Define three modes of entry of companies entering foreign markets. Analyse the advantages and disadvantages of these methods.

1188 WordsFeb 1, 20045 Pages
Since the latter part of the twentieth century, there has been a trend towards globalization in business. This involves firms deciding to enter foreign markets. Firms can choose between several possible modes of entry. This essay will describe three: turnkey projects, franchising and joint ventures, discussing the strengths and weaknesses of each. Firstly, turnkey projects. These normally involve a firm going to another country and being contracted by a firm there to set up a plant. The contractor agrees to undertake every detail of the project for a foreign client. This will involve the designing and building of the plant, supplying the necessary technology and raw materials and training of personnel. Upon completion of these tasks the…show more content…
If franchises don't pay so much attention to quality, then the franchisers reputation declines and so do revenues. Hence, due to the location of the franchisee's quality control is difficult to monitor. Therefore, a disadvantage can be to find the appropriate franchisee's. However, this can be solved by the franchiser establishing a master subsidiary and monitor control. Another mode of entry is joint ventures. A joint venture is a mode of entry into a foreign market in which a firm is owned jointly by two or more independent firms. This are usually made in new markets where access is difficult or there are unknown parameters such us political status, economic conditions, culture etc. Joint ventures often consist of two or more partners sharing the same project. They can have different formats based on what is shared. This involves the degree of sharing, the number of partners, the type of project and the degree of ownership. For instance, the typical joint venture is a 50/50 ownership (eg Fuji and Xerox). Each side will provide a group of managers that will have an equal share in the decision-making, running and controlling of the business. Sharing also entails technology, resources and raw materials. However, there are cases in which firms have signed a venture involving a larger share of ownership and therefore exercising more effective control. One strength of this mode of entry can be that firms

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