Modes of Entering in International Business
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Transcript of Modes of Entering in International Business
7/29/2019 Modes of Entering in International Business
http://slidepdf.com/reader/full/modes-of-entering-in-international-business 1/9
MODES OF ENTRY INTO INTERNATIONALMARKETS
By
The creators
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Modes
Exporting
International Licensing
International Franchising
Specialized ModesForeign Direct Investment
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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
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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
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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
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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
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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
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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
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