0710

Problem

Describe the advantages and disadvantages of the various investment and contract market entry strategies.

Step-by-step solution

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Step 1/2

Each and every organization operating in the business environment focuses on expanding their business either nationally or internationally. When considering international expansion, is more complex and challenging than national expansion. Depending on the nature of the target market, the organizations will have to formulate effective strategies.

Step 2/2

The advantages and disadvantages of various investment and contract market entry strategies have been discussed as follows:

Sole venturing

This is a market entry strategy through which an organization opens its own showroom or shows its physical presence in the target market.

Advantages

• Through sole venturing, the organization can establish its standardization, policies, procedures, etc. effectively.

• The profits will not be shared and can be used for further business expansion.

• The privacy of business operations, strategies, etc can be maintained.

Disadvantages

• The cost of production will increase as physical layout and infrastructure have to be built and maintained.

• The risk involved in marketing and promotion, the success of the business, etc is very high.

Contract

This is a foreign market entry strategy where the organization enters into a contract with the organization in the target market. Licensing, franchising, etc are some of the strategies for entering the foreign market.

Advantages

• The risk involved in market entry, like financial loss, is very low.

• The risk involved in marketing and promotion is less.

• The success of the business can be ensured.

Disadvantages

• Sharing of information and resources can lead to unethical use of it.

• Profits will also be shared along with the risks.

• The bad reputation of one firm can impact another firm too.