Advantages and Disadvantages of Modes of Entry to Foreign Ma
There are many different modes of entering foreign markets; each method will have its strengths and weaknesses in general terms. However each single organisation will be more attracted to a type mode depending on their backgrounds, nature of the company, long term and short term aims. Often the greatest obstacle for organisations when entering foreign markets is the array of standards which the company has to meet, for example; safety, environmental, packaging, labelling, patents, trademarks and copyrights, these factors can make it hard for businesses to be successful. The different modes of entering foreign markets I will evaluate are; exporting, licensing, Foreign Direct Investment (FDI), franchising, strategic alliances, turnkey projects and countertrade.
Exporting is the direct sale of domestically produced goods in another country. Exporting is a traditional and well established method of reaching foreign markets. Since exporting does not require the goods to be produced in the target country, no investment in foreign production facilities is required, which reduces risk if the project fails. Companies export primarily to increase sales revenue. However exporting also achieves economies of scale in production and allows the company to diversify sale locations; as economic growth is not the same in every market, export diversification can allow a company to benefit from a strong growth in one market to compensate for a weak growth in another. Exporting is usually seen as a low key method of entering a foreign market as it avoids the often substantial cost of establishing manufacturing operations in the host country such as, factories, machinery and employees.
Exporting also has a number of disadvantages. Some problems are common to many international businesses, factors such as language and cultural differences may limit company's success in certain countries. Companies which export usually find that trade and tariff