INTRODUCTION

LORIEVELLE CONTINEDO NOELY GAGAMA KASSIRINE PERMALE

DAVON JADE SALANIO ANGELICA FAITH YAP
Exports are just one way that firms can place their
products in foreign markets, a process known as
foreign market entry
Two other means are
– Contracting
– Foreign direct investment
Contracting and foreign direct investment are two
types of international production 2
exporting

Indirect Exporting Direct Exporting

The home-country firm relies on
another firm known as a sales agent
or trading company to complete the
export transaction
The home-country firm takes on the export
transaction itself
This can include the research, marketing,
finance, and logistics requirements of the trade
transaction 3
Contractual

Subcontracting The home-country firm contracts with

a foreign firm to produce a product to
certain specifications

The home-country firm licenses a foreign firm to allow it to

Franchising use the home-country firm’s production process in the
foreign country but exerts more control over production
and marketing to ensure consistency across foreign
markets

Licensing
The home-country firm licenses a foreign firm to allow it
to use the home-country firm’s production process in the
foreign country

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Investment

Greenfield Investment The home-country firm establishes a

brand-new production facility in the
foreign country that it fully owns

Mergers and
The home-country firm buys part (merger) or all
acquisitions (M&A) (acquisition) of the shares of an already-existing
production facility in the foreign country

Joint venture (JV) The home-country firm establishes a separate firm

in the foreign country that is jointly-owned with a
foreign-country firm

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 Category Mode Characteristics
Domestic None Purely domestic firm supplying home market
Exporting Indirect Exporting Another firm acts as sales agent
Exporting Direct Exporting Firm completes export transaction itself

1 Contractual
Contractual
Licensing
Franchising
License to foreign firm to produce abroad
License with conditions to ensure consistency
Contractual Subcontracting Contract with materials and specifications
Investment Joint Venture Jointly owned separate firm
Investment Mergers and Purchase of part or whole of foreign firm
Acquisitions

Investment Greenfield Brand-new production facility

The Foreign
Market Entry
Menu
 Nature of IPOM
International business environment where not just economics but
also international quality standards have to be maintained.
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 Nature of IPOM
The International stint makes the company more aware of its
surroundings, thus making it more competitive.
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 As IPOM is dynamic in nature, organization has
to design it strategic objectives which cover
Meeting international following points:
1
quality standards

Forecasting demand and

2
production design

Profitability 3

Minimum production
4
cost

Adaptation to modern
5
available technology

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INTERNATIONAL
PRODUCTION
 production of goods and services in
international locations and markets
involves management process which has to

INTERNATIONAL take into consideration local production market

and international customer necessities

PRODUCTION
encompass vertical production chains extended
across the countries in the region as well as
distribution networks throughout the world
value adding activity owned or controlled, and
organized by a firm outside its national
boundaries

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 Motivations for International
Production

Resource Seeking Gaining access to natural resources or human resources

Locating near expected market growth, to better adapt a product

Market Seeking to local needs, and to supply intermediate inputs to another firm

Rationalize the established structure of international

Efficiency Seeking production for economies of scale and scope

Part of a strategic game among global

Strategic Asset Seeking competitors in oligopolistic sectors

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GROSS DOMESTIC PRODUCT

measures production inside of a monetary value, in local currency, of all final broadest financial measurement of
country, no matter who makes it economic goods and services produced in a a nation’s total economic activity
country during a specific period of time

total goods and services bought by consumers
encompasses all private expenditures,
government spending, investments, and
exports but excludes imports that take place
within a designated country
enables economic policymakers to assess whether
the economy is weakening or progressing if it
needs improvements or restrictions

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GDP = C + I + G +(x-µ)
C = 130 000 000
I = 59 000 000
G = 34 000 000
x = 12 000 000
µ = 10 000 000
 GROSS NATIONAL PRODUCT

value of all goods and services made by counts the investments made by computes the value of all products
a country's residents and businesses, residents of the country both inside and manufactured by domestic
regardless of production location outside the country companies, regardless of where
they are made

doesn't count any income earned excludes products

in the country by foreign residents manufactured in the country
or businesses by overseas firms

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 GNP FORMULA

GNP = C + I + G + X + Z
C = 130 000 000
I = 59 000 000
G = 34 000 000
x = 12 000 000
µ = 10 000 000
Z = 50 000 000
CHALLENGES
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 Culture
Domestic POM has to content with homogenous culture where as
IPOM has to content with multi-culture multi-ethnicity scenario.
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 Business
Environment
Domestic POM has to consider local economical and social factors where as
IPOM has to deal with economical and social factors across geography and
countries. 21
 Market
Segmentation
Domestic POM is around local market where as IPOM has to
developed and diversified market.
22
 Usage of resources
Domestic POM has to deal with in-flexibility of moving around of
resources within one location while IPOM has advantage of moving
around of resources from high cost market to low cost market. 23
 Quality Standards
Domestic POM has to look at single local market therefore not much
variation in quality standards where as IPOM has to consider different
international markets with different quality standard requirements. 24
 Pricing
Pricing for Domestic POM may not be a challenge as competition would also
operate in the same environment. IPOM has to consider the customer paying
capacity which may vary from developed country to developing country. 25
 Economies of Scale
Domestic POM has to deal with limited local market, hence limiting scope
of economies of scale whereas IPOM has to access to larger market thus
providing a change of achieving larger economies of scale. 26
 Technology
In domestic environment innovation and usage of technology is much
more comparable among competition. For IPOM owing to different quality
and pricing requirements investment in technology becomes important. 27
 IPOM Strategies

External Vendor and Organization needs to finalize the vendors to

Procurement provide raw material as well important
components required to complete the final
product. Also procurement schedule has to
be finalized as not to hurt production.
Factory Design, Layout
and Quality Standards Organization need to standardize design and layout across
their production location as to minimize production planning
process, provide flexibility in sharing technical knowledge
and manpower.
Production/Factory
Location The choice of location for the production facility depends on its
proximity near to the market and cost of production (labor) in
that particular environment.

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REPORTERS

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THANKYOUU!!