Evaluation of Foreign Modes of Market Entry Essay

Evaluation of Foreign Modes of Market Entry - Essay Example These are export, license and franchise, alliance, joint venture, and wholly owned subsidiary. Each mode will be discussed and analyzed in the subsequent paragraphs. In evaluating, we will find which among these modes would be the best entry strategy for our car manufacturer who wants to take advantage of the low cost of production and seek new market opportunities elsewhere. The company may choose any of these modes to enter a new market and the thing that could constrain them is the degree of control, reasons that could produce different strategies of market participants as discussed below. Exporting increases profitability. Some companies found exporting ideal because of advantages of increased profitability, spreading risks, economies of scale, and enhanced innovation (Dun & Bradstreet). Exporting means a firm’s sales of goods or services produced in the home market and sold in the host country through an entity in the host country (Investopedia. n.d.). Export increases pr ofitability because lifestyles and habits are different from each country, thus it opens up the wider opportunity for products and services much more for products that have reached declining stage in the local market, or demand has diminished. Exports are one of the oldest forms of trade and occur on a large scale basis between two countries that have fewer barriers to trade. The growth of car exports has been observed in China in 2012 reaching 1,056,091 units, an increase of 29% from 2011. Most of their exports go to emerging countries (â€Å"Top Chinese Automakers†.2013). Exporting allows the company to spread the risks US market is swamped with various car models, making it...China is one of the emerging economies today. It is predicted that in the distant future, it will overshadow the United States as a leading economy because these multinationals are eyeing on this country for market entry. My study offers four modes of entry and a richer definition for each mode. Next, I related the advantages and disadvantages for each. Literature review suggests various modes that coincided with my view. Strong findings that I put forward in the study prove that joint venture is the more popular mode of entry; that firms go into a joint venture to avoid too many legal restrictions of the host country and as an easy access. Control is significant in all modes of entry. Weighing things over, exporting has the least degree of control, followed by licensing, alliance, and joint venture while the highest form of control is the wholly owned subsidiary. The decision, however still depends on the ultimate objective of the foreign company in entering a foreign market.