Modes of entry into the international business

A mode of entry into the international business is the channel which organisation employ to get entry into new international market.

Two mode of entry

Import ( Equity mode) and Export (Non- equity mode) - Direct export and Indirect export.

(A) Direct export: Direct export represent most basically mode of exporting, capitalising on economic of scale  production concentrated in home country and affording better control over distribution. Direct export works the best of the volume is small. Large volume on export may trigger protectionism. There are two types of direct export.

(a) Sales Representative: Represents foreign suppliers of manufacture goods in their local market for an established commission on sales provides support and service to manufacturer regarding local advertisement local sales, presentation etc.

(b) Import Distribution : Purchase product in their own right and resale them in their local market them in their local market to wholesale, retailer or both. Import Distribution are group Market  entry strategy. The products that are carried on inventory such as toy, appliances.

Advantages of Direct Exporting:

(i) Control over selection of foreign market and choice of foreign representative companies.

(ii) Good information feedback from target market.

(iii) Better protection of trade marks items, goodwill, etc.

(iv) Potential greater sales than with indirect exporting.

Disadvantage of direct exporting:

(i) Higher startup cost and higher risk as opposed to indirect exporting.

(ii) Greater information requirement.

(iii) Longer time to market as opposed to indirect exporting.

(iv) Time consuming as opposed to indirect exporting.

(B) Indirect export

Indirect is the process of exporting through domestically based export intermediaries. The exporter has no control over its product in the foreign market.

Types of indirect exporting.

(i) Export trading companies (ETC) Provides support services of the entire export process for one or more suppliers. Attracting to suppliers that are not familiar with exporting as ETS ( Export trading suppliers) usually perform all the necessary works. Local overseas trading partners present the product, quotes on specific enquiries etc.

(ii) Export Management companies (EMCs) :

They are similar to export management companies in the way that they usually export for produces. Unlike ETCs they are rarely take on export credit risk and carry one type on export credit risk and carry one type of product not representing competing one. Usually EMCs Trade on behalf of their suppliers as their Export department.

(iii) Export Merchant: Export Merchant wholesale companies that buy unpackage products from supplier or manufacturers for resale overseas under their brand name. The advantage of export merchant is promotion. One of the disadvantage for using export merchant is resulting presence of identical products under difference brand names and pricing on the market, meaning that export merchant activities may hinder manufacturers exporting efforts.

(iv) Confirming house:  Confirming house are intermediaries sellers that work for or foreign buyers. They receive the product requirement from the clients, negotiable purchase make deliveries and paid the suppliera and manufactures . An opportunity here arises in the fact that if the clients here arises in the fact that if the clients like the products it may become a trade representative. A potential disadvantage includes suppliers unawareness and lack of control over what is a confirming does with a product.

(v) Non forming purchase agent: They are similar to CH with the exception that they do not pay the supplier directly payments takes place between suppliers, manufacturers and foreign buyers.

Advantages of indirect exporting

(i) First market access

(ii) Concentration of resources for production

(iiii) Little or no financial commitment.

The export partners usually covers most expenses associated with international sales, transaction.

(iii) Low risk exist for those company who consider there domestic market to be more important and for those companies that are still developing their research and development, market and sales strategies.

(v) The management terms is not distracted.

(vi) No direct handle of export processes.

Disadvantage

(i) Higher risk than with direct exporting

(ii) little or no control over distribution, sales, market etc as opposed to direct exporting.

(iii) Inability to learn how to operate overseas.

(iv) wrong choice of Market and distributor may lead to inadequate market.