Once a company has decided to market in a foreign country, it must determine the best mode of entry. Its choices are exporting joint venturing and direct investment. As we can see, each succeeding strategy involves more commitment and risk, but also more control and potential profits. Importing The simplest way to enter a foreign market is through exporting. The company may passively export its surpluses from time to time, or it may make an active commitment to expand exports to a particular market. In either case, the company produces all its goods in its home country. It may or may not modify them for the export market. Exporting involves the least change in the company's product lines, organization, investments, or mission.
• Indirect Exporting
Companies typically start with indirect exporting, working through independent home-based international marketing intermediaries. Indirect exporting involves
less investment because the firm does not require an overseas sales force or a set of contacts. It also involves less risk. These home-based intermediaries - export merchants or agents, co-operative organizations, government export agencies, and export-management companies - bring know-how and services to the relationship, so the seller normally makes fewer mistakes.
• Direct Exporting
Sellers may eventually move into direct exporting, whereby they handle their own exports. The investment and risk are somewhat greater in this strategy, but so is the potential return. A company can conduct direct exporting in several ways. It can set up a domestic export department that carries out export activities. Or it can set up an overseas sales branch that handles sales, distribution, and perhaps a promotion. The sales branch gives the seller more presence and program control in the foreign market and often serves as a display center and customer service center. Or the company can send home-based salespeople abroad at certain times in order to find business. Finally, the company can do its exporting either through foreign-based distributors that buy and own the goods or through foreign-based agents that sell the goods on behalf of the company in exchange for an agreed fee or commission.
Establishing Market Entry Mode: Chapter 18
