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Management contract

Executive summary The main purpose of this analysis is exploring on the possibility of PepsiCo using joint venture as a mode of entry into Ireland market. There are other method of market entry into global market which includes exporting, licensing, use of agent/distributors, franchising, contract manufacturing, management contract and direct foreign investment. The choice of market entry depends on the organizations corporate strategy and the extent, depth and geographical coverage of its present and intended foreign operation.

PepsiCo should first evaluate the political, economic, social and technological environment in determining whether it is viable to undertake any investment. Joint venture allow sharing of cost risk, technology and expertise and generate high return compared to licensing or franchising furthermore it can be used where outright take over is not allowed. More over there is improved relation with the local government. Therefore PepsiCo should use joint venture in entering the Ireland market. Introduction There are various mode of foreign market entry for firms wishing to join the global market such as PepsiCo.

The various forms include exporting, licensing, use of agent/distributors, joint ventures, franchising, contract manufacturing, management contract and direct foreign investment (hill, 2009). 1. Exporting This refers to the sales of good abroad

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of product produced domestically. Passive exporting occurs where we receive orders for goods without having canvassed them. Where active exporting is adopted, the firm makes strategic decision to establish proper system for organizing the export function and for procuring foreign sales. 2. International investment

This is capital supplied by resident of one country to resident of another country. Such investment are divided into two categories i. foreign direct investment ii. foreign portfolio investment Foreign direct investments are investment made for the purposes of actively controlling property, asset or company located in host country. It refers to direct investment in equipment; structure and organization in a foreign country at a level that is sufficient to obtain significant management control. Foreign portfolio investment is purchases of foreign financial assets e. g.

stock, bonds, and certificates of deposit for a purpose other than control. 3. Licensing This is a contractual arrangement in which a firm in one country license the use of its intellectual property e. g. trademarks, patent, copyright, trade secrets and brand name to a firm in a second country in return for a loyalty payment. 4. franchising this is a specialized form of licensing which occurs when a firm in one country(franchisor) authorizes a firm in a another country(franchisee) to utilize it operating system as well as its brand name, trade marks and logos in return for a loyalty payment.

5. management contract This is an arrangement where a firm in one country agrees to operate facilities or provide other mgt services to a firm in another country for an agreed upon fee. Management contracts are common in hotel industry e. g. hoteliers such as Hilton and intercontinental often do not own the expensive hotel that bear their brand name through out the world but rather operate them under management contract (Kelly, 2006). 6. joint venture

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