South Korea - Mode of Entry
“MICHIGAN CELLARS”
MODE OF ENTRY in SOUTH KOREA
SLIDE 1: Motivations for Michigan Cellars to Go Abroad: * Proactive Motivation Factors: * Obtaining additional profits * Capitalizing on technological advantage, * Strengthening core competencies, * Achieving tax benefits, * Achieving economies of scale * Reactive Motivations * Local competition is increasing, * Experiencing excess capacity of wine production, * Saturated local wine market
SLIDES 2-5: Four Possible Modes of Entry: * 1. Exporting * Indirect Exporting * Direct Exporting * Advantages: * Avoids cost of establishing manufacturing operations * May help achieve experience curve and location economies * Disadvantages: * May compete with low-cost location manufacturers * Possible high transportation costs * Tariff barriers * Possible lack of control over marketing reps * 2. Licensing * Licensing * Franchising * Turnkey Contracts * Contract Manufacturing * Refers to offering a firm’s know-how or other intangible asset to a foreign company for a fee, royalty, and/or other type of payment * Advantages for the new exporter * The need for market research is reduced * The licensee may support the product strongly in the new market * 3. Strategic Alliances (SA) * Typically a collaborative arrangement between firms, sometimes potential or actual competitors, across borders * Based on sharing of vital information, assets, and technology between the partners * Have the effect of weakening the tie between potential ownership advantages and company control * Advantages: * Facilitate entry into market * Share fixed costs * Bring together skills and assets that neither company has or can develop *
MODE OF ENTRY in SOUTH KOREA
SLIDE 1: Motivations for Michigan Cellars to Go Abroad: * Proactive Motivation Factors: * Obtaining additional profits * Capitalizing on technological advantage, * Strengthening core competencies, * Achieving tax benefits, * Achieving economies of scale * Reactive Motivations * Local competition is increasing, * Experiencing excess capacity of wine production, * Saturated local wine market
SLIDES 2-5: Four Possible Modes of Entry: * 1. Exporting * Indirect Exporting * Direct Exporting * Advantages: * Avoids cost of establishing manufacturing operations * May help achieve experience curve and location economies * Disadvantages: * May compete with low-cost location manufacturers * Possible high transportation costs * Tariff barriers * Possible lack of control over marketing reps * 2. Licensing * Licensing * Franchising * Turnkey Contracts * Contract Manufacturing * Refers to offering a firm’s know-how or other intangible asset to a foreign company for a fee, royalty, and/or other type of payment * Advantages for the new exporter * The need for market research is reduced * The licensee may support the product strongly in the new market * 3. Strategic Alliances (SA) * Typically a collaborative arrangement between firms, sometimes potential or actual competitors, across borders * Based on sharing of vital information, assets, and technology between the partners * Have the effect of weakening the tie between potential ownership advantages and company control * Advantages: * Facilitate entry into market * Share fixed costs * Bring together skills and assets that neither company has or can develop *