Review of the Market Entry Modes

check up on of the mart Entry ModesINTRODUCTIONWhen we look at the development of world melodic line, it foot be easily noticed that upstart yrs put one across witnessed a growing strong point of competition in virtu everyy all told beas of business, whether in internal or multinational aras. In to solar daytimes changing and developing world, it has been getting much and much important and at the identical time becoming difficult day by day to expand your business borders. For this suit, it has excessively been getting more and more important to make the end of going world(prenominal)ly and choosing an let debut mode. The perception of this importance net be related to the fargon of this question how come international business is important especially for domestic companies? internationalist business is that kind of trade that gives increment to the providence of the world. In this the demand and supply and the tolls are influenced by the global issues. F or instance, the change in political conditions in Asia can raise manufacturing cost and cost of undertaking of an American confederation which is in a field in Asia. This would hence result in rise in the price of the harvest-home that you lease to purchase from a local mall. If in that respect is a decrease in cost of labour, on the another(prenominal) hand then you can r separately to pay relatively less price on the product. (Hussey, 2008)It is also rough other advantage of going internationally that it gives an hazard to developed countries to use their re generators rough-and-readyly like technology, capital and labour. Since a large number of the countries already consider natural resources and different inputs such as labor, technology, land and capital, they are apparent to stool some(prenominal) products more efficiently and sell them for cheaper prices than other countries. A country can obtain an item from some other country if it cannot effectively produce it within the national boundaries. This is the specialty of international trade. In same way a country can obtain an item from another country, for the reason of that product can be produced in its own country but with worse conditions such as lower quality or higher cost. Global trading also allows the different countries to luckicipate in global economy encouraging the foreign direct investors. These individuals invest their notes in the foreign companies and other assets. Hence the countries can become combative global participants.Entering a forthside(prenominal) MarketBefore accounting instauration international merchandiseing, if we reflect on our perception what marketing means itself, we bequeath face a few important definitions. According to Chartered plant of Marketing, marketing is a Management process which is responsible for come acrossing, predicting and providing customer requirements fruitfully. (Lowe and Doole, 2001)Marketing involvesproviding customer take and wants,finding out best ship canal and methods to provide these needs and wants,orienting the whole towards the process of focusing on that satisfaction,meeting shapingal objectives.In this way, it becomes important for the association or organization to prepare itself to achieve emulous advantage in the market. The alliance then needs to work on taking this advantage in the market. The company then needs to work on taking advantage by manipulating golable functions of marketing, within the uncontrollable marketing environment which is directly assume by SLEPT factors, i.e. Political, Economic, Socio-Cultural, Technological and Legal. (Lowe and Doole, 2001)When domestic and international marketing are compared, it is argued thatwhat differences there are between these two markets . Actually, the key elements are still same. The impression is not likely to change to any market degree when a company moves from a domestic market to an international market. Ho wever, two of import differences can be defined. First, of them, there are different approaching levels depending on international scope, and flake, the company provide be likely to face complexities and difficulties as the result of international marketing environment factors as it mentioned above. (Lowe and Doole, 2001)General Review of the Market Entry ModesFor the majority of companies, the most important international marketing decision that they are most likely to take is how they should enter impertinent markets, as these decisions which they make will directly affect every part of their business for many years in the future. There are advantages and disadvantages with each market entry method and critical in the decision-making process are the firms assessment of the cost and essay associated with each method and the level of betrothal the company is allowed by the government, or want to accept in the market. These factors make the degree of control it can exert over the total product and service offer and method of distribution. (Chee and Harris, 1993) There is, however, no ideal market entry strategy and different market entry methods might be adopted by different companies entering the same market and/or by the same company in different markets.The Alternative Market Entry ModesThe variety of alternative market entry methods are shown in figure below, depending on international involvement from virtually zero, when the company precisely makes its products for others to export but effectively does nothing itself to market its products internationally, to total involvement, where the firm might operate wholly-owned subsidiaries in all its key markets. (Chee and Harris, 1993)The market entry decision is taken within the company and it is determined related to the companys objectives and attitudes to international marketing and the confidence of its management teams to operate in foreign markets. In order to select most appropriate and effectiv e market entry strategy, it is essential to take into account some point includingthe company objectives and expectations relating to the size and value of predicted business,the size and financial resources of the companyits existing foreign market involvementthe skill, abilities and attitudes of the firms management for international businessthe intensity of the competition in target market,the affect of existing and expecting responsibility and non-tariff rampartsthe nature of product considered for international entering the areas of competitive advantage, such as trademark or letters patent protectionthe timing of entry in relation to the market and intensity of competitive siteHowever, this list of entry modes is likely to be important when the other factors which affect the entry mode and are very special(prenominal) to the companys particular situation. For instance, the regulations of laws of the host country might be a barrier for a company to own 100 percent of an surgical procedure in that country. All companies should identify, analyse and observe these immaterial factors and consider their say-so affect on their products/services. Although these external factors take place outside of the firms management teams control, they all must be taken into account as much as internal factors. (Chee and Harris, 1993)According to Terpstra and Sarathy (1994), alternative methods of foreign market entry can be summarized basically as shown belowProduction in HomeMarketForeign Production Sources-Contract Manifacture-Licencing-Assembly-Joint Venture-100 Percent Ownershipand / orIndirect exporting-Trading Company-Export Management Company-Piggyback, etc.Direct Exporting-Foreign allocator-Agent-Overseas Marketing SubsidiarySTARBUCKS IN CHINAIn 1999, when Starbucks invested into China, the company entered the joint-venture accord with three big local partners Beijing Meida Coffee, Shanghai Uni-President Starbucks Coffee Ltd and Maxims Caterer (Asia Puls e, 2006). On the one hand, the company was able to meet requirements from the Chinese governments regulations and lower the risk and level of investment when entering a mod market. In return, Starbucks sacrificed its control over development of those individual companies while only earning loyalty fees (ibid). As a result of joining the World share Organization (WTO) in 2001, Chinese government has loosened regulations on foreign investment, especially the removal of restrictions on foreign investment. Since then, share of local partners is no longer unavoidable for foreign companies (ibid). Consequently, Starbucks has paid out more than USD 21, 3 million to suck its share to 50 percent in Shanghai Uni-President Starbucks Coffee. Similarly, the company increase its stakes in Maxims Caterer to 51 percent and control over 50 percent of stock in Beijing Meida Coffee (Harris, 2007). Such onward integration gives Starbucks more control over its intricacy which will be more aggress ive in the come on future (ibid). Besides, Starbucks is also touch with hot chocolate sources and prices. Currently, for the Chinese market, Starbucks imports hot chocolate beans from its suppliers all around the world (Reuters, 2007a). Since these suppliers have been controlled tightly by the companys specialists, Starbucks can assure the quality of its products in China. However, Starbucks needs to pay import duty. Depending on the grapheme of coffee, this duty may castrate from 10 to 30 percent (Friedlnet, 2003). To make the problem worse, coffee prices have jumped from 89.36 US cents per pound in 2005 to 113.20 US cents per pound in 2007 and is evaluate to grow higher in 2008 (Reuters, 2007a). This may consequently influence the price of Starbucks product and influence Starbucks performance. In America, as a result of the increase in price of dairy product, Starbucks raised the price of its coffee drinks by 9 cents and 50 cents for its whole bean coffee in 2007 (Reuters, 2007b). This is the second time Starbucks raises its prices. The first time this happened was in 2006 when Starbucks raised 5 cents for all of its drinks (USA Today, 2006). To prevent such potential price change in the future, Starbucks has been operative with coffee farmers in many parts of China and trying to tending them meet the company standards. Jinlong Wang, president of Starbucks greater China, expressed that China does produce some quality coffee and sourcing from China would start very soon, perhaps in a couple of year (Reuters, 2007a). Starbucks also plan to advance a roasting plant in China. This backward integration when employ successfully in the future, will give Starbucks a huge competitive advantage.After initial success with more than 540 stores across China, Starbucks is striving grave to expand its operation and turn China into the biggest overseas market in near future. However, the Chinese market has many differences to other market that Starbucks has ent ered. ordinary coffee consumption in China is projected to increase by 20 to 25 percent each year. Therefore, much more opportunity is waiting for Starbucks in the near future. Despite its success, Starbucks should continuously monitor changes from the external environment and prevent unfortunate incidents such as in 2000 when Starbucks was kicked out of the Forbidden City, a symbol of Chinese Culture (CNN, 2000). Failing to monitor and respond properly, China can be a graveyard for Starbucks ambitions. splendour OF CHOOSING AN EFFECTIVE INTERNATIONAL MARKETING STRATEGYIn todays competitive international world, one of the most significant tasks for many companies which are preparing itself to enter a foreign market is to make the right decision about how the company should enter a foreign market. One reason for this is that this decision is likely to influence every part of its business for a long perid of time in the future. However, there are advantages and disadvantages of every hotshot foreign market entry modes. For the aim of selecting the most appropriate and effective foreign market entry strategy, it is essential to take into account some point including (Chee and Harris, 1993)the company objectives and expectations relating to the size and value of predicted business,the size and financial resources of the companyits existing foreign market involvementthe skill, abilities and attitudes of the firms management for international businessthe intensity of the competition in target market,the affect of existing and expecting tariff and non-tariff barriersthe nature of product considered for international entering the areas of competitive advantage, such as trademark or patent protectionthe timing of entry in relation to t he market and intensity of competitive situationRecommended StrategiesIn fast-changing Chinese cities, finding locations that will embody the right lifestyle is more like gambling than science. Real-estate subsist-how is a hallmark o f Starbucks worldwide, but the computerized social function databases that are used to test a potential street coigne in the United States would be comminuted help in Chinese cities. Starbucks must continue to use joint ventures or license other companies to own and operate Starbucks stores as this philosophy differs from its domestic approach, where the stores are for the most part company-owned. The idea is that an experienced local partner can help identify locations, sift through tax issues and give Starbucks stores a more local community appeal. Once the market is established Starbucks will be effrontery an opportunity to purchase a controlling interest in the partnership, which will then allow them more control and management of the overall operation and agency of the business.As Starbucks adds a whopping six stores a day on average, the company must continue to carefully consider everything from the direction of commuter traffic zipping by a potential drive-thru site to how many people are pounding the pavement on a worry urban block. As of Oct. 3, Starbucks had 12,440 stores worldwide, including 7,102 company-operated stores and 5,338 licensed locations. Starbucks must continue to open new locations as their market continues to grow. At some stage there are limits to their expansion, but to date the company has not gulln any signs that they are near that optimal point or number. A major concern would implicate anything from a drop in quality to the brand losing its luster.Despite potential saturation and plans to add many more stores in China. Starbucks insists that it sees very little cannibalization of its existing business when a new store opens. In fact, the company says, one reason would-be customers dont end up buying a Starbucks drink is because the line or wait is too long. One ancestor is to open up another store nearby.Besides adding stores, drive-thru and kiosks throughout the world, Starbucks also has plans to make itself ubiquito us even in places where it cant squeeze in a store. It is getting ready to launch Starbucks-branded vending machines, which will let people buy warm lattes and other drinks in a nine-ounce can for $2.50. And thats in addition to the business it already does selling bottled cold Starbucks drinks and coffee beans in more traditional food stores.In closing if you see a mall in the United States today itll probably be there two years form now but, a year passes by in a Chinese location, and you almost wont know your way around there any more. Ive witnessed this first hand when I travel to China on business. This is just how fast the Chinese economy and market is growing and Starbucks is looking to convert 1.3 billion tea drinkers to coffee lovers. The key attribute to attain this surmountable goal is to continue the expansion plan in China and other countries in Asia.ReferencesPulse A., (2006), Starbucks Soars in China, accessed on 15th February 2010, usable from www.atimes.com/atimes/ China_Business/HF15Cb06.htmlHarris C., (2007), Starbucks Exec Talks of High Hopes for harvesting in Asia, accessed on 18th February 2010, unattached from http//seattlepi.nwsource.com/business/330121_starbuckschina04.htmlReuters, (2007a), Reuters Summit Starbucks to source coffee from China, accessed on 21st February 2010, available from www.today.reuters.com/news/articlehybrid.aspx?type=comktNewsrpc=33storyid=2007-09-04T075310Z_01_PEK299845_RTRIDST_0_CHINA-SUMMIT-STARBUCKS-URGENT.XMLReuters, (2007b), Starbucks raising U.S. Drinks Price Next Week, accessed on 22nd February 2010, available from http//www.reuters.com/article/domesticNews/idUSN2337368320070723?feedType=RSSrpc=22sp=trueFriedlnet, (2003), Analysis The Chinese Coffee Market, accessed on 21st February 2010, available from http//www.friedlnet.com/news/03031606.htmlUSA Today, (2006), Starbucks Raises Prices of Most Coffee Drinks by Five Cents, accessed on 19th February 2010, available from http//www.usatoday.com/money/indu stries/food/2006-09-22-starbucks-prices_x.htmCNN, (2000), Starbucks create from raw material Storm in Chinas Forbidden City, accessed on 1sixth February 2010, available from http//edition.cnn.com/2000/FOOD/news/12/11/china.starbucks.reuterTerpstra V. and Sarathy R., (1994), International Marketing, 6th Edition, Orlando The Dryden Press.Chee H. and Harris R., (1993), Marketing a Global Perspective, Fitman Publishing, London, and p 21Lowe R. And Doole I., (2001), International Marketing Strategy Analysis, Development and Implementation, 3rd edition, Thomson learning. Hussey R., (2008), Importance of International Trade, accessed on 15th February 2010, available from www.thefreelibrary.com/Importance+of+International+Trade-a01073876158