27 July 2005

International Market Entry Modes (Part I)

In today's globalising world, firms are increasing looking towards other regions of the world to trade in. The newspapers are filled with reports of firms merging or aquiring firms from different part of the world or firms looking to franchise their products and services.

What are the steps taken by the executives of these firms before deciding on which market to enter? How do they make sure they make their journey a successful one? The decision requires an analysis of the aspects of the foreign market.
  • Whether to go abroad
  • Which markets to enter
  • How to enter those markets
  • Choice of marketing program
  • Marketing organisation
Criteria for Country Selection

1. Country/market Attractiveness in terms of the following:
o Market size
o Market growth and need potential in terms of demand
2. Company strength in terms of brand and accessibility
3. When the risk e.g. political is marginal compared to opportunities
4. Customer response
5. Competitive situation

However, most firms make their decisions to trade across boarders i.e. go international based on market conditions. They therefore become proactive or reactive in their decision making process.

A firm becomes proactive i.e. pulled by the potentials and advantages in the foreign market due to the following reasons:

1. The firms specific advantages in terms of profit
2. The advantage of having a unique brand
3. When a firm possesses technological advantages
4. The availability of resources in the foreign countries
5. Economies of scale
6. Economic and political factors

A firm becomes reactive i.e. pushed by bad domestic markets when the following is evident:

1. The pressure of domestic competition
2. Poor domestic market due to stagnant or declining sales figures
3. Saturated domestic markets
4. Overproduction


Shirazi said...

Good stuff for economics students.

Ahsan Kaleem said...

Thankyou for your comments.

Lizzie Matafwali-Yassa said...

Thanx, it has help with international business assignment