Example Of Keyword: Investment, Exports, Market, Strategy Essay
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Foreign direct investment is another type of exporting method. This is in contrast to portfolio investments. There are a number of steps to consider for planning a successful export strategy using the basic steps to essential success. Then the export organization has varied methods for exports to a market which is studied in detail. Two entry strategies are compared and contrasted for Sony and Pepsico industries.
Compare and contrast Foreign Direct Investment (FDI) and other forms of International Business.
Foreign direct investment is investment in acquisitions of foreign assets with control and managing them through financial or other means. According to Shawn (n.d.), FDI can be implemented using purchase, investment, joint venture etc. This is in contrast to Portfolio investment which is another form of international business where investment is in the company’s stocks, bonds or assets without purpose of controlling or directing operations and management. Purpose of international business using portfolio investment could be diversification of risk from multiple markets, increasing financial rate of return while FDI is mainly for acquiring control of overseas assets. According to Dunung (2012), other forms of international business are horizontal and vertical FDI, Greenfield FDI and Brownfield FDI. Horizontal FDI is when investment and control of foreign asset is in a new market. Vertical FDI is about investments on a global scale for acquiring assets for core input functions usually for a home country. Whenever an organization imports goods and components as returning to home country, it is called backward vertical FDI. Greenfield FDI is provided as an international business strategy when a multinational corporation enters in a developing country to build new factories or stores. When an organization or government purchases and/or leases the present production facility for a new production activity, then it is called Brownfield FDI.
Offer an article summary that discusses how to enter a foreign market, what are the steps needed and the essential elements for success. Compare and contrast two different entries.
There are many strategies and methods of entering a foreign market. The following is a summary of strategies, steps and essential elements for success,
The exports of commodities are studied as the marketing of commodities from one country to another which can be direct or indirect. For direct exporting there is usually an agent, overseas subsidiary or distributor who acts through a government agency. This is when the pricing, certification and promotions of commodity comes into control with other parties. The problem is market information. The direct exporter chooses market, physical distribution and product pricing. Control is problem in direct exporting of commodities to other countries.
Indirect exporting of commodities is when use of trading companies, export management companies is utilized. This takes a form of establishment of subsidiaries in the target nation market. These methods provide a plethora of advantages ranging from worldwide contracts or contract with operating market, highly motivating commission rates, less expertise, and a lower credit acceptance which takes the burden away from the manufacturer.
Usually piggyback is a form of exports when an organization having less skill uses the services of other export skilled organizations. Yet another form of exporting is when consolidating orders are done from plenty of organizations in order to prosper from a bulk buy of commodities.
A type of exports called the countertrade occurs when an organization is expanding operations by opening in a market where competition is less with currency based exchange simply not possible. Stimulating industries where raw material is in short supply, giving a basis for reciprocal trade are some benefits of countertrade. This form of exports are a barter where contracts are non legal and not covered by GATT. This allows to export from countertrade to circumvent import quotas.
Another form of exports where there is direct exchange of goods for another, is the barter. In this export valuation of commodities is rather difficult so a currency is provided to underpin the item value. Different types of barter are there. Simple barter is a straight barter of direct exchange. A closed end form of barter is when buyer for commodities is taken into barter even before the contract is to be signed by the two trading parties. Clearing account barter is when the neither party to trade requires hard currency. Here each of the parties in trade is in agreement to a single contract of specified equal valued goods, duration is year, expressed in non convertible dollars, no money, and central bank line of credit is used. A counterpurchase are when consumer or buyer agrees to buy on condition of seller buying some of buyer’s products. Counterpurchase is not profitable as GATT (general agreement on trade and tariffs) does not cover it, low quality, limited marketing, delivery inconsistency, difficult setting the prices and difficulty in use of currency trading are observed weaknesses.
Another form of exports is licensing. This is a method of foreign operations in which the firm from another country has agreed to allow organization in another country to use manufacturing, trademark, processing and skill provided by the licensor. Similar to franchise operations with little expense and involvement.
An easier export method is joint venture when two or more investors share ownership and control of property rights with operations.
Wholly owned operations are comprising 100% ownership. This form of exports has greatest commitment of inclusive capital and managerial efforts. With this exports have 100% control with ability to communicate which overcomes disadvantages. Under the export type capital and earnings repatriation ( send back to home country) can be monitored more easily.
Export processing zone, EPZ is only serving a particular form of market entry, it is also an investment incentive for new investors. As an export form of international trade, it also provides employment to host countries for skill transfer as a basis of the flow of commodities from and out of the country.
The steps to perform an activity in foreign trade exports are following;
Gathering information on target markets
Preparing project plan
Making the best strategic choices
Making the financial plan
Deciding on payments
Learning laws and regulations
Health and environmental issues
Customs and tariff details
Understand logistics and supply relations
According to Katsikeas (1997), the essential elements for success of an exporting organization are following;
Understanding local conditions of market from extensive primary and secondary research into the product commodities, forecast sales, pricing, packaging and competitive advantage.
Identifying and choosing market where entrepreneurship is friendly and risk from politics and trade restrictions are low. Ability to identify the market for international product life cycle match is a good choice and worthwhile.
Including details of product description in export marketing plan to target market and industry. This should also include business goals and objectives, product and services information and descriptions, analysis of the target market to enter, with future trends and predictions, also
comparison between strengths and weaknesses in relation to competition,
strategies for international marketing,
financial information and budgets.
The success elements of strategy also include very essential contacting country’s consulate in the market while you need to enter it. This is to enable access for valueable market data and directories of potential buyers for particular industries.
The entry of Nike, Sony and Reebok into foreign markets is noteworthy. The details of Sony and Pepsico are provided as the information on how exports have been successful using a predictive entry method in the global market. While Sony enters global market with delayed focus, there is more innovation and fast growth for many products in new markets. Sony understands local conditions late, sizes up opportunity and scale operations effectively. Pepsico is in contrast, fast entering, with innovation though aiming just like Sony to be market leader in products divison yet chooses advantage in environment friendliness and quality. Laura (2012) found that while Sony has the technology to support Pepsico relies on specific commercial actions. While Sony has a centralized plan for marketing and exporting the Pepsico relies on functional business unit strategy based on innovation.
Carpenter, Mason, & Dunung, S. P. ( 2012, December 29). Challenges and Opportunities in International Business. Virginia, US: Saylor academy.
Morgan, R. E., & Katsikeas, Constantine S.(1997). Theories of international trade, foreign direct investment and firm internationalization: a critique. Management Decision, 35/1, 68–78.
Araki Laura. (2012, May 7). Japan’s Evolving Business Strategies. Retrieved from http://www.nbr.org/research/activity.aspx?id=246
Grimsley Shawn. (n.d.). What Is Foreign Direct Investment? - Definition, Advantages & Disadvantages. Retrieved from http://education-portal.com/academy/lesson/what-is-foreign-direct-investment-definition-advantages-disadvantages.html
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