Advantages Of Foreign Market Entry Method

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While an organisation goes about making the decision on foreign market entry method, it should be based on weighing the trade-offs between returns and inherent risks. An organisation is required to select the entry method that presents the best risk-adjusted investment returns (Agarwal & Ramaswami 1991). However, this is not the only consideration to be made. An organisation’s choice is also influenced by its need for control and the resources available (Stopford & Wells 1972; Cespedes 1988). Resource availability relates to managerial and financial capacity of an organisation in successfully serving a specific foreign market. Control, on the other hand, entails an organisation’s need to influence decisions, methods, and systems within the …show more content…

This is based on the resulting desired effects that include: ownership advantages; location advantages; and internalisation advantages (Agarwal & Ramaswami 1991). Ownership advantages relate to an organisation’s ability to develop (especially differentiated products), its multinational experience and the organisation’s size. These components represent an organisation’s skill and assets. Ideally, for any organisation to successfully compete with other companies in the host country, they need to possess superior or advanced set of these assets and skills to enable it earn significant economic returns capable of surpassing the higher costs they will incur in foreign market servicing (Agarwal & Ramaswami 1991). In addition, with the capability of manufacturing differentiated products, an organisation or firm possesses higher control modes that eventually leads to increased efficiency. This practice is supported by empirical data as observed by Coughlan and Flaherty (Coughlan & Flaherty 1983). An organisation requires substantial resources during international expansion to cushion it against high marketing costs, economies of scale achieved, and contract and patents enforcing (Hood & Young 1979). The organisation’s size would naturally indicate its costs absorption capabilities. According to Buckley and Casson, an organisation’s

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