An indian tractor manufacturing company would like to enter african market in collaboration with a local company. describe any two method of international market entry suitable in this context. also discuss their merits and limitations
Answers
The two main methods of entering an international market are Contract Manufacturing and Joint Venture. Advantages of Contract Manufacturing - It is less risky and involves lower investment from the Indian company. Disadvantages of Contract Manufacturing - May not lead to quality production and loss of profits to the Indian company. Advantages of Joint venture - Sharing of marketing and technical skills. Disadvantages of joint venture - It needs higher investment and greater profitability risks.
Solution:
The two most common ways of international market entry is the franchising and licensing.
Franchising have minimum advertisement costs and does not require maximum customer base.
However, training is bit difficult to provide in the international lands.
Licensing is the least risky way of entering into international market.
Royalty payment is received in return.