Marketing Management, Millenium Edition - epiheirimatikotita.gr

Although many countries in central Europe possess an eager, hungry-to-learn laborpool, their infrastructures create difficulties. The team evaluating a new market mustdetermine whether the company could earn enough on its investment to cover therisk factors or other negatives. 12DE C I D I N G H O W T O E N T E R T H E M A R K E TDirectinvestmentOnce a company decides to target a particular country, it has to determine the bestmode of entry. Its broad choices are indirect exporting, direct exporting, licensing, jointventures, and direct investment. These five market-entry strategies are shown in Figure6-2. Each succeeding strategy involves more commitment, risk, control, and profit potential.Amount of commitment, risk, control, and profit potentialJointventuresLicensingDirectexportingIndirectexportingINDIRECT EXPORTThe normal way to get involved in a foreign market is through export. Occasional exportingis a passive level of involvement in which the company exports from time totime, either on its own initiative or in response to unsolicited orders from abroad. Activeexporting takes place when the company makes a commitment to expand its exportsto a particular market. In either case, the company produces its goods in thehome country and might or might not adapt them to the foreign market.Companies typically start with indirect exporting—that is, they work through independentintermediaries to export their product. There are four types of intermediaries:Domestic-based export merchants buy the manufacturer’s products and then sellthem abroad. Domestic-based export agents seek and negotiate foreign purchases andare paid a commission. Included in this group are trading companies. Cooperative organizationscarry on exporting activities on behalf of several producers and are partlyunder their administrative control. They are often used by producers of primary productssuch as fruits or nuts. Export-management companies agree to manage a company’sexport activities for a fee. Indirect export has two advantages. First, it involves less investment.The firm does not have to develop an export department, an overseas salesforce, or a set of foreign contacts. Second, it involves less risk. Because internationalmarketingintermediaries bring know-how and services to the relationship, the sellerwill normally make fewer mistakes.F I G U R E 6-2Five Modes of Entry into ForeignMarketsDIRECT EXPORTCompanies eventually may decide to handle their own exports. The investment andrisk are somewhat greater, but so is the potential return. University Games ofBurlingame, California, has blossomed into a $50-million-per-year international companythrough careful entry into overseas ventures.■ University Games Bob Moog, president and founder of University Games,says that his company’s international sales strategy relies heavily on thirdpartydistributors and has a fair degree of flexibility. “We identify the foreignmarkets we want to penetrate,” says Moog, “and then form a business venturewith a local distributor that will give us a large degree of control. In Australia,we expect to run a print of 5,000 board games. These we willmanufacture in the United States. If we reach a run of 25,000 games, however,we would then establish a sub-contracting venture with a local manufacturerin Australia or New Zealand to print the games.” 13374part threeDevelopingMarketingStrategies■A company can carry on direct exporting in several ways:Domestic-based export department or division: Might evolve into a self-containedexport department operating as a profit center.