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Foreign Market Entry Modes

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One should keep a few things in mind when analyzing and deciding which foreign market entry modes would be most suitable for AC. First, the company wants to support its clients locally and has long-term objectives. Furthermore, AC prefers to operate in its own name and the company provides services. Therefore, not all market entry modes are relevant. Based on the given information in the previous chapter, it can be concluded that the following entry modes are not suitable for AC: export management company, importer, foreign distributor/wholesalers, retailers, export combination, and contract manufacturing. This leaves local (sales) representatives, commercial agents, piggyback marketing, strategic alliances, joint venture, licensing and franchising …show more content…

Using a commercial agent is another way of exporting directly without the use of an intermediary. An advantage is that this person has good knowledge of the circumstances in the local market as well as knowledge of market demands. Furthermore, the commercial agent usually knows potential customers and possible competitors. However, there are also some disadvantages in using a commercial agent. A commercial agent may have more clients and therefore has to divide its attention. Furthermore, a commercial agent does not offer after-sales services and may be expensive when many orders are booked (Harlaar et al., 2012). In addition, the obligation of paying commission stays, even after the contract is terminated. In fact, in some countries this obligation is lifted only after a certain period after termination of the contract …show more content…

Advantages of a joint venture are that the local partner has knowledge of the customs and tastes of people and often has an established distribution network. Another advantage is that the local partner may have valuable business and political contacts. In addition, the parties involved can share costs and risks. As stated by Harlaar, Ouwehand & de Leeuw (2012) a possible disadvantage is “loss in managerial control which can result in reduced profits, increased operating costs, inferior product quality , exposure to product liability, environmental litigation and fines”. Also, cooperation may be difficult because of different backgrounds, goals and capabilities, for

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