Market Entry Barriers

Market

Entry

Modes

A market entry barrier is defined as any factor that reduces the motivation or ability of potential entrants to enter a new market despite the high profits enjoyed by the early pioneers in that market. Market entry barriers can be assumed the cost that must be accepted by a firm seeking to enter a new industry or market that is not borne by firms already in that industry or market. Market entry barriers vary according to the market structure in that market barriers are higher in pure monopoly and tight oligopoly markets than in pure competition markets. The entry barriers facing Chinese executives differ from those of other industrial countries since the Chinese economic environment and firm-specific attributes are different

Leaving most of the resourcing commitment to the export channels together with the control.

Licensing

Licensing is a way in which the company can establish local production in foreign markets without capital investments. A licensing agreement is an arrangement wherein the licensor gives something of value to the licensee in exchange of a certain performance and payments from the licensee. This approach leaves, like exporting, the resource commitment and control at other parties.

Joint

Ventures/Intermediate

A joint venture, intermediate or a strategic alliance is a partnership between two or more parties. In international joint ventures these parties will be based in different countries, and this obviously complicates the management of such an arrangement. In a joint venture or contractual agreement, each partner contributes resources and skills and, therefore, each partner possesses a degree of bargaining power. Goa (2004) views an entrant’s bargaining power in an overseas partnership as being equal to the partner’s relative dependence on the focal firm. Furthermore, a firm can increase its

Each mode involves different resource deployment patterns, levels of control and risk, and political and cultural awareness. Numerous studies indicate that a firm's entry-mode choice impacts a firm's overseas business performance and survival (Davis et al, 2000).

Highlighted by researchers are two key strategic decisions, the location of production and/or marketing activities and the level of ownership (level of control) (Sharma and

Erramilli, 2004). The major disadvantage of all entry modes with production in the host

(new) country is the loss of a potential country-of-origin effect (Grünig and Morschett,

2012). This could however be a major opportunity in cutting costs. Control (or ownership) as defined in the entry decision-making literature refers, according to Gao

(2004), to the entrant’s ability to influence the activities of the foreign operations.

Control is often considered as an imperative in foreign entry mode decisions because it enables a multinational firm to coordinate actions among national subsidiaries, implement and revise global business strategies, check partner opportunism, and resolve unavoidable disputes within and/or across subsidiaries. Therefore, control is a way