Which is not a market entry strategy followed by multination corporation
Answers
Answer:
A firm must decide as to how it will enter a foreign market, i.e., it must decide its mode of entering the foreign market
It has to establish an institutional arrangement for selling its products in foreign markets. Various options involve varying levels of investment, risk, control and returns. Firms can choose which mode to use depending on their level of commitment to the international markets.
Modes of Entry in a Foreign Market
1. Indirect Exporting:
Companies can, while going international, use domestically based agents who operate on a commission basis without taking title to goods, or merchants who sell the products of the company in international markets (after taking title to the goods). They can also use the distribution facilities of other firms in the international markets.
Small firms that find it difficult to use any of the above means can sell their products via other organizations that export products on behalf of several small firms collectively. These are generally large trading concerns and export management companies that negotiate contracts on behalf of smaller exporters. Such companies can take up several activities such as market assessment, channel selection financing arrangements, documentation, etc., for the smaller exporters.
The scale of operations of the smaller exporters does not permit these firms to be able to manage such activities. Moreover, the larger companies have better access to information about international markets. The firm’s involvement level with the foreign markets is lowest in this case. It may be evaluating the attractiveness of the foreign market before increasing its stake. The investment involved in this effort is the least among all the other alternatives for expansion.
The main advantage of using this strategy is that the exporting company can utilize the expertise of the organization that has knowledge about the country in which the goods are being exported. The exporting company can also have good links with the organization that organizes such export activities, since both companies are located in the same country.
2. Direct Exporting:
A company may decide to export its products itself. The company develops overseas contacts, undertakes marketing research, handles documentation and transportation and decides the marketing mix Companies can use foreign-based agents or distributors. An agent may agree to handle the company’s product exclusively, or may handle products of other companies too. An agent does not take title to the products and works on commission.
Distributors take title to the products company appoints distributors when after-sales service is required as they are likely to possess the necessary resources. The advantages of foreign-based agents and distributors are that they are familiar with the market and have business contacts.
Their profit or commission is based on sales generated and they may not be interested in developing long-term market positions for the company. They may not be willing to put in extra efforts to sell new products and will give maximum attention to selling established products of the company which will generate maximum profit or commission for them.
They may consider themselves to be representatives of their customers than of the company and may be reluctant to give market feedback to the company. The company has limited control over agents and distributors.
The company can employ its own salespersons who will scout for customers in the foreign market and sell to them. This method is recommended for expensive products and when the numbers о customers are limited.
The salesperson will pay attention to the development of the market. The possibilities for feedback and other information from the market are better. Thus, customers will be looked after better and the company’s interest would be better served. This is an expensive method, so the order sizes have to be large.
The company may establish a sales and marketing office in the foreign market. This office monitors the marketing efforts of the company. They may use agents or distributors or may decide to develop their own distribution infrastructure and appoint their own salespersons. The idea is to take charge of the marketing operations of the company. This involves greater commitment of the organization than indirect exports.