GLOBAL ENTRY

STRATEGIES

DIFFERENT MODES OF MARKET

ENTRY

Different modes of entry

EXPORTING

-indirect exporting
-direct exports
-intra-corporate
transfers

LICENSING
FRANCHISING

SPECIAL MODES
-Contract
manufacturing
-Management
Contracts
-Turnkey projects

Foreign Direct
Investment(FDI)
Joint Ventures

Forms of Exporting

Indirect
exporting

Direct
exporting

Intracorporated
transfer

Forms of Exporting
5

Indirect involvement means that

the firm participates in international
business through an intermediary
and does not deal with foreign
customers or markets.

Direct involvement means that the

firm works with foreign customers or
markets with the opportunity to
develop a relationship.

Indirect Exporting

Indirect Exporting Eg.

16-7

Exporting of goods and services

through various home-based
exporters
Manufacturers export agents
Export commission agents
Export merchants
International firms

Direct Exporting

Intra-corporate Transfer

Exporting

Licensing

Licensing is when a firm, called the licensor,

leases the right to use its intellectual property
technology, work methods, patents,
copyrights, brand names, or trademarksto
another firm, called the licensee, in return for
a fee.

The property licensed may include:

Patents
Trademarks
Copyrights
Technology
Technical know-how
Specific business skills

The Licensing Process

Basic Issues in
International Licensing

Specifying the boundaries of the

agreement
Determining compensation
Establishing rights, privileges, and
constraints
Specifying the duration of the contract
Eg. Pepsico, Coke Bottling Plant

Tokyo
Disneyland is
owned and
operated by a
Japanese
development
company under
license from
Walt Disney
Company

Franchising
Under franchising, an independent organisation
called the franchisee operates the business
under the name of another company called the
franchisor.
In such an arrangement the franchisee pays a
fee to the franchisor.
Franchising is a form of Licensing but the
Franchisor can exercise more control over the
Franchisee as compared to that in Licensing.

Franchising Agreements

Franchisee has to pay a fixed amount

and royalty based on sales.
Franchisee should agree to adhere to
follow the franchisors requirements
Franchisor helps the franchisee in
establishing the manufacturing facilities
Franchisor allows the franchisee some
degree of flexibility.
Eg. McDonalds, Subway, KFC

Franchising- Adv. & Disadv.

Specialized Entry Modes

Contract manufacturing

Contract manufacturing is outsourcing entire

or part of manufacturing operations.
E.g.: pharmaceuticals, Personal Care
products etc
The iPad and iPhone, which are products
from Apple Inc., are manufactured in China
by Foxconn. Hence, Foxconn is a contract
manufacturer and Apple benefits from a
lower cost of manufacturing devices

Management Contract
A management contract is an agreement
between two companies whereby one
company provides managerial assistance,
technical expertise and specialised
services to the second company for a
certain period of time in return for
monetary compensation.
Eg. Schools, sports facilities, hospitals,
office buildings, malls and large businesses
have on-site cafeterias, restaurants.

Turnkey Project

A turnkey project is a contract under

which a firm agrees to fully design,
construct and equip a
manufacturing/business/service
facility and turn the project over to the
purchaser when its ready for
operation, for a remuneration.

FOREIGN DIRECT INVESTMENT

22

A direct investment into

production or business
in a country by an
individual or company in
another country, either
by buying a company in
the target country or by
expanding operations of
an existing business in
that country

Mergers and acquisitions

Mergers and Acquisitions

Merger : The combining of two or more

companies, generally by offering the
stockholders of one company securities in
the acquiring company in exchange for the
surrender of their stock.
Acquisition : When one company takes over
another and clearly established itself as the new
owner, the purchase is called an acquisition.

HDFC Bank acquisition of Centurion Bank of

Punjab for $2.4 billion

Joint Ventures

A joint venture is an entity formed between

two or more parties to undertake economic
activity together. The parties agree to create
a new entity by both contributing equity,
and then they share in the revenues,
expenses, and control of the enterprise.
Sony-Ericsson is a joint venture by the
Japanese consumer electronics company
Sony Corporation and the Swedish
telecommunications company Ericsson to
make mobile phones

THANK YOU