Scribd Logo
Upload

Welcome to Scribd!

  • 219 views

    Entry Modes in International Business

    Uploaded by

    rohan_jangid8
    The document discusses several methods for entering foreign markets: - Exporting allows companies to reach foreign markets without establishing a foreign production facility but requires coordination among multiple parties. - Licensing permits companies to use another company's intellectual property in exchange for fees and possibly technical assistance, providing high returns with low investment but losing potential profits from manufacturing and marketing. - Joint ventures offer benefits like risk/reward sharing, but require balancing cooperation and competition between partners. - Foreign direct investment provides high control through direct ownership of foreign facilities but requires significant resources and commitment. - Franchising sells rights to use a brand model in exchange for initial and ongoing fees, allowing control through standardized business methods. - Wholly owned subsidiaries

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd

    Entry Modes in International Business

    Uploaded by

    rohan_jangid8
    219 views10 pages
    The document discusses several methods for entering foreign markets: - Exporting allows companies to reach foreign markets without establishing a foreign production facility but requires coordination among multiple parties. - Licensing permits companies to use another company's intellectual property in exchange for fees and possibly technical assistance, providing high returns with low investment but losing potential profits from manufacturing and marketing. - Joint ventures offer benefits like risk/reward sharing, but require balancing cooperation and competition between partners. - Foreign direct investment provides high control through direct ownership of foreign facilities but requires significant resources and commitment. - Franchising sells rights to use a brand model in exchange for initial and ongoing fees, allowing control through standardized business methods. - Wholly owned subsidiaries

    Original Description:

    ppt

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses several methods for entering foreign markets: - Exporting allows companies to reach foreign markets without establishing a foreign production facility but requires coordination among multiple parties. - Licensing permits companies to use another company's intellectual property in exchange for fees and possibly technical assistance, providing high returns with low investment but losing potential profits from manufacturing and marketing. - Joint ventures offer benefits like risk/reward sharing, but require balancing cooperation and competition between partners. - Foreign direct investment provides high control through direct ownership of foreign facilities but requires significant resources and commitment. - Franchising sells rights to use a brand model in exchange for initial and ongoing fees, allowing control through standardized business methods. - Wholly owned subsidiaries

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    219 views10 pages

    Entry Modes in International Business

    Uploaded by

    rohan_jangid8
    The document discusses several methods for entering foreign markets: - Exporting allows companies to reach foreign markets without establishing a foreign production facility but requires coordination among multiple parties. - Licensing permits companies to use another company's intellectual property in exchange for fees and possibly technical assistance, providing high returns with low investment but losing potential profits from manufacturing and marketing. - Joint ventures offer benefits like risk/reward sharing, but require balancing cooperation and competition between partners. - Foreign direct investment provides high control through direct ownership of foreign facilities but requires significant resources and commitment. - Franchising sells rights to use a brand model in exchange for initial and ongoing fees, allowing control through standardized business methods. - Wholly owned subsidiaries

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10
    At a glance
    Powered by AI
    The key takeaways are the different entry modes discussed - exporting, licensing, joint ventures, foreign direct investment and franchising. Their advantages and disadvantages are explained.

    Some main advantages of licensing are that it requires a small investment and has potential for high returns. However, the licensor loses potential returns from manufacturing and marketing. A main disadvantage is that the licensor loses control over production and marketing.

    Five common objectives of a joint venture are market entry, risk/reward sharing, technology sharing, joint product development and conforming to government regulations.

    Exporting

    Traditional and well established method of reaching a foreign market. No investment in foreign production facility required. Most of the cost associated with exporting take the form of marketing expenses. Commonly requires coordination among four players i.e. exporter, importer, transport provider, government.

    Licensing
    Essentially permits a company in the target country to use the intangible property of the licensor viz. trademarks, patents and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance. Because small investment is required on the part of licensor, licensing has the potential to provide a high ROI, however, because the licensee produces and markets the product, potential returns from manufacturing and marketing activities may be lost.

    Joint Venture
    Five common objectives in joint venture: market entry, risk/reward sharing, technology sharing and joint product development and conforming to Government regulation. Other benefits include political connections and access to distribution channels depending on the relationship between the parties.

    Contd. From earlier slide


    Such alliances are favorable when: The partners strategic goals converge while their competitive goals diverge. The partners size, market power and resources are small compared to the industry leaders. Partners are able to learn from each other while limiting access to their own proprietary skills. The key issues to consider in a JV are ownership, control, length of agreement, technology transfer, local firm capabilities and resources and Govt. intentions.

    Contd. From earlier slide


    JV s have conflicting pressures to cooperate and complete: Strategic imperative: the partners want to maximize the advantage gained for the joint venture, but they also want to maximize their on competitive position. The JV attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resouces. The JV is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control.

    Foreign Direct Investment(FDI)


    FDI is the direct ownership of facilities in the target country. It involves the transfer of resources including capital, technology and personnel. FDI may be made through the acquisition of an existing entity or the establishment of new enterprise. Direct ownership provides a high degree of control in the operations and ability to know better about consumers and competitive environment. It requires a high level of resources and a high degree of commitment.

    Contd. from earlier slide


    Potential problems include: Hero Honda a case in point. Conflict over asymmetric new investments. Mistrust over proprietary knowledge. Performance ambiguity. Lack of parent firm support. Culture clashes. If, how, and when to terminate the relationship.

    Entry Modes.Contd.
    Franchising: is a business in which the owner, or franchiser, sells the rights to its brand/ logo/symbol and the business model to third party. Examples: McDonalds, Subway, Domino, KFC . Investing in a Franchise, the franchisee must first pay an initial fees for the rights to the business, training, and the equipment required for running that particular franchise. Thereafter, the franchisee will generally pay the franchise business owner or the franchiser an going royalty payment, either on a monthly or quarterly basis. This payment is usually calculated as a percentage of the franchise operations gross sales. g

    Entry Modes.. Contd.


    Control of Franchise: The franchiser will require that the business model stays the same. The franchiser will require the franchisee to use the uniforms, business methods, and signs or logos particular to the business itself. The franchisee will also have to use the similar pricing in order to keep the adverting streamlined.

    Entry Modes contd.


    :Wholly Owned Subsidiary A company whose common stock is 100% owned by another company, called the parent company. A company can become wholly subsidiary through acquisition by the parent company. In contrast, a regular subsidiary is 51% to 99% owned by the parent company. One situation in which a parent company might find it helpful to established a parent company is if it wants to operate in a foreign market. This arrangement is common in high-tech companies who want to retain complete control and ownership of their technology.

    You might also like