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Concerning investment and control, the question really is how far the company wishes to control its own fate. The degree of risk involved, attitudes and the ability to achieve objectives in the target markets are important facets in the decision on whether to license, joint venture or get involved in direct investment.
Cunningham1 identified five strategies used by firms for entry into new foreign markets: In marketing products from less developed countries to developed countries point iii poses major problems. Buyers in the interested foreign country are usually very careful as they perceive transport, currency, quality and quantity problems.
This is true, say, in the export of cotton and other commodities. Because, in most agricultural commodities, production and marketing are interlinked, the infrastructure, information and other resources required for building market entry can be enormous.
Sometimes this is way beyond the scope of private organisations, so Government may get involved. It may get involved not just to support a specific commodity, but also to help the "public good".
Whilst the building of a new road may assist the speedy and expeditious transport of vegetables, for example, and thus aid in their marketing, the road can be put to other uses, in the drive for public good utilities. Moreover, entry strategies are often marked by "lumpy investments".
Huge investments may have to be undertaken, with the investor paying a high risk price, long before the full utilisation of the investment comes.
Good examples of this include the building of port facilities or food processing or freezing facilities. Moreover, the equipment may not be able to be used for other processes, so the asset specific equipment, locked into a specific use, may make the owner very vulnerable to the bargaining power of raw material suppliers and product buyers who process alternative production or trading options.
Zimfreeze, Zimbabwe is experiencing such problems. It built a large freezing plant for vegetables but found itself without a contract. It has been forced, at the moment, to accept sub optional volume product materials just in order to keep the plant ticking over.
In building a market entry strategy, time is a crucial factor. The building of an intelligence system and creating an image through promotion takes time, effort and money. Brand names do not appear overnight. Large investments in promotion campaigns are needed.
Transaction costs also are a critical factor in building up a market entry strategy and can become a high barrier to international trade. Costs include search and bargaining costs.
Physical distance, language barriers, logistics costs and risk limit the direct monitoring of trade partners. Enforcement of contracts may be costly and weak legal integration between countries makes things difficult.
Also, these factors are important when considering a market entry strategy. In fact these factors may be so costly and risky that Governments, rather than private individuals, often get involved in commodity systems.Impact Of Barriers To Entry On Market Strategy Economics Essay Published: 23, March Purpose - The purpose of this paper is to review previous research and to propose a model for the impact of barriers to entry on the market strategy of an entrant firm, where product/market scope and product differentiation are central strategy components.
When developing a market entry strategy, focus on how the new market fulfils the success factors sought by the client. Make sure to layout several different market entry strategies and evaluate those against each other.
The chapter begins by looking at the concept of market entry strategies within the control of a chosen marketing mix. It then goes on to describe the different forms of entry strategy, both direct and indirect exporting and foreign production, and the advantages and disadvantages connected with each.
Sample Economics Essay Questions Discuss whether the institutions that supported the Golden Age of capitalism may have been incapable of sustaining growth in the longer term.
Explain how a consumers risk preference may affect her decision to purchase a consumer durable. Deciding On An Effective Market Entry Strategy Economics Essay International business refers to the performance of trade and investment activities by firms across national borders.
Firms that participate in international business are Multinational Enterprises (MNE). Exporting is the best mode of entry into international markets by smaller firms wanting to expand their market. Firms venturing for the first time usually use exporting as their entry strategy.
This strategy is most favored by small and medium sized enterprises (SMEs). There are two types of export strategies.