What are the advantages and disadvantages of market entry strategies?
Advantage : Direct negotiation, Direct pricing, Direct contract, No commission, Knowing accurate market information and situation, etc. Disadvantage : Time-consuming, Costs may be high, Limitation of market expansion, Limitation of knowing business customs in local market, etc.
Advantages of Market Entry
The advantages of this strategy include: increasing sales, consolidating the brand in the market, increasing return on investment, improving customer service and increasing the cost of products, developing simpler sales channels.
- Structured exporting. The default form of market entry. ...
- Licensing and franchising. Licensing is giving legal rights to in-market parties to use your company's name and other intellectual property. ...
- Direct investment. ...
- Buying a business.
- Direct Exporting. Direct exporting is selling directly into the market you have chosen using in the first instance you own resources. ...
- Licensing. ...
- Franchising. ...
- Partnering. ...
- Joint Ventures. ...
- Buying a Company. ...
- Piggybacking. ...
- Turnkey Projects.
- You could significantly expand your markets, leaving you less dependent on any single one.
- Greater production can lead to larger economies of scale and better margins.
- Your research and development budget could work harder as you can change existing products to suit new markets.
The five most common modes of international-market entry are exporting, licensing, partnering, acquisition, and greenfield venturing.
A late entrant is able to avoid the obvious mistakes of not understanding customer perception by reading well into the growth phase of its competition. They can position themselves correctly and channel investment to create and deliver a better "perceived" product.
- access to new markets and distribution networks.
- increased capacity.
- sharing of risks and costs (ie liability) with a partner.
- access to new knowledge and expertise, including specialised staff.
- access to greater resources, for example, technology and finance.
Solution(By Examveda Team)
Brand extender market entry strategies are the most common for existing firms. Brand Extension is the use of an established brand name in new product categories.
#1 Exporting/Trading
One way to enter a new market is through exporting goods. This strategy allows you to enter several markets simultaneously. You can assign a local distributor to conduct transactions with your buyers. The main advantage of working with local distributors is access to their existing client base.
What is market entry strategy example?
What are examples of market entry strategies? There are several examples of market entry strategies that companies can use to enter a new market. Some of these include exporting, licensing, franchising, partnering, joint ventures, turnkey projects, and greenfield investments.
Market entry strategy is a planned distribution and delivery method of goods or services to a new target market. In the import and export of services, it refers to the creation, establishment, and management of contracts in a foreign country.
As nouns, the difference between disadvantage and advantage is that disadvantage is a weakness or undesirable characteristic; a con while the advantage is any condition, circ*mstance, opportunity, or means, particularly favorable to success, or any desired end.
- Supply chain disruptions. ...
- High up-front costs. ...
- Export licenses and documentation. ...
- Product adaptation. ...
- Political disruptions. ...
- Cultural hurdles. ...
- Exchange rate fluctuations. ...
- Multi-currency payments.
Advantages of International Trade:
Due to this, there is no underutilization of resources. Wider variety of products available to consumers: Due to trade, the products from other countries are imported, and the consumers have a wide choice of items to choose from.
Gaining market share through imitation is difficult for a late mover. Consequently, the late mover may attempt to design innovative new products to attract customers, which can be expensive.
Entering small and remaining small can be an advantageous entry strategy because it minimizes the need to engage in direct competition with large and established ventures. Partially, this is because this approach requires the resources necessary to compete with such corporations.
The first mover may invest heavily in persuading consumers to try a new product. Later entrants would benefit from these informed buyers and would not need to spend as much on educating consumers. Later entrants can avoid mistakes made by the first mover.
| Advantages | Disadvantages |
|---|---|
| Organizational: strategic partner may provide goods & services that complement your own | Sharing: trade secrets |
| Economic: reduced costs & risks | Competition: strategic alliances may create a potential competitor |
- Weaker management involvement or less equity stake.
- Fear of market insulation due to the local partner's presence.
- Less efficient communication.
- Poor resource allocation.
- Difficult to keep objectives on target over time.
What are the advantages and disadvantages of licensing?
| Advantages to Licensing | Disadvantages to Licensing |
|---|---|
| You will not need to incur the costs of producing, promoting, packaging, or selling your product. | You will likely lose control over your product, including promotion, packaging, and selling. |
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.
- 1) Selling Consultancy Services. ...
- 2) Licensing Services. ...
- 3) Franchising Services. ...
- 4) Joint Ventures for Service Providers. ...
- 5) Hiring a Sales Representative. ...
- 6) Mutual Recognition Agreements.
- access to new markets and distribution networks.
- increased capacity.
- sharing of risks and costs (ie liability) with a partner.
- access to new knowledge and expertise, including specialised staff.
- access to greater resources, for example, technology and finance.
| Advantages | Disadvantages |
|---|---|
| Does not require capital investment or presence of the licensor in the foreign market | Revenues are usually more modest than with other entry strategies |
| Ability to generate royalty income from existing intellectual property | Difficult to maintain control over how the licensed asset is used |
- Access to more consumers and businesses. ...
- Diversifying market opportunities so that even if the domestic economy begins to falter, you may still have other growing markets for your goods and services.
- Expanding the lifecycle of mature products.
#1 Exporting/Trading
One way to enter a new market is through exporting goods. This strategy allows you to enter several markets simultaneously. You can assign a local distributor to conduct transactions with your buyers. The main advantage of working with local distributors is access to their existing client base.
| Advantages | Disadvantages |
|---|---|
| Organizational: strategic partner may provide goods & services that complement your own | Sharing: trade secrets |
| Economic: reduced costs & risks | Competition: strategic alliances may create a potential competitor |
- Weaker management involvement or less equity stake.
- Fear of market insulation due to the local partner's presence.
- Less efficient communication.
- Poor resource allocation.
- Difficult to keep objectives on target over time.
A merger between companies will eliminate competition among them, thus reducing the advertising price of the products. In addition, the reduction in prices will benefit customers and eventually increase sales. Mergers may result in better planning and utilization of financial resources.
What are the advantages and disadvantages of licensing?
| Advantages to Licensing | Disadvantages to Licensing |
|---|---|
| You will not need to incur the costs of producing, promoting, packaging, or selling your product. | You will likely lose control over your product, including promotion, packaging, and selling. |
Disadvantages to the licensor include:
The licensor having loss of control of their intellectual property. The licensor having to depend on the skills, abilities, and resources of the licensee to generate revenues. The licensor being exposed to intellectual property theft by the licensee.
Lower income than in other entry modes. Loss of control of the licensee manufacture and marketing operations and practices leading to loss of quality. Risk of having the trademark and reputation ruined by an incompetent partner.
- Supply chain disruptions. ...
- High up-front costs. ...
- Export licenses and documentation. ...
- Product adaptation. ...
- Political disruptions. ...
- Cultural hurdles. ...
- Exchange rate fluctuations. ...
- Multi-currency payments.
- Foreign exchange risk. There is the danger that there will be a sudden large change in the currency exchange rate. ...
- Piracy risk. Even if rare, this possibility must be considered.
- Political risk. There are many scenarios where this may be a hindrance. ...
- Legal risk. ...
- Cultural risk.
Export promotion leads to expansion of goods for the foreign market. These goods earn foreign exchange that can be used to facilitate development. Export promotion industries have a wide market for their produce for both domestic and foreign markets. They are therefore able to produce for a greater capacity.
