Editing User:Jukeboksi/BBA studies/Entering Target Markets

Course code: IBU2LF004

= Theme 1 - Methods of internationalization =
Teacher: Päivi Käri-Zein

* A '''[[w:market entry strategy|market entry strategy]]''' is the planned method of delivering [[w:good (economics)|goods]] or [[w:Service (economics)|services]] to a new '''[[w:target market|target market]]''' and distributing them there. ( Wikipedia )

:'''''Some of the most common market entry strategies are''''': 
:::* '''directly exporting''' products
:::* '''indirect exporting''' using a  [[w:Reseller|middleman]], and 
:::* '''producing products in the target market'''. ( Wikipedia )

::But also: 
:::* '''[[w:Licensing|Licensing]]'''
:::* '''[[w:Franchising|Franchising]]'''
:::* '''[[w:Greenfield project|Greenfield project]]'''
:::* '''[[w:Joint venture|Joint ventures]]'''
:::* '''Wholly owned [[w:subsidiary|subsidiaries]]''' 
:::* [[w:Alliances|Alliances]]
:::* Turnkey project ( Wikipedia )

* '''[[w:export|To export]]''' means shipping the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer". In International Trade, "exports" refers to selling goods and services produced in the home country to other markets. ( Wikipedia )

*'''[[w:Global marketing|Global marketing]]''' is marketing on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives". ( Wikipedia )


== Methods of internationalization - Lesson 1 - Export entry modes ==



'''Export modes''' - [[w:Export#Indirect selling|Indirect export]]ing vs. direct exporting 

Q: What kind of [[w:intermediary|intermediaries]] can help the company to export? How?
:* Export Agents
:* Export Management Companies
:* Export Trading Companies
:* Export Merchants
:* Association with Another Exporter

Q: What is the main difference between agent and distributor?
:::*An agent is someone who acts on your behalf. Although an agent may arrange a sale, the sale contract will be between you and the customer. An agent may be either an employee or self-employed.
:::*A distributor is a [[w:customer|customer]] of yours. The distributor then sells the product on to the distributor’s own customers.


== Methods of internationalization - Lesson 2 - Requirements for internationalization ==

* '''[[w:Internationalization|Internationalization]]''' has been viewed as a process of increasing involvement of enterprises in international markets. ( Wikipedia )

Common types of '''[[w:intellectual property|intellectual property]]''' rights include 
:*[[w:patent|patent]]s
:*[[w:copyright|copyright]]
:*[[w:industrial design right|industrial design right]]s
:*[[w:trademark|trademark]]s
:*[[w:trade dress|trade dress]] and 
:*in some jurisdictions [[w:trade secret|trade secret]]s. ( Wikipedia )

== Methods of internationalization - Lesson 3 - Licensing and franchising ==

* The verb '''[[w:license|license]]''' or grant license means to give permission. The noun license refers to that permission as well as to the document recording that permission. ( Wikipedia )

* '''[[w:Franchising|Franchising]]''' is the practice of using another firm's successful  [[w:business model|business model]]. The word 'franchise' is of Anglo-French derivation - from ''franc'' - meaning free, and is used both as a noun and as a (transitive) verb.
:::For the franchisor, the franchise is an alternative to building '[[w:chain store|chain store]]s' to distribute goods that avoids the investments and liability of a chain. The franchisor's success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business. ( Wikipedia )

* '''Franchising''' can be described as co-operation between two legally and financially independent firms where one firm, the franchisee, pays the other firm, the franchisor, for the right to sell the franchisor’s product and/or right to use its trademarks and business format in a given location for a specific period of time. Franchising is an ongoing business relation-ship between the franchisee and the franchisor. ( Blair and Lafontaine (2011, 3-4) )

* How does the licensor make money? How does the [[w:licensee|licensee]] make money?

== Methods of internationalization - Lesson 1 - Foreign direct investment ==

* '''[[w:Foreign direct investment|Foreign direct investment]]''' ('''FDI''') is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to [[w:portfolio investment|portfolio investment]] which is a passive investment in the securities of another country such as [[w:stock|stock]]s and [[w:Bond (finance)|bonds]]. ( Wikipedia )


A '''[[w:subsidiary|subsidiary]]''', '''subsidiary company''', '''daughter company''', or '''sister company''' is a [[w:company (law)|company]] that is completely or partly owned by another corporation that owns more than half of the subsidiary's [[w:stock|stock]], and which normally acts as a [[w:holding company|holding corporation]] which at least partly or (when as) a parent corporation, wholly controls the activities and policies of the daughter corporation. 
:::... The controlling entity is called its ''[[w:parent company|parent company]]'', ''parent'', or ''[[w:holding company|holding company]]''. ( Wikipedia )

:::* If shares == 100% wholly owned subsidiary
:::* If shares > 50% subsidiary
:::* If shares < 50% equity alliance

* In many disciplines a '''[[w:Greenfield_project|greenfield]]''' is a project that lacks any constraints imposed by prior work. The analogy is to that of construction on greenfield land where there is no need to work within the constrains of existing buildings or infrastructure. ( Wikipedia )

* A '''[[w:greenfield investment|greenfield investment]]''' is the investment in a manufacturing, office, or other physical commerce-related structure or group of structures in an area where no previous facilities exist. ( Wikipedia )

* '''[[w:Mergers and acquisitions|Mergers and acquisitions]]''' (abbreviated '''M&A''') are both an aspect of corporate strategy, corporate finance and [[w:management|management]] dealing with the buying, selling, dividing and combining of different [[w:companies|companies]] and similar [[w:business organization|entities]] that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. Mergers and acquisitions activity can be defined as a type of [[w:restructuring|restructuring]] in that they result in some entity reorganization with the aim to provide growth or positive value. ( Wikipedia )
:::From a '''''legal point of view''''', a '''merger''' is a legal consolidation of two companies into one entity, whereas an '''acquisition''' occurs when one company takes over another and completely establishes itself as the new owner (in which case the target company still exists as an independent legal entity controlled by the acquirer). ( Wikipedia on distinction between merger and acquisition from [[w:mergers and acquisitions]] )
:::Acquisitions take many forms
::::* horizontal = the product lines and markets of the acquired and acquiring companies are similar
::::* vertical = the acquired firm becomes supplier or customer of the acquiring firm
::::* concentric = the acquired company has the same market but different technology, or the same technology but different markets
::::* conglomerate = the acquired company is in a different industry from that of the acquiring company ( Heini )


* A '''[[w:joint venture|joint venture]]''' ('''JV''') is a business agreement in which the parties agree to develop, for a finite time, a new entity and new [[w:assets|assets]] by contributing [[w:Ownership equity|equity]]. They exercise control over the [[w:Business|enterprise]] and consequently share revenues, expenses and assets. 
:::There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares. ( Wikipedia )

* '''[[w:Consolidation (business)|Consolidation]]''' of an industry or sector occurs when widespread M&A activity concentrates the resources of many small companies into a few larger ones, such as occurred with the [[w:automotive industry|automotive industry]] between 1910 and 1940. ( Wikipedia on Mergers and acquisitions )

= Theme 2 - Export and import practicalities =
Teacher: Pertti Tilli

* '''[[w:International trade|International trade]]''' ( [[w:fi:kansainvälinen kauppa]] ) is the exchange of [[w:Capital (economics)|capital]], [[w:good (economics)|goods]], and [[w:Service (economics)|services]] across [[w:international borders|international borders]] or territories. ( Wikipedia )

* '''[[w:Import|Import]]''' / '''[[w:export|export]]'''

== Export and import practicalities - Lesson 1 - Basics of import/export ==

* A '''[[w:letter of credit|letter of credit]]''' is a document issued by a financial institution, or a similar party, assuring payment to a seller of goods and/or services provided certain documents have been presented to the bank. ( Wikipedia )
::: One of the primary peculiarities of the documentary credit is that the payment obligation is independent from the underlying contract of sale or any other contract in the transaction. ( Wikipedia on documentary credit )

* A '''[[w:Bill of Lading|Bill of Lading]]''' is a document generated by a shipping line or its agent, giving details of a [[w:transport|shipment]] of [[w:good (economics)|merchandise]]. Alongside this principal purpose, the bill of lading also certifies that the goods have been shipped aboard a vessel (and in some cases certifies the condition of the goods at the point of loading), assigns [[w:title (property)|title]] to the goods, and requires the carrier to release the merchandise to the holder of the title or a named party at the destination port. ( Wikipedia )
::: The Bill of Lading is a document of title of,goods, transferable by endorsement and is a receipt from shipping company regarding the number of packages with a particular weight and markings and a contract for the transportation of same to a port of destination mentioned therein. ( Wikipedia introduction )

* A '''[[w:freight forwarder|freight forwarder]]''', '''forwarder''', or '''forwarding agent''', is a person or company that organizes shipments for individuals or [[w:corporations|corporations]] to get goods from the [[w:manufacturer|manufacturer]] or producer to a market, customer or final point of distribution. ( Wikipedia )

* A '''[[w:private carrier|private carrier]]''' is a company that transports only their own goods. The carrier's primary business is not transportation. ( Wikipedia )

* A '''[[w:common carrier|common carrier]]''' in [[w:common law|common law]] countries (corresponding to a '''public carrier''' in [[w:Civil law (legal system)|civil law]] systems, usually called simply a '''''carrier''''') is a person or company that transports goods or people for any person or company and that is responsible for any possible loss of the goods during transport. ( Wikipedia )

* A '''[[w:contract of sale|contract of sale]]''' is a legal [[w:contract|contract]] an exchange of goods, services or property to be exchanged from seller (or vendor) to buyer (or purchaser) for an agreed upon value in money (or money equivalent) paid or the promise to pay same. ( Wikipedia )

* '''[[w:Multimodal transport|Multimodal transport]]''' (also known as combined transport) is the transportation of goods under a single contract, but performed with at least two different means of [[w:transport|transport]]; the carrier is liable (in a legal sense) for the entire carriage, even though it is performed by several different modes of transport (by rail, sea and road, for example). ( Wikipedia )

== Export and import practicalities - Lesson 2 - Good sales quotations and Incoterms ==

* A '''[[w:sales quote|sales quote]]''' allows a prospective buyer to see what [[w:cost|cost]]s would be involved for the work they would like to have done. ( Wikipedia )
::: A sales quote may also be known as '''offer''' and sometimes '''bid'''. ( jubo-jubo )

* '''The [[w:Incoterms|Incoterms]]''' ([[w:Incoterms#2010|2010]]) rules or '''International Commercial Terms''' are a series of pre-defined commercial terms published by the [[w:International Chamber of Commerce|International Chamber of Commerce]] (ICC) that are widely used in International [[w:commercial transaction|commercial transaction]]s or [[w:procurement|procurement]] processes. ( Wikipedia )
::: [[w:Incoterms#Allocations of costs to buyer/seller according to Incoterms 2010|Table of incoterms showing who picks up the cost in each incoterm]] ( Wikipedia )
::: Incoterms specify:
:::* Transfer of risk
:::* Transfer of obligations
:::* Division of costs ( Teacher )

Main '''[[w:financial risk|financial risk]]s''' in foreign trade: 
* Customer risk ( unable or unwilling to pay )
* Country risk ( political risk )
* Foreign exchange ( currency ) risk
* Bank risk
* Interest rate risk

== Export and import practicalities - Lesson 3 NO CLASS  ==

== Export and import practicalities - Lesson 4 - Documents and payments in international business ==

* '''[[w:International monetary systems|International monetary systems]]''' are sets of internationally agreed rules, conventions and supporting institutions, that facilitate [[w:international trade|international trade]], [[w:foreign investment|cross border investment]] and generally the [[w:redistribution (economics)|reallocation of capital]] between [[w:nation state|nation state]]s. They provide means of payment acceptable between buyers and sellers of different nationality, including deferred payment.  To operate successfully,  they need  to inspire confidence, to provide sufficient liquidity for fluctuating levels of trade and to provide means by which global imbalances can be corrected. ( Wikipedia )

* The '''[[w:International Bank Account Number|International Bank Account Number]]''' ('''[[w:IBAN|IBAN]]''') is an internationally agreed means of identifying [[w:bank account|bank account]]s across national borders with a reduced risk of [[w:transcription error|transcription error]]s. ( Wikipedia )

=== Export and import practicalities - [[w:Document|Document]]s in [[w:international trade|international trade]] ===

[[w:Exporter|Exporter]]:
:* [[w:commercial invoice|Commercial invoice]]
:* [[w:packing list|Packing list]]
:* [[w:insurance|Insurance]] certificate
:* [[w:inspection|Inspection]] certificate
:* [[w:Bank draft|Bank draft]]
:* [[w:certificate of origin|Certificate of origin]]
:* [[w:Bill of Lading|Bill of Lading]]

Both:
:* [[w:sales contract|sales contract]] '''''or''''' [[w:pro forma#Invoices|pro forma invoice]] and [[w:Order (business)|order]]

[[w:Importer|Importer]]:
:* [[w:Purchase order|Purchase order]]
:* [[w:Letter of Credit|Letter of Credit]] application
:* [[w:Import|Import]] declaration 
::::(from teacher's slides)

=== Export and import practicalities - Methods of [[w:payment|payment]] ===
* '''Open account'''
* '''[[w:Documentary credit|Documentary credit]]''' -> redirects to '''[[w:L/C|L/C]]''' as it ensures the payment. 
* '''[[w:Advance payment|Advance payment]]''' ( Teacher )
* '''[[w:Documentary collection|Documentary collection]]'''
:::A '''[[w:documentary collection|documentary collection]]''' is a process, in which the [[w:seller|seller]] instructs his [[w:bank|bank]] to forward [[w:document|document]]s related to the [[w:export|export]] of goods to the [[w:buyer|buyer]]'s bank with a request to present these documents to the buyer for [[w:payment|payment]], indicating when and on what conditions these documents can be released to the buyer. ( Wikipedia )
::::::Documentary Collections facilitate [[w:import|import]]/export operations. ''They do not provide the same level of security as '''[[w:Letters of credit|Letters of Credit]]''', but, as a result, the costs are lower.'' ( Wikipedia )
::::::Unlike the Letters of Credit, for a Documentary Collection the bank acts as a channel for the documents but does not issue any [[w:payment covenant|payment covenant]]s (does not guarantee payment). The bank that has received a documentary collection may [[w:debit|debit]] the buyer's account and make payment only if authorised by the buyer. ( Wikipedia )
:::::: Documentary collection is done with the '''[[w:Bill of lading|Bill of lading]]''' ( jubo-jubo )

== Export and import practicalities - Lesson 5 - NO CLASS ==

== Export and import practicalities - Lesson 6 - Customs, risk management and currency questions ==
* '''[[w:Customs|Customs]]''' is an [[w:authority|authority]] or [[w:Government agency|agency]] in a country responsible for collecting [[w:Duty (economics)|customs duties]] and for controlling the flow of goods, including animals, transports, personal effects, and [[w:hazard|hazard]]ous items, into and out of a country. ( Wikipedia )

* '''[[w:Risk management|Risk management]]''' is the identification, assessment, and prioritization of [[w:risk|risk]]s (defined in [[w:ISO 31000|ISO 31000]] as ''the effect of uncertainty on objectives'', whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. 
:::Risks can come from 
:::* uncertainty in financial markets, 
:::* threats from project failures (at any phase in design, development, production, or sustainment life-cycles), 
:::* legal liabilities, 
:::* credit risk, accidents, 
:::* [[w:Act of God|natural causes and disasters]] as well as 
:::* deliberate attack from an adversary, or 
:::* events of uncertain or unpredictable [[w:Root cause|root-cause]]. 
:::::Several risk management [[w:Technical standard|standards]] have been developed including the [[w:Project Management Institute|Project Management Institute]], the [[w:National Institute of Standards and Technology|National Institute of Standards and Technology]], actuarial societies, and ISO standards. Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, [[w:Risk analysis (engineering)|engineering]], [[w:Industrial & Organizational Assessment|industrial processes]], financial portfolios, actuarial assessments, or public health and safety. ( Wikipedia )

* '''[[w:Foreign exchange risk|Foreign exchange risk]]''' (also known as '''exchange rate risk''' or '''currency risk''') is a [[w:financial risk|financial risk]] that exists when a financial transaction is denominated in a [[w:currency|currency]] other than that of the base currency of the company. ( Wikipedia )

== Export and import practicalities - Lesson 7 - Costs in import/export ==


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<center>This article '''used to be''' at the address '''<nowiki>https://GloBBA12.si/wiki/Entering_Target_Markets</nowiki>''' from 2012 to 2016 and '''<nowiki>https://wiki.study/regarding/Entering_Target_Markets</nowiki>''' from 2016 to 2020</center>

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