Please forward journal entry for investment in subsidiary error screen to 94. These options vary with cost, risk and the degree of control which can be exercised over them.
The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. Details on the sourcing element have already been covered in the chapter on competitive analysis and strategy. 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. Total adaptation and conformity strategy – foreign producer gives a straight copy. 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. The disadvantage is mainly that one can be at the “mercy” of overseas agents and so the lack of control has to be weighed against the advantages. For example, in the exporting of African horticultural products, the agents and Dutch flower auctions are in a position to dictate to producers. A distinction has to be drawn between passive and aggressive exporting. It is interesting to note that Korey5 1986 warned that direct modes of market entry may be less and less available in the future. Growing trading blocks like the EU or EFTA means that the establishment of subsidiaries may be one of the only ways forward in future. Credit acceptance takes burden from manufacturer.
Piggybacking Piggybacking is an interesting development. The method means that organisations with little exporting skill may use the services of one that has. Another form is the consolidation of orders by a number of companies in order to take advantage of bulk buying. Normally these would be geographically adjacent or able to be served, say, on an air route.
Options to buy into partner exist or provision to take royalties in stock. Requires considerable fact finding, planning, investigation and interpretation. Those who decide to license ought to keep the options open for extending market participation. This can be done through joint ventures with the licensee.