add some detail to my business presentation
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bus_321_--.pptAGILITY: A LOGISTIC COMPANY
Modes of entry
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Introduction
Foreign markets are very dynamic and full of uncertainty.
Therefore, companies choosing to participates in these ,markets must be well informed and choose the best entry modes in an attempt to exploit the revenue advantages they promise.
The companies must also control and commit their resources in an effective manner so as to mitigate the impacts of the risks involved
Many third party logistics providers offer some form of warehousing.
This means that a client business can hire to store products in a controlled facility that is managed by the provider.
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Entry Modes
There are two main entry modes in international participation.
These are:
Equity modes: Comprising of Contractual agreements and Exports.
Non-Equity modes: Comprising of Wholly owned subsidiaries and joint ventures
The third party provider usually makes extensive capital investments in allowing for increased efficiency through modern technologies.
Another advantage is that a provider might have warehouses in centralized areas that make shipping and receiving easier.
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How Equity Modes of entry work in logistics companies
Exports: Is a mode of entry in which a company produces and stores goods to be sold in other countries. Can be direct exports or indirect exports
Exports are used by third party Logistic companies, such as those involved in supply chain management, warehousing, transportation and shipping.
In an attempt to economise the economies of scale, companies seeking to enter foreign markets contact third party logistic companies to transport, distribute or store their products.
Many third party logistics providers offer some form of warehousing.
This means that a client business can hire to store products in a controlled facility that is managed by the provider.
This is an attractive option because it removes the need to lease a warehouse and pay employees who are only tangentially related to the core business.
The third party provider usually makes extensive capital investments in allowing for increased efficiency through modern technologies.
Another advantage is that a provider might have warehouses in centralized areas that make shipping and receiving easier.
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Continuation
For instance, a company may sell its products through its affiliate logistic company in the foreign country
Contractual agreements: Licensing.
Involves franchising, contract manufacturing and turkey contracts.
Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise
Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise.
Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include Dominos Pizza, Coffee Republic and McDonald’s Restaurants.
Turnkey contracts are major strategies to build large plants. They often include a the training and development of key employees where skills are sparse – for example, Toyota’s car plant in Adapazari, Turkey. You would not own the plant once it is handed over.
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Continuation
Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include Dominos Pizza, Coffee Republic and McDonald’s Restaurants.
Turnkey contracts are major strategies to build large plants. They often include a the training and development of key employees where skills are sparse
Turkey contracts often include a the training and development of key employees where skills are sparse – for example, Turkey based Toyota Car plant in Adnamapari. One would not own the plant once it is handed over.
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How Non-Equity Modes of entry work in logistics companies
Joint Ventures tend to be equity-based. That is, a new company is set up with parties owning a proportion of the new business. There are many reasons why companies set up Joint Ventures to assist them to enter a new international market:
These might be to gain access to technology, core competences or management skills. For example, Honda’s relationship with Rover in the 1980’s.
To gain entry to a foreign market. For example, any business wishing to enter China needs to source local Chinese partners.
Joint ventures are advantageous in a variety of ways. For instance, they enable a company to outdo competitors by utilizing IT skills, tools and competencies that an individual venture may not own
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Wholly Owned Subsidiaries
A wholly owned subsidiary refers to a company whose common stock is entirely owned by the parent company.
Their entries are categorised into two strategies: Green field Investments and acquisitions.
Greenfield investments are the establishment of a new wholly owned subsidiaries. They are always potentially costly and but provide full control to the company.
Wholly owned subsidiaries are essential when joint venture fail due to the inability to fulfil the following main principles:
he partners' strategic goals converge while their competitive goals diverge The partners' size, market power, and resources are small compared to the Industry leaders Partners are able to learn from one another while limiting access to their own proprietary skills
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Acquisitions
A logistics company may choose to acquire a new firm due to a variety of reasons.
These are to acquire expertise and knowledge of the existing market by third parties, such consultant, competitors, or business partners.
This entry strategy is time consuming due to the need of establishing new distribution networks, new operations, and the need to learn while implementing appropriate marketing strategies to compete with rivals in the dynamic markets.
- A logistics company may choose to acquire a new firm due to a variety of reasons.
- These are to acquire expertise and knowledge of the existing market by third parties, such consultant, competitors, or business partners.
- This entry strategy is time consuming due to the need of establishing new distribution networks, new operations, and the need to learn while implementing appropriate marketing strategies to compete with rivals in the dynamic markets.
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Logistics companies in Kuwait and the UK
There are different logistic countries operating in Kuwait and United Kingdom
Good examples are the KGL logistic company based in Kuwait and Agility in the UK.
Agility uses Non-equity based modes such as joint ventures.
Through Joint ventures, Agility is able to partner with premiar air carriers and maximize on performance and space allocation.
Logistic companies in both Kuwait and the United Kingdom are known for their heavy involvement in foreign markets.
This has been achieved via contractual agreements, direct and indirect exports as well as joint ventures
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Continuation
Through such joint ventures, Agilitry has been able to have more than 25000 employees working inn over 600 offices located in almost 200 countries across the globe.
On the contrary, KGL logistics company in the UK used equity based entry modes such as to offer warehousing and freight.
For instance, through foreign exports in transportation, shipping and freight services, KGL has been able to offer customized services from small parcels to large sea freights.
Companies must consider other implications of a potential information systems strategy. First, they have to consider the high energy costs that are associated with supporting information systems. Data centers require a lot of energy in order to operate at optimum levels. Second, organizations have to grapple with the issue of interoperability. Employees and consumers want an infrastructure that can be supported across multiple mobile and desktop devices. Third, the organization needs to make important decisions about the practices of its employees with regard to Information technology (Birchall & Giambona, 2008). For instance, they have to determine if the employees can be allowed to bring their devices to their home.
Moreover, they have to determine if the employees can go home with the devices that contain company data. Fourth, organizations have to find an effective approach towards managing social media. The platform provides an opportunity to reach a wide audience. The organization can also build a strong connection with the employers by engaging directly with them. However, it also poses significant challenges. The use of social media may undermine the image of the organization if an employee makes a bad comment in these platforms such as Twitter and Facebook.
Additionally, it is difficult to control the public debate even when the organization may be dealing with a negative campaign. The organization would also need to develop a lot of cultural awareness. Online platforms have enhanced the need for cultural sensitivity in the society due to increased interactions between different groups of people (Parrish & Linder-VenBerschot, 2010).
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Agility and Airfreight services
A pictorial representation of Air freight services offered by Agility, a logistics Company
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Continuation
Furthermore, the manner in which logistic companies in both the UK and Kuwait creates the basis for arguing that foreign involvements are intense in the two countries.
Most of the logistics companies in the two countries utilize both Equity and Non-equity based entry models. However, according to a research done by Agility in 2014, equity based entry methods are more predominant that than non-equity based modes due to the nature of international markets.
KGL AIR FREIGHT
KGL offers services such as warehousing, land & Air freight, Project cargo and customs clearance
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Continuation
If Agility chooses to expand her operations in the UK and Kuwait, the company may use acquisitions in the UK and joint ventures in Kuwait.
Joint Ventures will work best in the UK because they facilitate entry into new markets and also bring together complimentary skills and assets that Agility cannot achieve alone (Abdulla, 2015).
Similarly, acquisitions work best for Kuwait because the broaden the company’s customer base.
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Conclusion
In summary, entry modes into foreign partcipatiions can either be equity based or non-equity based modes
Equity based entry modes comprise of exports and contractual agreements such as licensing, franchises and other forms of contracts.
Non-equity based entry modes comprise of joint ventures and wholly owned subsidiaries. ‘
Each entry mode has its own strengths an d weaknesses
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References
Agility. (2015). Agility emerging markets logistic index. Retrieved from:http://www.agility.com/EN/About-Us/Documents/Agility%20Emerging%20Markets%20Logistics%20Index%202015.pdf
Abdulla, M. (2014). Modes of Entry. Retrieved from:http://www.slideshare.net/aleem_ab2002/modes-of-entry
Marketing teacher.com. (2009). Modes of entry into international market places. Retrieved from:http://www.marketingteacher.com/modes-of-entry-into-international-markets-place/
KGL Logiostics. (2010). Supply chain management. Retrieved from:http://www.kgl.com/Logistics/Home.aspx
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