MODES OF ENTRY INTO INTERNATIONAL MARKETS

By The creators

Modes

Exporting International Licensing International Franchising Specialized Modes Foreign 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, examples 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

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