methods and approaches that a company or organization uses to enter a new market. These strategies are designed to help companies establish a foothold in a new market, gain a competitive advantage, and achieve success in that market. Market entry strategies can vary depending on the type of market, the industry, and the target market. Some common market entry strategies include:
Counter Trade: Several sorts of transactions in which “the seller gives a buyer with products or services and promises in return to purchase goods or services from the buyer” are all referred to as “ countertrade ” under this general phrase. It might or might not include exchanging money, as in barter.
Contracting: Contracting is another method of entering a foreign market that involves the exchange of ideas. In order to produce the product on their behalf, the product's maker will contract out the production to another company. Contracting out clearly saves the company from exporting to overseas markets.
Indirect Export: The company sells its goods to a third party, who subsequently resells them on the international market.
Direct investment: This involves setting up a subsidiary or acquiring an existing company in the new market.
COVID-19: COVID-19, also known as coronavirus disease 2019, is a respiratory illness caused by the SARS-CoV-2 virus. It first emerged in Wuhan, China in late 2019 and quickly spread around the world, leading to a global pandemic. The virus is primarily spread through respiratory droplets when an infected person talks, coughs, or sneezes. COVID-19 can cause a range of symptoms, from mild to severe, including fever, cough, shortness of breath, fatigue, body aches, loss of taste or smell, and in severe cases, pneumonia, acute respiratory distress syndrome, and even death. The disease has had a significant impact on public health, economies, and societies worldwide, leading to widespread lockdowns, travel restrictions, and social distancing measures to slow the spread of the virus. Vaccines have been developed to protect against COVID-19, and efforts to vaccinate people worldwide are ongoing.
Direct Export: The company manufactures its goods in its own country before selling them to customers abroad.
Technology Transfer: The term “technology transfer” refers to a wide range of operations, including the internal transfer of technology from an organization’s R&D or engineering division to its manufacturing division. The same technology transfer from an MNC’s laboratory or activities in one nation to those same laboratories or operations in another country is likewise included. Ultimately, It involves the transfer of technology from a research collaboration financed by numerous corporations to one of the members.
Exporting: This involves selling products or services to customers in a new market from the company’s home country.
Joint Venture: A domestic and international company pair together in a joint venture. Both partners contribute funds, jointly own the business, and have joint control over it. The foreign partner typically contributes knowledge of the new market, access to networks and contacts in business as well as access to other local company resources like real estate and regulatory compliance. Because they are riskier and less flexible than other alternatives, joint ventures demand a bigger commitment from companies. In many nations, especially those where foreign-owned enterprises are taxed more heavily than domestically owned businesses, joint ventures may provide tax advantages.
Mergers and Acquisition (M & A): Consolidation of businesses is what Mergers and Acquisitions (M&A) are referred to as. When comparing the two concepts, Mergers refer to the joining of two businesses to create a single entity, whereas Acquisitions refer to the taking over of one business by another. Multinational corporations may decide to invest directly in wholly-owned subsidiaries in order to conduct extensive production and marketing operations abroad. This sort of entry leads in a corporation directly owning manufacturing or marketing subsidiaries abroad, in contrast to the ways of entry previously stated. Because they are actually “in” the market, businesses are able to compete more fiercely there. However, this approach calls for a substantially bigger investment because the subsidiary is in charge of all marketing initiatives abroad. It's also a risky proposition because it necessitates a thorough awareness of local business practices and customs. Several countries mandate that domestic business partners own at least a portion of all commercial enterprises. Joint ventures might be international in scope. This happens most frequently when business partners work together to conduct business in a global area.
International Subcontracting: It is also known as outsourcing or contract manufacturing. Domestic subcontracting has flourished in a number of highly industrialised countries, particularly the United States and Japan. International subcontracting is a logical continuation of domestic subcontracting. The main cause of the large manufacturing companies’ reliance on small-scale businesses for the supply of the parts and components for their assembly is that the pay rate in the unorganised sector is significantly lower than the rate that prevails in the organised sector. It differs significantly from contracting as the manufacturer does not grant the subcontractors the right to build the entire product on behalf of the manufacturer, and the company essentially retains control over the product's final assembly.