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You want to export your goods. Do you want to keep matters in your own hands, or do you employ agents or distributors? Whether the best choice for you is direct or indirect export depends on your situation, your product, and the demands posed by the foreign market. Consider the pros and cons of both options. Direct export means direct sales to a customer abroad. You send your invoice directly to the customer. For instance: you product handmade mobile casings, and mail them to your customers in Belgium and Germany. You maintain close contacts with your customers and undertake your own marketing and sales. Sales through a foreign branch of
your company are also direct exports. Indirect export means you appoint third parties, like agents or distributors, to represent your company and your products abroad. Whichever mode of exporting you choose, make sure you lay down your arrangements in writing. There are model
contracts you can use as a basis, provided by the International Chamber of Commerce
and the Verbond van Nederlandse Handelsagenten en Importeurs (page is in Dutch, but contracts are
available in English). If you sell goods directly to the end user abroad, you can draw up an international sale contract. If you’re starting a collaboration with an agent or distributor, you can draw up an agency or distribution contract. FAQPartnersContactAbout usDisclaimerPrivacy and cookiesAccessibilityOndernemersplein (Dutch)Business.gov.nl is an initiative of: European Commission Point of Single ContactBusiness.gov.nl is the Dutch Point of Single Contact for entrepreneurs. Foreign Market Entry Modes The decision of how to enter a foreign market can have a significant impact on the results. Expansion into foreign markets can be achieved via the following four mechanisms:
ExportingExporting is the marketing and direct sale of domestically-produced goods in another country. Exporting is a traditional and well-established method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses. Exporting commonly requires coordination among four players:
LicensingLicensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance. Because little investment on the part of the licensor is required, licensing has the potential to provide a very large ROI. However, because the licensee produces and markets the product, potential returns from manufacturing and marketing activities may be lost. Joint VentureThere are five common objectives in a joint venture: market entry, risk/reward sharing, technology sharing and joint product development, and conforming to government regulations. Other benefits include political connections and distribution channel access that may depend on relationships. Such alliances often are favorable when:
The key issues to consider in a joint venture are ownership, control, length of agreement, pricing, technology transfer, local firm capabilities and resources, and government intentions. Potential problems include:
Joint ventures have conflicting pressures to cooperate and compete:
Foreign Direct InvestmentForeign direct investment (FDI) is the direct ownership of facilities in the target country. It involves the transfer of resources including capital, technology, and personnel. Direct foreign investment may be made through the acquisition of an existing entity or the establishment of a new enterprise. Direct ownership provides a high degree of control in the operations and the ability to better know the consumers and competitive environment. However, it requires a high level of resources and a high degree of commitment. The Case of EuroDisneyDifferent modes of entry may be more appropriate under different circumstances, and the mode of entry is an important factor in the success of the project. Walt Disney Co. faced the challenge of building a theme park in Europe. Disney's mode of entry in Japan had been licensing. However, the firm chose direct investment in its European theme park, owning 49% with the remaining 51% held publicly. Besides the mode of entry, another important element in Disney's decision was exactly where in Europe to locate. There are many factors in the site selection decision, and a company carefully must define and evaluate the criteria for choosing a location. The problems with the EuroDisney project illustrate that even if a company has been successful in the past, as Disney had been with its California, Florida, and Tokyo theme parks, future success is not guaranteed, especially when moving into a different country and culture. The appropriate adjustments for national differences always should be made. Comparision of Market Entry OptionsThe following table provides a summary of the possible modes of foreign market entry: Comparison of Foreign Market Entry Modes
Recommended Reading Foley, James F., The Global Entrepreneur: Taking Your Business International The articles on this website are copyrighted material and may not be reproduced, What are the disadvantages of exporting?Disadvantages of exporting. Supply chain disruptions. ... . High up-front costs. ... . Export licenses and documentation. ... . Product adaptation. ... . Political disruptions. ... . Cultural hurdles. ... . Exchange rate fluctuations. ... . Multi-currency payments.. Which of the following is a disadvantage of exporting quizlet?Which of the following is a disadvantage of exporting as a mode for entering a foreign market? It involves heavy investment in the foreign country. It increases the cost of selling in the foreign market.
Which of the following is an advantage of exporting as a mode of entry?Exporting is the sale of products and services in foreign countries that are sourced from the home country. The advantage of this mode of entry is that firms avoid the expense of establishing operations in the new country.
Which of the following is a drawback of licensing as a mode of entry into foreign markets?Which of the following is a drawback of licensing as a mode of entry into foreign markets? Licensing deals fail when there are barriers to foreign investment in a particular country. Licensing does not give a firm tight control over manufacturing, marketing, and strategy.
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Which of the following is a disadvantage of exporting as a mode for entering a foreign market?
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