Definition A mode of entry into an international market “is the channel which organisation that want operate in international markets employ to gain entry to a new international market. The choice for a particular entry mode is a critical determinant in the successful running of a foreign operation”. (European Journal of Science, 2011) Doole and Lowe (2008) argued that there are different types of entry mode relative to the level of investment: Non-equity mode: exporting (direct and indirect) such as direct marketing, franchising and licensing, which involves selling some regular production overseas and require little investment.
As a result, the risk is relatively small. Equity modes require large investment and risk: wholly-owned subsidiary, acquisition, strategic alliance, joint-venture Factors influencing the decision to enter a foreign market There are many factors to consider in order to select the right market entry method (Doole and Lowe, 2008): To start with, the macro environment of our target market: Singapore; needs to be assessed through a PESTEL analysis: Political Policies favorable to foreign investment Least corrupted government of Asia
One of the safest city-state low entry barriers and regulations for foreign investmentEconomic GDP increase of 5. 2% from 2007 to 2012 Well-developed and successful free market economy system One of the worlds highest GDP per capita Well-developed and efficient infrastructures Sociocultural Increasing population abundance of young and healthy workforce diversity of population: many foreignersTechnological Global recognition of IT city-state Environmental Not relevant to our projectLegal Strong intellectual property laws
Favorable tax policies to foreign investment This analysis indicates that the Singaporean market is favorable and attractive for foreign investments. In addition, according to a report edited by the World Bank and the International Finance Corporation (IFC) in 2012, it is the seventh year that Singapore has been the best place to do business in the world (Asiaone. com, 2012) (http://www. asiaone. com/A1Business/General+News/Story/A1Story20121023-379332. html) http://www. youtube. com/watch? v=XxZaovQ7lqg
Another factor to consider before entering a foreign country is the size and value of the anticipated market: as seen earlier, Singapore is not only an attractive place to do business in, but also carries great interest and potential in the beauty and personal care market. Thirdly, the size and the financial resources of the company: in 2009, Herborist made $43. 14 million in profit. It represents an increase of more than 65% from 2007. As a result, the company presently has the financial resources required.
Furthermore, the skills, abilities and attitudes of management: Herborist management is very committed in the overseas development of the company. with their internalization process that started in 2001, the company has encountered both success and failure and developed skills to build successful brand expansions abroad. Lastly, there are other factors to consider such as the degree of control expected from the company. In the Asia-Pacific region, the favored entry modes are: Pre-crisis era: licensing, joint-venture and long-term contractual agreements Post-crisis era: according to El Kayal (2001), wholly-owned operations are preferable