BUS 200 Lecture Notes - Lecture 15: Experience Curve Effects, Oil Refinery
Chapter 13
Entering Foreign Markets
A firm contemplating foreign expansion must make three basic decisions: which markets to enter, when
to enter those markets, and on what scale
Firms can enter foreign markets through:
• Exporting
• Licensing or franchising to host country firms
• A joint venture with a host country firm
• A wholly owned subsidiary in the host country
The advantages and disadvantages of each entry mode is determined by:
• Transport costs and trade barriers
• Political and economic risks
• Firm strategy
Terms:
✓ Once attractive markets have been identified, it is important to consider the timing of entry.
✓ The advantages frequently associated with entering a market early are commonly known as
first-mover advantages
✓ pioneering costs—that is, costs that an early entrant has to bear that a later entrant can avoid.
• Pioneering costs arise when the business system in a foreign country is so different from
that i a fir’s hoe arket that the eterprise has to devote osiderale effort, tie,
A firm expanding internationally must decide:
• Which markets to enter
• When to enter them and on what scale
• How to enter them - the choice of entry mode
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Document Summary
A firm contemplating foreign expansion must make three basic decisions: which markets to enter, when to enter those markets, and on what scale. Exporting: a joint venture with a host country firm. Licensing or franchising to host country firms: a wholly owned subsidiary in the host country. The advantages and disadvantages of each entry mode is determined by: Transport costs and trade barriers: political and economic risks. Once attractive markets have been identified, it is important to consider the timing of entry. The advantages frequently associated with entering a market early are commonly known as first-mover advantages. A firm expanding internationally must decide: which markets to enter, when to enter them and on what scale, how to enter them - the choice of entry mode. Similarly, the threat of tariff barriers by the host-country government can make it very risky.
