What are the Different Modes of Entry into International Business?
- 1. Direct Exporting Direct exporting involves you directly exporting your goods and products to another overseas market. For some businesses, it is the fastest mode of entry into the international business. Direct exporting, in this case, could also be understood as Direct Sales. ...
- 2. Licensing and Franchising ...
- 3. Joint Ventures ...
- 4. Strategic Acquisitions ...
- 5. Foreign Direct Investment ...
How to decide on the entry modes into international business?
Before deciding on the entry modes into international business, the crucial part is deciding which markets to enter. This decision needs to be deliberated by you as the marketer by analyzing all the possible options and making the choice basis a suitable framework.
What are the six major modes of international business?
The six major modes of international business are imports and exports, tourism and transportation, licensing and franchising, turnkey operations, management contracts, and direct and portfolio investment.
What are the traditional international-expansion entry modes?
In this section, we will explore the traditional international-expansion entry modes. Beyond importing, international expansion is achieved through exporting, licensing arrangements, partnering and strategic alliances, acquisitions, and establishing new, wholly owned subsidiaries, also known as greenfield ventures.
What is the best way to enter an international market?
Exporting is a typically the easiest way to enter an international market, and therefore most firms begin their international expansion using this model of entry. Exporting is the sale of products and services in foreign countries that are sourced from the home country. The advantage of this mode of entry is that firms avoid the expense ...
What are the modes of entering into international business?
There are several market entry methods that can be used.Exporting. Exporting is the direct sale of goods and / or services in another country. ... Licensing. Licensing allows another company in your target country to use your property. ... Franchising. ... Joint venture. ... Foreign direct investment. ... Wholly owned subsidiary. ... Piggybacking.
What are the modes of entry into international business class 11?
Modes of Entry Into International Business. Exporting is defined as the sending of goods and services from the home country to a foreign country. Importing is defined as the purchase of foreign products and bringing them into one's home country.
What are the modes of internationalization?
In accordance with existing research, internationalisation modes can be distinguished amongst direct exporting, exporting via foreign intermediaries, licensing and franchising, strategic alliances/joint ventures, and sales and/or manufacturing subsidiaries (Agndal and Chetty, 2007, Pedersen and Petersen, 1998).
What are the 5 international market entry strategies?
10 market entry strategies for international marketsExporting. Exporting involves marketing the products you produce in the countries in which you intend to sell them. ... Piggybacking. ... Countertrade. ... Licensing. ... Joint ventures. ... Company ownership. ... Franchising. ... Outsourcing.More items...
What are the 6 modes of entry?
Let's understand in detail what each of these modes of entry entail.Direct Exporting.Licensing and Franchising.Joint Ventures.Strategic Acquisitions.Foreign Direct Investment.
What are the four 4 methods of entry to foreign market?
Choose your mode of entry. opening a physical presence. selling through online marketplaces. offering direct e-commerce sales. selling indirectly through another company that exports to the target market.
What is the meaning of mode of entry?
The mode of entry is the path or the channel set by a company to enter into the international market. Many alternative modes of entry are available for an organization to choose from and expand its business. Some of the basic modes or paths companies use to enter into the global market are as follows −
What are the four types of international business?
The four types of international businesses one can start are as follows: 1. Exporting 2. Licensing 3. Franchising 4....Foreign Direct Investment (FDI).Exporting: ... Licensing: ... Franchising: ... Foreign Direct Investment (FDI):
Why mode of entry is important?
The choice of entry mode is an important strategic decision for SMEs as it involves committing resources in different target markets with different levels of risk, control, and profit return.
What are the 3 basic strategies of international business?
Multinational corporations choose from among three basic international strategies: (1) multidomestic, (2) global, and (3) transnational. These strategies vary in their emphasis on achieving efficiency around the world and responding to local needs.
What are the two major modes of entry in foreign markets?
There are two major types of market entry modes: equity and non-equity. The non-equity modes category includes export and contractual agreements. The equity modes category includes joint ventures and wholly owned subsidiaries.
What is the most common way to enter an international market?
The most common and least risky way to get goods into an international market is to export. You manufacture products in your home country, transport them abroad, and then sell through agents or distributors in the target market. A perk of exporting is that you don't need to invest in production in a foreign country.
Which is the easiest mode of gaining entry into international markets Class 11?
As compared to other modes of entry, exporting/importing is the easiest way of gaining entry into international markets. It is less complex an activity than setting up and managing joint-ventures or wholly owned subsidiaries abroad.
What is the main mode of entry into international market Mcq?
Modes of entry into international business MCQ Question 7 Detailed Solution. Exporting is the most appropriate mode of entry in international business to an enterprise with little experience in international markets.
What are the four types of international business?
The four types of international businesses one can start are as follows: 1. Exporting 2. Licensing 3. Franchising 4....Foreign Direct Investment (FDI).Exporting: ... Licensing: ... Franchising: ... Foreign Direct Investment (FDI):
What is international business?
International business activities encourage the cross-border transfer of goods, services, resources, individuals, ideas, and technologies. The activities are carried out exporting and importing which enable the movement of goods from one country to another.
What are the criteria for a country to be considered a candidate?
It must decide which countries to consider. In general, the candidate countries should be rated on three criteria: market attractiveness, risk and competitive advantage. Once a company decides on a particular country, it must determine the best mode of entry.
How to make a successful global marketing program?
Formal research, flexible marketing mix, regular monitoring and local initiative are required to make global marketing programme successful. It is tempting to pursue global marketing. A company has a blockbuster brand in its domestic market and it feels it can sell the brand in the global market too. The company should carry out a formal research in the markets that it wants to enter. In deciding to go abroad, a company needs to define its international marketing objectives and policies. The company must determine whether to market in a few countries or many countries. It must decide which countries to consider. In general, the candidate countries should be rated on three criteria: market attractiveness, risk and competitive advantage. Once a company decides on a particular country, it must determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, direct investment and using a global web strategy. Each succeeding strategy involves more commitment, risk, control, and profit potential. In deciding on the marketing programme, a company must decide how much to adapt its marketing programme-product, communication, distribution, and price-to local conditions. Depending on the level of international involvement, companies manage their international marketing activity in three ways; through export departments, international divisions, or global organizations.
What is multinational corporation?
A company seeking to market its product in more than one country. is engaging in international marketing. A company that is extensive-. ly engaged in international trade beyond exporting and importing is. called a multinational corporation. A multinational corporation trans-.
Which international trade community is one such community?
international trade. One such community is the European Union
Does psychic proximity determine choices?
At other times, psychic proximity determines choices. Many U .S.
What are the Different Modes of Entry into International Business?
Some of the modes of entry into international business you can opt for include direct export, licensing, international agents and distributors, joint ventures, strategic alliance, and foreign direct investment.
What is foreign direct investment?
Foreign Direct Investment involves a company entering an overseas market by making a substantial investment in the country. Some of the modes of entry into international business using the foreign direct investment strategy includes mergers and acquisitions, joint ventures and greenfield investments.
What is direct exporting?
1. Direct Exporting. Direct exporting involves you directly exporting your goods and products to another overseas market. For some businesses, it is the fastest mode of entry into the international business. Direct exporting, in this case, could also be understood as Direct Sales.
What is the crucial part of international business?
Before deciding on the entry modes into international business, the crucial part is deciding which markets to enter. This decision needs to be deliberated by you as the marketer by analyzing all the possible options and making the choice basis a suitable framework.
What is joint venture in business?
A joint venture is one of the preferred modes of entry into international business for businesses who do not mind sharing their brand, knowledge, and expertise.
Why should a company expand internationally?
Each business should be diversified across products and also across the market segments that it targets. This protects the business from uncertainties. This is another reason why a company should expand internationally. Usually, your job as a marketer would be the stabilize your product portfolio as well as customer portfolio to make your business robust against seasonality and these uncertainties.
What is marketing in a country?
Often the market campaigns, product, promotion and pricing strategies that are a success in one country fail in another country. Therefore, you as a marketer need to understand the cultural fabric of the country you target and craft a marketing plan for it.
Methods of Entering International Business Definition
Methods of entering international business defines all the methods and ways that are to be undertaken by an organization while entering into a global market. It is essential to analyse the factors that may impact the organization in this process in order to opt the best method for going international.
Overview of Methods Of Entering International Business
The organization likes to earn a profit, and for that it regularly monitors and tries to increase the profit percentages by taking various steps. There are various techniques through which the organization can grow its business and increase profit percentage with time.
Methods of Entering International Business
The modes, which the domestic organization can adopt for entering the international business, are as follows:
Challenges for Entering in International Market
An organization may go for any method in order to run its business at international level. However, it has to take into consideration various factors that may impact the company’s planning and bring loss to the organization.
What is franchising in business?
Franchising is a form of licensing, which is most often used as market entry modes for services such as fast foods, business to-consumer services and business-to-business services. Franchising is somewhat like licensing where the franchiser gives the franchisee right to use trademarks, know-how and trade name for royalty.
What is exporting in business?
Exporting is mainly used in initial entry and gradually evolves towards foreign-based operations. Export entry modes are different from contractual entry modes and investment entry modes in a way that they are directly related to manufacturing. Export can be divided into direct and indirect export depending on the number and type of intermediaries.
What is joint venture in business?
A joint venture is a contractual arrangement whereby a separate entity is created to carry on trade or business on its own, separate from the core business of the participants. A joint venture occurs when new organizations are created, jointly owned by both partners. At least one of these partners must be from another country than the rest and the location of the company must be outside of at least one party’s home country.
What are the different types of strategic alliances?
There are different types of strategic alliances: 1 Marketing alliances where the companies jointly market products that are complementary produced by one or both of the firms. 2 A promotional alliance refers to the collaboration where one firm agrees to join in promotion for the other firm’s products. 3 Logistics alliance is one more type of cooperation where one company offers, to another company, distribution services for their products. 4 Collaborations between businesses arise when the firms do not for example have the capacity or the financial means to develop new technologies.
What is direct exporting?
Direct exporting means that the firm has its own department of export which sells the products via an intermediary in the foreign economy namely direct agent and direct distributor. This way of exporting provides more control over the international operations than indirect exporting.
What is export mode?
Export mode is the most common strategy to use when entering international markets. Exporting is the shipment of products, manufactured in the domestic market or a third country, across national borders to fulfill foreign orders. Shipments may go directly to the end user, to a distributor or to a wholesaler.
What is strategic alliance?
Strategic alliance is when the mutual coordination of strategic planning and management that enable two or more organisations to align their long term goals to the benefit of each organisation and generally the organisations remain independent. Strategic alliances are cooperative relationships on different levels in the organisation. Licensing, joint ventures, research and development partnerships are just few of the alliances possible when exploring new markets. In other words, strategic alliances can be described as a partnership between businesses with the purpose of achieving common goals while minimizing risk, maximizing leverage and benefiting from those facets of their operations that complement each other’s. A strategic alliance might be entered into for a one-off activity, or it might focus on just one part of a business, or its objective might be new products jointly developed for a particular market.
Did You Know?
Partnerships in emerging markets can be used for social good as well. For example, pharmaceutical company Novartis crafted multiple partnerships with suppliers and manufacturers to develop, test, and produce antimalaria medicine on a nonprofit basis. The partners included several Chinese suppliers and manufacturing partners as well as a farm in Kenya that grows the medication’s key raw ingredient. To date, the partnership, called the Novartis Malaria Initiative, has saved an estimated 750,000 lives through the delivery of 300 million doses of the medication. 11
What is Illy Caffé?
The joint venture, Ilko Coffee International, was created to bring three ready-to-drink coffee products—Caffè, an Italian chilled espresso-based coffee ; Cappuccino, an intense espresso, blended with milk and dark cacao; and Latte Macchiato, a smooth espresso, swirled with milk—to consumers in 10 European countries. The products will be available in stylish, premium cans (150 ml for Caffè and 200 ml for the milk variants). All three offerings will be available in 10 European Coca-Cola Hellenic markets including Austria, Croatia, Greece, and Ukraine. Additional countries in Europe, Asia, North America, Eurasia, and the Pacific were slated for expansion into 2009.
How to enter a new market?
Another way to enter a new market is through a strategic alliance with a local partner. A strategic alliance involves a contractual agreement between two or more enterprises stipulating that the involved parties will cooperate in a certain way for a certain time to achieve a common purpose.
What is exporting in business?
Exporting is the marketing and direct sale of domestically produced goods in another country. Exporting is a traditional and well-established method of reaching foreign markets. Since it does not require that the goods be produced in the target country, no investment in foreign production facilities is required.
Why do firms export to countries?
Firms export mostly to countries that are close to their facilities because of the lower transportation costs and the often greater similarity between geographic neighbors. For example, Mexico accounts for 40 percent of the goods exported from Texas. 5 The Internet has also made exporting easier. Even small firms can access critical information about foreign markets, examine a target market, research the competition, and create lists of potential customers. Even applying for export and import licenses is becoming easier as more governments use the Internet to facilitate these processes.
What is FDI in business?
A common form of FDI is the foreign subsidiary: an independent company owned by a foreign firm (called the parent ). This approach to going international not only gives the parent company full access to local markets but also exempts it from any laws or regulations that may hamper the activities of foreign firms.
What is the best way to build a company's own presence?
Ultimately, most companies will aim at building their own presence through company-owned facilities in important international markets. Acquisitions or greenfield start-ups represent this ultimate commitment. Acquisition is faster, but starting a new, wholly owned subsidiary might be the preferred option if no suitable acquisition candidates can be found.
Exporting
- It is the process of selling goods and services produced in one country to another countries. Exporting may be direct or indirect. Direct export– A company capitalizing on economies of scale in production concentrated in the home country, establishes a proper system for organizing export functions and procuring foreign sales. Indirect export-involv...
Licensing
- Licensing is a method in which a firm gives permission to a person to use its legally protected product or technology and to do business in a particular manner, for an agreed period of time and within an agreed territory. It is a very easy method to enter a foreign market as less control and communication are involved. Example:Starbucks (licensor) and Nestle (licensee) for exclusive ri…
Franchising
- It is a system in which semi-independent business owners (franchisees) pay fees and royalty to a parent company (franchiser) in return for the right to be identified by its trademark, to sell its product or services, and often to use its business format or system. Example:Burger King, McDonald etc. Advantages It is less risky Advantage of expertise of franchiser Highly motivated …
Merger & Acquisition
- A merger is a combination of two or more district entities into one, the desired effect being a accumulation of assets and liabilities of distinct entities and several other benefits such as economies of scale, tax benefits, fast growth, synergy, diversification, etc. The merging entities cease to be in existence and merge into a single servicing entity. Example:Vodafone and Idea fo…
FDI
- It is a mode of entering foreign markets through investment. Investment may be directly or indirectly through financial institutions. FDI influences the investment pattern of the economy and helps to increase overall development. The extent to which FDI is allowed in a country is subjected to the government regulations of that country. Advantages Modifications can be made at any po…
Joint Venture
- It is a strategy used by companies to enter a foreign market by joining hands and sharing ownership and management with another company. It is used when two or more companies want to achieve some common objectives and expand international operations. Example:Uber (a taxi company) and Volvo (a heavy vehicle co.) The common objectives are– Foreign market entry Ri…
Contract Manufacturing
- When a foreign firm hires a local manufacturer to produce their product or a part of their product it is known as contract manufacturing. This method utilizes the skills of a local manufacturer and helps in reducing the cost of production. The marketing and selling of the product is the responsibility of the international firm. Example:Foxconn Technology (Local manufacturer) grou…
Strategic Alliance
- It is a voluntary formal agreement between two companies to pool their resources to achieve a common set of objectives while remaining independent entities. It is mainly used to expand the production capacity and increase market share for a product. Alliances help in developing new technologies and utilizing the brand image and market knowledge of both companies. Example:…