modes of entering in international business

7/29/2019 Modes of Entering in International Business

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MODES OF ENTRY INTO INTERNATIONALMARKETS

By

The creators



Modes

Exporting

International Licensing

International Franchising

Specialized ModesForeign Direct Investment



EXPORTING

ADVATAGE :

• Allows a firm to quickly enter the foreign market

• Often involves less financial exposure

•Permits a firm to enter a foreign market gradually

DISADVATAGES :

• Little control over marketing and distribution in the host

country can quickly lose market to other firms

• In case of many goods, transportation costs may be high

rendering the exported products too

• Expensive for host markets



Forms of exporting:

• Indirect exporting

Occurs when a firm sells its products to a domestic customer,

who in turn exports the product, in either its original form or a

modified form

• Direct exporting

Involves sales to customers - either distributors or end-users -

located outside the firm's home country

• Intracorporate transfers

Is selling of goods / services by a firm in one country to an

affiliated firm in another



International Licensing

• Is a contractual arrangement in which a firm (the licensor) sells

the right to use its intellectual property (technology, patents,

work methods, brand names, trade marks, copyrights, and

company name) to a firm (the licensee) in return for fees.

Roles of licensing in internationalization:

• Helping firms survive and compete within a rapidly changing

international industrial environment

• Protectionism and regulation of FDI

• Licensing of universities research results

• Emergence of small, high-technology firms rising R&D costs



International Franchising

A contractual arrangement in which a firm (the franchiser) sells the

right to use its intellectual property (technology, patents, work

methods, brand names, trade marks, copyrights, and company

name) to a firm (the franchisee) in return for fees.

Types of franchise agreements:

• · Product/trade name franchises

distribution of product in a specified territory or location with the

use of manufacturer's trademark.

EX . - car dealerships, petrol service stations,• Business format franchises:

incorporates the licensing of a trademark for business in a specified

territory along with an entire system for conducting a business.

These now account for nearly 75% of all franchise businesses,exam les are McDonalds, KFC



Specialized Modes

• The sale of a good, service, know-how or system in one

direction is conditional upon the sale of a good or service as

part or full payment in the reverse direction. More than 20%

of world trade is financed through countertrade transactions.

world debt crisis

• circumvention of exchange controls

• bilateralism

•

entry into new markets• major growth opportunities in emerging markets lacking hard

currency and cash-strapped countries



Foreign Direct Investment

• FDI not only brings in capital, it also brings in latest technologies

and modern management practices. Such investments are crucial

to ensue that any country's industries would be able to create

products and services in future that can be sold in international

markets

• FACTORS TO ATRACT FDI:

• Supply factors:

– Lower production costs for certain products / industries

– In those countries Better logistics, warehousing and

transportation infrastructure and systems (by air, sea )

– availability of natural resources and other factors of

production lead to cheaper prices

– To access to key technologies



Thank You

modes of entering in international business

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