A Market Entry Strategy is a way in which businesses enter their goods and services into new markets. There is no one strategy that works in all international markets. There are a number of different factors that can influence a company’s best strategy, including, but not at all limiting to tariffs and other barriers to entry, marketing and sales costs, delivery and transportation costs and any other costs that might arise from entering the market.
Four Market Entry Strategies include:
Exporting is recognised as one of the more popular from in operating in international markets and occurs on a larger scale between countries that have fewer restrictions on their trades. It can be described as where goods and services produces in one country are sold, traded and distributed in another country.
One of the major benefits of exporting is the ability to help grow the economy by increasing sales and profits. For some businesses exporting might be too much of an expense for their company to enter into. The extra costs that are likely to arise can become an issue or lead into a degree of financial risks.
There are two methods of exporting that include:
This involves exporting directly to the customer that bought the good or service. This method does not involve any third party distributor and the company/business is responsible for the logistics of the shipment.
For example: selling/buying homemade and personalized knitted sweaters.
This involves exporting uses intermediaries or middlemen to incorporate the goods and services into the destined markets and getting it directly to the customers. This method also allows for risks that may be associated from using direct exportation.
For example: Vembev is the licensee and distributor in Trinidad and Tobago of the PepsiCo range of beverages for Trinidad and Tobago and for Barbados.
Franchising involves buying or selling the rights to use a company’s or business’s name to sell a product or service.
It is a type of licence that the interested party (franchisee) attains access to a business’s (Franchiser) proprietary knowledge and trademarks. In exchange for gaining the franchise, the franchisee usually pays the franchisor an initial start-up and annual licensing fees as per agreement.
For example: Food franchises are some of the most popular franchises in Trinidad and Tobago. There are three different areas that this can be divided into including full service restaurants, quick service restaurants (QSRs), and retail food.
Subway is the largest food franchise in the world (not counting convenience stores) in terms of units with nearly 45,000 restaurants in 113 countries.
This is the process of giving another company the rights to produce or sell a business’s or company’s products or services. It is a mainly useful strategy if the purchaser of the license has a relatively large market share in the market the company wants to enter.
Licensing differs from franchising as it deals with the intellectual property (IP), logo and design at a fee that can include royalties. Franchising is a type of licensing that uses specific branding replicas of the business model.
For example: Disney Consumer Products
One of the biggest in the world driven by entertainment content from the Walt Disney Company, including the Disney Channel, Walt Disney Studios, and Home Entertainment, along with innovative products, diversified retail penetration, and segmentation.
When entering new and foreign markets in some parts of the world (including Asia) partnering is a must especially help the business get by. It is important to partner with someone who is just as invested in the business as you and who understands their country’s regulations that may be in place so that you can gain entry into the market. It’s a way to brand together two products that benefits both parties involved.
Too often businesses go into partnerships just for financial benefits and not allow the partnership to grow into a more nurturing relationship. The relationship between the partners should offer the partners an option for the future, opening new doors and unforeseen opportunities that may arise. In any type of partnership there are differences of opinion, goals can change and structures and may even end; contentiously or amicably.
For example: Betty Crocker and Hershey’s. This is where Betty Crocker partnered with Hershey’s to include the chocolate syrup in its signature brownie recipe.
Globalization is the integration of international trade, investment amongst businesses. It is by far one of the oldest form trades as people would travel vast distances to buy and trade different products and services.
Caribbean countries have somewhat of an open trade environment, including imports and exports that can count for more than 80% of GDP for some countries.
Free trade is beginning to take over the current systems that possess barriers that protect the local markets from imports. The Caribbean region’s trading relationship is now becoming much more complexed as the region tries to diversify its trading beyond traditional partners including UK, US and to include Canada, Latin America and other countries.
There is an increase in the cross border investment within CARICOM with Trinidad and Tobago is the leader. Businesses and companies are now reorganizing and restructuring businesses operate more efficiently and more effectively in the Global environment. This includes formation of alliances, takeovers and regional expansion. Small Island Developing States (SIDS) have been relying heavily on taxes on the international trade to generate the revenue to the country. The World Trade Organization (WTO) is an intergovernmental organisation which regulates international trade.
Jamaica’s economy is a mixed developing economy and has benefits including:
•Export markets from the natural bauxite the country produces. They also export fruits such as bananas, citrus, cocoa and labour (exporting workers to work for companies in other countries). Exports make up a part of the country’s GDP, which in turn increases the capita per head.
•Tourism is one of the major successful businesses. Jamaica is home to some of the most beautiful beaches and resorts in the world and many tourists from all over the world travel to Jamaica for wonderful vacations.
•Jamaica has entered into a series of bilateral investment treaties with the main capital-exporting countries on the assumption that these treaties will promote investment growth into the island.
•When import duties are removed the prices fall; and therefore, low-income consumers will benefit from globalization by having access to cheaper imports. When free trade triumphs, it is also likely that the Jamaicans will have access to goods of a higher quality, simply on the basis that variety and competition are likely to enhance production standards for purchase.
Though globalization has many benefits to a country, there are also negative effects that occur. Those can include job security, fluctuation in prices and currency that affects the economy. Other negative effects include:
•Because of free trade agreements between the US and Jamaica, dairy farmers from the Caribbean island had to compete with the American farmers without any subsidy, aid from the government which resulted in the influx of cheaper powdered milk into the island thus destroying the dairy industry.
•The exploitation of cheap labour by foreign industrialists that take advantage of the citizen’s need for employment.
•Regional free trade. Jamaica tends to produce similar products together with other CARICOM members so that the scope for trade, even though it is increasing it’s not substantial.
•In investments, the barrier to foreign investment is removed, and inspires the entry of foreign investment projects which has the ability to challenge domestic entrepreneurial interests.
Globalization has had a major impact in almost every aspect of life and will continue to be growing in the global economy. While there are many drawbacks to globalization, many economists agree that it’s a force that’s both unstoppable and beneficial to the world’s economy. There have always been periods of protectionism and nationalism in the past, but globalization continues to be the most widely accepted solution to ensuring consistent economic growth around the world.?
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