This unit introduces the factors that are important to consider in entering a new market and the methods and management of different entry modes.

• Analyzing a market can be thought of as a four-step process. In Step 1, identify basic appeal, managers determine basic product demand in markets and availability of resources in sites for operations.
• The first step is to determine basic product demand, which means exploring the general suitability of a nations business climate.
• In Step 2, managers explore differences in cultures, politics, laws, and economies and incorporate their findings into market and site selection decisions.
• The third step is to look at the market potential. The main variables include market size, market growth rate and the suitability of any particular site.
• In the final step select the market or site, managers perform their final analyses on all remaining locations. This can include field trips and analysis of any competitors.
• Information on these items that already exists within the company or that can be obtained from outside sources is called secondary market research. Managers often use information gathered from secondary research activities to broadly estimate market demand for a product or to form a general impression of a nations business environment.
• Secondary data are relatively inexpensive because they have already been collected, analyzed, and summarized by another party.
• Primary market research is the process of collecting and analyzing original data and applying the results to current research needs. This includes interviews, focus groups, surveys and information from trade shows or trade missions.
• Once a market has been selected it has to determine how to enter the market. Exporting, the practice by which a company sells its products directly to buyers in a target market is the earliest and often the lowest risk choice.
• Direct exporting occurs when a company sells its products directly to a consumer. With indirect exporting a company sells its products to intermediaries who then resell to buyers in a target market.
• There are two basic ways of financing this. With advance payment an importer pays an exporter for merchandise before it is shipped. This method of payment is common when two parties are unfamiliar with each other, the transaction is relatively small, or the buyer is unable to obtain credit because of a poor credit rating at banks. The second method is an open account, where the exporter ships merchandise and later bills the importer for its value is called open account.
• Other methods of entering a market include licensing, where a company owning intangible property (the licensor) grants another firm (the licensee) the right to use that property for a specific period of time. Franchising, another way of entering a market, where one company (the franchiser) supplies another (the franchisee) with intangible property and other assistance over an extended period. A company can create a wholly owned subsidiaries, entirely owned and controlled by a single parent company. In a joint venture a separate company is created owned by two or more entities. Finally, a strategic alliance, where entities co-operate but do not form a separate company, can allow firms to share the cost of an international investment project, tap competitors specific strengths, and access distribution channels.

According to your unit notes and Chapter 13 of the textbook, there are many ways to enter a market. Select one of the ways described and describe the factors you believe are important to undertake this form of market entry. Are any of these factors also important to other forms of market entry?