Entering Foreign Markets
TheU.S. commercial service prepares the Country Commercial Guide whichis a series of reports for each country who is to the interest of itsinvestors. Indian market together with its large population basepresents diverse opportunities for the U.S. exporters who in turnought to offer the best products and services. As a result, Indiarequires equipment and services for use in its major sectors such asenvironment, healthcare, infrastructure, transport, and defense tomatch this large population. There is therefore a need for companiesto seize an opportunity and venture into this Indian market as itglobalizes and expands. Basing on the Country Commercial Guide, it isthe purpose of this paper to explain the best entry method to thisforeign market by a company in the health technologies.
Thereare various entry methods to choose from for a company that intendsto enter a foreign market. These include exporting, turnkey projects,licensing, franchising, and or joint ventures (Root, 1994). Differententry methods work well for different types of companies depending onthe size of the company and the country they desire to enter. Indiais the second fastest growing market in Asia. It therefore presents agood opportunity for various companies desiring to venture inbusiness in the country. My company in the health technologies sectordesires to enter the country. The most appropriate entry mode mycompany would use is licensing. From the Country Commercial Guide,India’s market in the health sector is experiencing rapid changes.The industry is expected to grow tremendously in the next few years.This will be propelled by renewed strength from the government andthe private investors in this growing sector (Peng, 2009). The rapidgrowth will be propelled by increased investments from the corporatesdominating the market as well as new entrants who are being supportedby these private investors.
Licensingis a complex arrangement where a firm willingly transfers the rightsto use a product or service to another foreign firm at an agreed fee.This gives the foreign firm the right to offer the products orservices exclusively or non-exclusively during a certain fixed termand within a specific identified market (Root, 1994). In India,companies in the health care sector are majorly dominated by privateinvestors. These investors understand the positive implications thatoffering licenses to new entrants in the market will have to thegrowth expected by the sector. The licensor in the home countrypresents the limited rights and/or resources to the licensee from aforeign country. This makes it possible for the foreign investor tooffer services and products similar to those offered by the licensor.
Licensingis an appropriate entry mode because of its relative flexibility inthat, the work agreement is customizable which helps meet the needsand interests of both parties. It has a various advantages such asability to gain extra income for the technical know-how of theservices being offered, quick market expansion without risks or needfor extra capital for investment, gives way for investments in thefuture, ability to retain already established markets, and minimalpolitical risks and interference. There are however few disadvantagesalongside this entry mode. Compared to other entry modes, it attractsthe least income, lack of control in the programs of the country oneis investing, and creation of a new competitor as the licensor canuse the licensee’s technology once the contract ends.
Undeniably,India is experiencing a rapid growth in the health sector in which,the private investors alone cannot meet the increased demand. Ittherefore becomes easy for foreign investors in the healthtechnologies to enter the market. This will be very profitable toboth the Indians and the foreign investor. This is achievable as longas the foreign investor offers services and products in line with theset standards. Licensing is one of the best entry mode to apply for acompany in the health technologies and is desiring to enter India. Itis however important to understand that the method to apply willdepend on the size of the company as well as the terms of agreementbetween Indian authorities and the foreign company.
Peng,M, (2009). GlobalBusiness. Mason:South-Western College Publisher.
Root,F. (1994). EntryStrategies for International Markets. NewJersey: John Wiley& Sons.