Advantages Of Foreign Market Entry Method

856 Words2 Pages
bulb-icon

Recommended: Management of multinational corporations

While an organisation goes about making the decision on foreign market entry method, it should be based on weighing the trade-offs between returns and inherent risks. An organisation is required to select the entry method that presents the best risk-adjusted investment returns (Agarwal & Ramaswami 1991). However, this is not the only consideration to be made. An organisation’s choice is also influenced by its need for control and the resources available (Stopford & Wells 1972; Cespedes 1988). Resource availability relates to managerial and financial capacity of an organisation in successfully serving a specific foreign market. Control, on the other hand, entails an organisation’s need to influence decisions, methods, and systems within the …show more content…

This is based on the resulting desired effects that include: ownership advantages; location advantages; and internalisation advantages (Agarwal & Ramaswami 1991). Ownership advantages relate to an organisation’s ability to develop (especially differentiated products), its multinational experience and the organisation’s size. These components represent an organisation’s skill and assets. Ideally, for any organisation to successfully compete with other companies in the host country, they need to possess superior or advanced set of these assets and skills to enable it earn significant economic returns capable of surpassing the higher costs they will incur in foreign market servicing (Agarwal & Ramaswami 1991). In addition, with the capability of manufacturing differentiated products, an organisation or firm possesses higher control modes that eventually leads to increased efficiency. This practice is supported by empirical data as observed by Coughlan and Flaherty (Coughlan & Flaherty 1983). An organisation requires substantial resources during international expansion to cushion it against high marketing costs, economies of scale achieved, and contract and patents enforcing (Hood & Young 1979). The organisation’s size would naturally indicate its costs absorption capabilities. According to Buckley and Casson, an organisation’s

Show More
Related

  • International Trade Environment: The Case of Haier’s Corporation

    2760 Words  | 6 Pages

    Nowadays with the development of technology especially after the appearance of internet, communications between people become more convenient and frequent. When their relationships become increasingly close, globalization has turned into the trend of the age. Facing such a good opportunity of expanding market, acquiring more profit and resources, various international firms started to spring out. ‘International firms usually mean companies who do business between two or more countries’ (John D. Daniels, 2013). At present, they have comprised a large and growing portion of the world business. To be successful in fierce global competition, international firms have to make many changes actively to deal with different conditions. Changes on corporate governance, internal organization and foreign entry strategy are three major parts of them. However, no matter how many changes have been made, the implication of culture and institution from home country where they started from still exist. And host country culture and institutions also have implications to the choice of foreign entry strategy. To prove this, the paper use famous international company Haier as an example to analyze implications of culture and institutions from home country China and host country America.

    Read More

  • Globalization Essay

    946 Words  | 2 Pages

    ...t have merged together, the fixed costs are distributed over a large volume of production causing the unit cost of production of the firms to decline to big levels (Ghose, 2003: 29 paragraph: 4). After the firms have engaged themselves with merging and acquisition due to globalization there are other benefits that may arise. These include production facilities, management functions and management resources and systems. A foreign company can bring these benefits to the firm that it has acquired or merged with. There is also another important benefit that may arise that when global firms merge or are involved in the process of acquisition, there will be diversification of risks. When there are unfavorable conditions in one country affecting the market, the other country can have very favorable conditions and there will be no pure loss (Carr, 1999: 417 paragraph: 2).

    Read More

  • Analysis Of Theodore Levitt The Globalization Of Markets

    1168 Words  | 3 Pages

    Today, many companies enter the global market, and some companies have become extremely successful in the global marketplace and others still struggling. In Theodore Levitt’s article “The Globalization of Markets”, he states that a well managed corporation focuses on selling standardized products with high quality and low priced instead of focuses on selling on customized products with high cost. Levitt defines the differences between multinational corporation and global corporation, and adopts many specific examples to proves his view. He defines the multinational corporation who operates in many countries and adjust its product based on the taste of specific region. This will result in a high cost to produce the product because company have to input more resource into each individual product. However, global corporation sells similar product worldwide at relative low cost. According to Levitt, the cultural differences are becoming more and more “homogenized”; therefore, becoming a global corporation will lead to the successful of the company in the global market.

    Read More

  • michael porter

    502 Words  | 2 Pages

    The ease with which firms can enter into a new market or industry is a critical variable in the strategic management process. In some industries the barriers to entry are minimal. In oth...

    Read More

  • The Internalization Process Of Ikea's Internalization Strategy

    1896 Words  | 4 Pages

    Internalization process is something really interesting because companies create their strategy in many different ways. Business organizations may expand from their home countries to foreign countries by setting up replicas (of parts of) their value chains in other countries. Well-known examples of such organizations are those that expand internationally by replicating a format aimed mainly at distribution, such as McDonald’s, ,Starbucks and also IKEA.

    Read More

  • Marketing Plan for The International Retreat Professionals

    739 Words  | 2 Pages

    Foreign market entry modes can differentiate in the degree of risk they present, the control and commitment of resources they require and the return on investment they promise (McDonald, Burton, Dowling, 2002). There are two major types of entry modes: equity and non-equity modes. The non-equity modes include; export and contractual agreements. The equity modes category includes: joint venture and wholly owned subsidiaries (Peng, 2008).

    Read More

  • Overview of Mergers and Acquisitions

    1872 Words  | 4 Pages

    The reason why enterprises have transnational M&A is that they can enter host countries’ markets quickly and have time efficiency. Enterprises can not only acquire local resources prior but also get the profit of market structure efficiency.

    Read More

  • Disney Joint Venture Strategy

    1170 Words  | 3 Pages

    When a company decides to enter a foreign market, they must decide on the best mode of entry. There are many modes of entry that a company can choose from and all have their advantages and disadvantages. Different local conditions at different foreign locations require specific entry mode strategies. One entry mode strategy that many companies choose to use is a joint venture. A joint venture involves establishing a firm that is jointly owned by two or more otherwise independent companies (Hill, 2013, p. 458). Joint ventures involve direct investment in the foreign country and can entail the company be a minority, a majority or equal owner. Joint ventures are usually used when the foreign country has established rules against

    Read More

  • managing global

    1506 Words  | 4 Pages

    As a global manager, paying close attention to the external environment is a prerequisite. The external environment is the different forces outside the organisation able to impact on the success of the organisation. The external environment in new and different countries may have elusive properties such as technology, social systems, politics, currency, and tax which the global manager need to consider and analyse. External forces such as the social and political systems are of particular importance as they are the ones most likely to influence an organisation's success. Therefore these are the main factors to which managers should pay close attention so as to "understand the constraints under which they operate and the opportunities that exist" (Robbins, Bergman, Stagg, Coulter, 2000, 141). By studying the specific political and social systems of a particular external environment managers can use their understanding of these systems to their advantage and develop exceptional strategies based on their understanding. For instance, in some countries such as the Peoples Republic of China, one must be willing to 'open the back door if the front one is closed', in other words, managers need to understand the "importance of guanxi (connections) in doing business in China"(Robbins et al).

    Read More

  • International Market Selection

    3006 Words  | 7 Pages

    The international business development has heightened the importance of international market selection (IMS) of companies, especially for their exporting strategy. However, not many companies really comprehend the geographical, social, economic characteristics of foreign countries in comparison with their home countries (Cavusgil, 1985). This fact has challenged many studies to create the optimal approach for IMS. The major question is: Which foreign market should a company enter? Thus, this report focuses on providing a practical consultancy to evaluate and determine its most appropriate foreign markets.

    Read More

  • Globalization and Organizational Structure

    1227 Words  | 3 Pages

    Oesterie, M. J., Richta, H. N., & Fisch, J. H. (2012). The influence of ownership structure on internationalization. International Business Review, 22(1), 187-201.

    Read More

  • Air Canada Case Study

    3779 Words  | 8 Pages

    Saturation of domestic markets and the need by firms to diversify their markets have provided firms with the need to go international (MA sum, & Fernandez, 2008). Internationalization can be defined as the act by companies to explore international markets, although there has not been a clear definition of internationalization (Andersen 1997, p.28). Internationalization is a huge decision by firms and the wrong strategy can lead to ultimate fall of the organization. Internationalization allows firms and companies to own or control businesses and activities in several countries; a process that affects the whole organization making it more international (Dunning, 1993) and by going international, companies can gain competitive

    Read More

  • International Banking Advantages And Disadvantages

    742 Words  | 2 Pages

    Discuss the advantages and disadvantages of international expansion the banking industry may encounter. In June 1852, American railroad bonds were issued in London and used to finance the 705-mile long Illinois Central. The issuance was so successfully executed that three-quarters of the Illinois Central assets were held British investors . This early example of investment banks tapping into international funds was the beginning of a global banking revolution in which banks would increasingly rely on foreign markets to raise funds, expand their business across continents and redefine financial innovation.

    Read More

  • History of Multinational Corporations

    2012 Words  | 5 Pages

    Chandler, A.D. (1986), "Technological and organizational underpinnings of modern industrial multinational enterprise: the dynamics of competitive advantage", chapter 2 in A. Teichova, M. Lévy-Leboyer and H. Nussbaum (eds.), Multinational Enterprise in Historical Perspective, New York: Cambridge University Press.

    Read More

  • Advantages And Disadvantages Of International Trade

    921 Words  | 2 Pages

    International trade is an economic practice where countries can import and export goods with no concerns to government intervention which includes tariffs and import/export bans or limitations. International trade has several advantages on developing countries; who are nations with low levels of economic resources or low standard of living. Developing countries can advance their economy through strategic free trade agreements. Free trade generally improves the quality of life of poor nations. Nations can import goods that are not easily available within their borders; importing goods may be cheaper for than trying to produce consumer goods. Many developing nations do not have the production procedures available for translating raw materials into valuable goods.

    Read More

More about Advantages Of Foreign Market Entry Method

Open Document