Exports can take different strategies as long as it eventually leads to remittance of returns to the original owner in the parent home country. The strategy to employ upon entry into the international export market depends on a number of factors which assume legal, political, economic and social characters.
Direct exporting involves the direct transfer of fully produced commodities services from the home country, usually the exporter, to the foreign country, usually the importer. It is applicable where the importing country has a favourable and liberal import regime. This is to mean the laws and the political policies are favourable of imports. In addition, it is applicable where the exporter enjoys a competitive advantage in producing the commodity as compared to production in importing countries.
Turn-key projects refer to fully completed projects that are ready for use that are prepared by the owner for sale to the buyer. Usually, in export markets, turn-key projects apply for machinery and construction exports. This entry strategy is applicable where the importing country lacks the competence and capacity to come up with such projects but require the projects for consumption. They would, thus, require the services of external manufacturers to avail the project ready for consumption or use. A typical turn-key project is seen in road construction. Often, some countries may lack the competencies and capacities to construct roads. They tender the construction business to foreign companies which complete the construction and return to their native country.
Licensing refers to the concept of permitting local producers to use a foreign companies patents, production formulas, trademarks, and other intangible assets. Often, this strategy is employed where the importing country has export barriers and a trading regime that is unfavourable to direct imports. This could be manifested in excess taxation. In addition, licensing is applicable where the licensee does not have the competing ability to outdo the original company but has the market share in the importing country.
Franchising entails the right given to the local firms to use the brand, formula and business model of the original foreign company. It allows for a presence of foreign products but with a local stake involved. Usually, franchises are employed when the company lacks enough capital for effective expansion but want to leverage on its good brand image. In addition, franchises help in circumventing unfavourable trade regimes as it does not fall under direct exports but still will enjoy the profits made at the local levels.
Joint ventures refers to entry strategy where the foreign company retains part ownership and devolves another part to local investors. Joint ventures are primarily motivated by trade regimes. Some regimes require a certain percentage of ownership to be reserved for natives so as contain the overall balance of trade from favouring foreigners. In addition, joint ventures are adopted where the importing country and the parent company’s country have a large cultural divide. To bridge the cultural divide, the parent company incorporates local companies and investors in the ownership and overall management of the venture.
Finally, wholly owned subsidiaries refers to a strategy where the parent company operates a company in the foreign market and retains one hundred percent ownership. Usually, this is occasioned by two factors. One the trade regime is favourable allowing for foreign investment in the local country and the parent company has adequate funds to set base in foreign markets and run the subsidiaries from oversees through their local managers.
References
Ekholm, K., Forslid, R., & Makusen, J. (2010). Export Platform - Foreign Direct Investment. Journal of the European Economic Association, 5(4), 776-795. Retrieved from http://onlinelibrary.wiley.com/doi/10.1162/JEEA.2007.5.4.776/abstract
Hill, C. W. (2013). International Business. New York: Macgraw Hill Higher Education.
Miri, L., & Inbar, P. (2007). Examining Control and Autonomy in the Franchisor–Franchisee Relationship. International Small Business Journal, 21(2), 131-159. Retrieved from https://www.google.co.ke/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CDsQFjAD&url=http%3A%2F%2Fwww.sagepub.com%2Fmcdonaldizationstudy5%2Farticles%2FLabor%2520and%2520Organizations_Articles%2520PDFs%2FPizanti.pdf&ei=dzdEUeu2Ko_KsgbEsoCACw&usg=AFQjCNG7iGI
Ruta, M., & Venables, A. (2013). Trade Policy for Natural Resources: What are the Issues? Inter-American Development Bank and Trade Sector: Institute for the Integration of Latin America. Retrieved March 16, 2013, from http://www.iadb.org/intal/icom/35/eng/i_articulos.html
