Perhaps one of the first key decisions a prospective business owner makes is the
ID: 383837 • Letter: P
Question
Perhaps one of the first key decisions a prospective business owner makes is the mode of entry in the chosen country. Making the correct choice will ensure the integrity of the business not only legally, but financially as well. Accordingly, a detailed understanding of the various modes of entry will provide students with the knowledge needed to properly select the appropriate organization.
You need to discuss Turnkey with the follow points Discuss and describe the various modes of entry. Evaluate the pros and cons associated with each mode of entry.
Explanation / Answer
Exporting permits small organization to work on their business model along with the distribution of products or goods in the international market. This type of entry results in low cost structure with less risk involved. Exportation reach bounds the transportation cost and competition in market by removing the necessity for marketing. Exporting makes a small business to evaluate for what kind of changes are required for an existing good or product.
Ownership is the best option to start new business in international market with no influence. The only issue with this type of entry is to deal with the economical and political climate for a market or region. Also, more risk is associated with the product to be sold in the new or unknown market. But in the long run, if everything goes well, this type of entry generates more profits.
Franchising or Licensing allows one company to produce or manufacture product on other company’s name by maintaining the brand control, operational aspects and manufacturing. This type of entry reduces the cost and time in expansion but at the same time needs lot of attention in terms of monitoring the business activities.
Joint ventures results in selling one’s goods in partner’s country by sharing the cost involved. This gives more power to manage the business well financially. But the risk is always there for some of the business operations to be shared with the partner where one’s influence becomes very less and with no control.
Other option could be export processing zones which are governed by foreign governments. This gives opportunities to enter in the new market with incentives or subsidies involved.